San Jose-based Broadcom Inc. (NASDAQ:AVGO) is nearing the completion of its merger with VMware, Inc. (NYSE:NYSE:VMW), having secured necessary legal clearances worldwide, including Australia, Brazil, Canada, EU, Israel, Japan, South Africa, South Korea, Taiwan, UK and other jurisdictions. The merger is set to conclude without any legal impediments from the U.S.
Broadcom is a prominent provider of semiconductor and infrastructure software solutions catering to critical markets such as data centers, networking, enterprise software, broadband, wireless, storage, and industrial. On the other hand, VMware propels digital innovation via its leading multi-cloud services for all applications.
As part of the merger agreement, VMware shareholders had until October 23, 2023 to choose their preferred consideration for the transaction: either $142.50 in cash or 0.2520 of a Broadcom share per VMware share held before the deal's closing. The merger consideration adheres to proration procedures ensuring that half of VMware shares convert into cash and half into Broadcom stock.
Final results reveal that approximately 96% of VMware stockholders opted for the stock consideration. This choice led to about 52.1% of such shares converting into Broadcom stock and around 47.9% receiving $142.50 cash per share. A minority group of about 4% of stockholders chose the cash consideration or did not submit a valid election.
InvestingPro Insights
As we approach the final stages of the merger between Broadcom Inc. and VMware, Inc., InvestingPro provides key insights that may help investors understand the financial health and performance of these companies.
Broadcom, a significant player in the Semiconductors & Semiconductor Equipment industry, has high earnings quality with free cash flow exceeding net income and a record of consistently increasing earnings per share. It has also raised its dividend for 13 consecutive years, a testament to its strong financial performance. The company's adjusted market cap stands at $346.02 billion, and it has an impressive P/E ratio of 25.01 as of Q3 2023. In the past year, Broadcom has experienced a revenue growth of 11.91% and a gross profit margin of 74.27% as of Q3 2023. For more detailed insights and tips, consider the InvestingPro product that includes 20 additional tips for Broadcom.
On the other hand, VMware, a prominent player in the Software industry, has also demonstrated high earnings quality, with free cash flow exceeding net income. The company has an adjusted market cap of $61.4 billion and a P/E ratio of 42.83 as of Q2 2024. Despite a declining trend in earnings per share, VMware maintains impressive gross profit margins. As of Q2 2024, the company has a gross profit margin of 81.33% and an operating income margin of 16.05%. The InvestingPro product offers 18 additional tips for VMware.
These insights, along with real-time data from InvestingPro, provide a comprehensive understanding of the companies' financial performance ahead of their merger.
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