China may further delay approving the VMware-Broadcom deal

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on Oct 19, 2023
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  • An FT report says China may take even longer to approve VMW-AVGO deal.
  • U.S. announced new sanctions on export of AI chips to China this week.
  • Shares of both VMware and Broadcom Inc are in the red on Thursday.

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VMware Inc (NYSE: VMW) lost nearly 10% on Thursday following a report that China is considering a further delay in approving its deal with Broadcom Inc (NASDAQ: AVGO).

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A possible retaliation to U.S. sanctions?

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Broadcom is currently in the process of buying VMware for $69 billion.

Earlier this week, both companies expressed confidence that the merger will be complete by the end of October.

On Thursday, however, a Financial Times report said that China may take even longer to green light the Broadcom-VMware deal now that the United States has moved to expand its sanctions on the export of sophisticated AI chips to Beijing.

VMware is expected to report its quarterly financial results in the final week of November. Consensus is for it earn $1.22 a share – well above 78 cents per share a year ago.

Deal spread widened significantly today

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Note that the VMW-AVGO deal needs two separate approvals from China. One from its State Administration for Market Regulation and another from its Ministry of Foreign Affairs and State Council.

The deal spread, following the news this morning, widened significantly to $23.78 from $16.77 just a day ago. Neither of the two companies have commented on today’s FT report so far.

The stock market news arrives only a couple months after Broadcom and VMware received approval for the merger from the United Kingdom following a rather lengthy investigation.

Shares of the multinational semiconductor company are also in the red at writing. Famed investor Jim Cramer had recently taken a positive tone on the pending approval of China for the VMWare-Broadcom deal.

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