The European 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 EC’s decision follows an in-depth investigation of the acquisition, which is worth around $61 billion in cash and stock and was announced in May last year.
Its preliminary market investigation found that, by acquiring VMware, Broadcom could have restricted competition in the markets for the supply of Network Interface Cards (NICs), Fibre Channel Host-Bus Adapters (FC HBAs) and storage adapters. The in-depth investigation confirmed that the transaction, as initially notified, would harm competition in the worldwide market for the supply of FC HBAs.
To address the Commission’s competition concerns in the worldwide market for the supply of FC HBAs, Broadcom offered the following comprehensive access and interoperability commitments to Marvell and to any potential future entrant:
Guaranteed access to the interoperability Application Programming Interfaces as well as to the materials, tools and technical support necessary for the development and certification of third-party FC HBAs. It also committed to ensuring (i) their interoperability with VMware’s server virtualisation software; and (ii), third parties’ access to this information at the same time as Broadcom.
Guaranteed access to the source code for all of Broadcom’s current and future FC HBA drivers through an irrevocable open source license. This would allow Marvell and any potential entrant to ensure interoperability with VMware’s server virtualisation software and allow them to reuse and modify Broadcom’s drivers for its own use.
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 EC says it 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, it 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 EC’s decision is conditional upon full compliance with the commitments, which will be in place for ten years. Under supervision of the EC, an independent trustee will be in charge of monitoring compliance with the commitments. Moreover, a fast-track dispute resolution mechanism in case of disagreement between the parties will further ensure the commitments’ effective implementation.
