EU Commission Clears Acquisition of VMware by Broadcom
EU Commission Clears Acquisition of VMware by Broadcom
The European Union (EU) Commission has approved, under the EU Merger Regulation, the proposed acquisition of VMware by Broadcom. The approval is conditional upon full compliance with the commitments offered by Broadcom.
The EU had opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed acquisition of VMware by Broadcom. The Commission was particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware's software.
Broadcom is a hardware company that offers, among other products, Network Interface Cards (‘NICs'), Fibre Channel Host-Bus Adapters (‘FC HBAs') and storage adapters. Broadcom recently started expanding into software markets.
VMware is a software provider offering mainly virtualization software which interoperates with a wide range of hardware, including NICs, FC HBAs and storage adapters. The company’s portfolios are largely complementary.
The Commission's preliminary market investigation found that, by acquiring VMware, Broadcom could have restricted competition in the markets for the supply of NICs, FC HBAs and storage adapters.
The Commission's in-depth investigation confirmed that the transaction, could harm competition in the worldwide market for the supply of FC HBAs. At the same time, it ruled out possible competition concerns related to:
(i) The market for the supply of NICs and storage adapters,
(ii) The market for the development of Smart NICs; and
(iii) The bundling of Broadcom's virtualisation software with VMware's.
Furthermore, Broadcom committed to implementing an organisational separation between the team working on Broadcom's FC HBAs and the team in charge of third-party certification and technical support. It also committed to ensuring protection of confidential information of Marvell and any potential entrant obtained in the context of the interoperability and certification processes.
The Commission carefully investigated the effectiveness of the remedies, collecting views from Marvell as well as server manufacturers, which are the main direct customers of FC HBAs.
In view of the positive feedback from market participants, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns and would maintain competition on the market for FC HBAs.
The Commission's decision is conditional upon full compliance with the commitments, which will be in place for ten years. Under supervision of the Commission, an independent trustee would be in charge of monitoring compliance with the commitments. Moreover, a fast-track dispute resolution mechanism in case of disagreement between the parties would further ensure the commitments' effective implementation.
