U.K. competition authority launches in-depth investigation of Broadcom-VMware deal

By Scott Kanowsky

Investing.com -- U.K. competition regulators have opened an in-depth investigation into U.S. chipmaker Broadcom's (NASDAQ: AVGO) planned $61 billion takeover of software firm VMware (NYSE: VMW), one week after it claimed that the tie-up may make computer servers too expensive for British businesses.

The U.K. Competition and Markets Authority said neither Broadcom nor VMware offered concessions to assuage its concerns around the deal. Last Wednesday, the CMA warned that it would launch a deeper inquiry into the deal if its worries were not addressed.

In a statement at the time, the CMA flagged that the merger could lead to less innovation and drive up the cost of computer parts used by government departments, major banks, and telecom groups.

"[T]his deal could allow Broadcom to cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive, and affordable IT systems," said CMA Executive Director David Stewart.

The CMA added that Broadcom may use the transaction to obtain "commercially sensitive information," such as plans for new projects, that its hardware rivals supply to VMware.

Broadcom has previously said that it is working with the regulator and would demonstrate that the agreement will enhance competition while benefitting businesses and consumers.

Led by Malaysian-American billionaire Hock Tan, Broadcom has been attempting to grow its offerings since its planned acquisition of semiconductor giant Qualcomm (NASDAQ: QCOM) was scuppered in 2018 due to national security concerns raised by former U.S. president Donald Trump.

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