VMware (ticker VMW) investors have the choice of choosing to take Broadcom (AVGO) stock or cash. After a sharp 55% rally in Broadcom shares The agreement was announced in May 2022 VMware investors should pick a stock.
VMware is a software maker, Broadcom is a leading semiconductor maker, and its shares have benefited from enthusiasm for AI spending growth.
VMware holders who choose cash will receive a substantial increase from VMware’s current stock price. Investors who make no choice make money.
Here is the situation. VMware closed Tuesday at $164.35, down 0.7%, while Broadcom fell 1.7% to $844.52. Broadcom is trimming its equity stake in the merger to about 50%, meaning it will likely give half stock and half cash to VMware owners in total.
VMware holders have the choice of receiving 0.252 Broadcom shares now worth about $213 or $142.50 in cash, for each VMware share. The combined value of the merger (50% stock and 50% cash) is approximately $178 per VMware share. Baron He calculated.
In the event that a substantial number of VMware holders may elect shares, VMware holders who elect shares will receive a dividend of $178 based on the current share price. For their share of VMware, they will receive a proportionate share of half stock and cash. Those who choose cash will receive $142.50 and those who choose no choice will receive the same amount.
The price of $178 per share is a nice premium of about $13 over VMware’s current share price and largely reflects uncertainty over whether Chinese regulators will approve the transaction, regulatory arbitrageurs say. Baron.
“We do not believe VMware’s market value accurately reflects the likelihood that the transaction will be successfully completed,” said Roy Beren, co-manager of the Merger Fund. The spread is about 8%, which is the amount of the contract that is set to close in a month and a half.
He says the opaque nature of China’s antitrust process is behind the wide spread, and the sheer size of the deal is undermining the capital capacity of the arbitration community.
The Friday community also knows that the agreement to buy Intel has been canceled
Tower Semiconductor
After failing to get Chinese regulatory approval before the merger deal expired in August. US-China tensions will also result in an expansion of the current VMware arbitration.
Still, Wall Street seems to be putting the odds on the deal going through at 75% or higher, assuming that VMware will trade around $125 to $135 if the deal doesn’t go through.
Broadcom is confident the deal will go through. The company said in a press release. It will be released on August 21 He plans to close the deal on October 30.
Broadcom said it has received regulatory approvals in many countries and states outside the US and sees “no legal impediment” to closing the deal under US merger rules. Broadcom said it was working “constructively” with regulators around the world and said it believed it would obtain the remaining necessary regulatory approvals by the target Oct. 30 closing date.
Broadcom CEO Hok Tan declined to comment on the company’s earnings conference call in August about whether China’s approval was necessary for the deal.
Broadcom did not respond to A. Baron A question on the situation in China.
in Election Information Book, VMware said it expects the election deadline to be five business days before the closing date of the deal and at least three business days before the deadline for voting forms. Such information is publicly disclosed by the two companies.
VMware said to investors who hold VMware shares with a bank or broker: “You should contact your broker, bank or other nominee immediately and follow the instructions for making an election and exchanging your VMware common stock in a transaction. He said.
Write to Andrew Barry at [email protected]
