Broadcom Inc. is moving closer to selling a potential jumbo investment-grade bond after scoring approval from the European Union’s merger officials for its $61 billion acquisition of VMWare Inc.
The European Commission gave the chipmaker the nod on Wednesday after months of negotiations with the firms, paving the way for the world’s biggest-ever takeover for a semiconductor maker. Now, the company will have to figure out how to fund the $32 billion of commitments it secured in 2022 to help fund the deal.
“With this decision, the Commission recognizes the importance of this combination in enabling enterprises to accelerate growth and momentum in the multi-cloud ecosystem,” Broadcom said in a statement on Wednesday.
The approval comes after Microsoft Corp. on Tuesday won an unprecedented reconsideration from a UK regulator for its purchase of Activision Blizzard Inc., the largest gaming deal on record, less than an hour after securing the green light from a US judge.
Read more: Microsoft Bond Investors Wary as Activision Deal Greenlit
The debt commitments that Broadcom secured comprise the biggest blue-chip loan financing package for an acquisition since banks pledged $41.5 billion to fund the spinoff and merger of AT&T Inc.’s media business with Discovery Inc. in May 2021. Should Broadcom replace the debt with a bond offering, it would likely surpass Pfizer Inc.’s $31 billion transaction that helped fund the purchase of Seagen Inc. with the fourth-biggest US investment-grade bond sale ever, according to data compiled by Bloomberg.
“Though Broadcom’s absolute debt may nearly double, the components of debt financing could include a fair amount of five-year or shorter bank terms loans — versus 100% longer-duration public debt — to lower borrowing costs and further hasten the potential pace of debt reduction,” Bloomberg Intelligence analyst Robert Schiffmanwrote in a June note.
Broadcom and VMWare didn’t respond to requests for comment.
The UK’s Competition and Markets Authority will publish its own provisional findings into Broadcom’s record deal later this month, with a statutory deadline of Sept. 12.
Broadcom has been working with Barclays Plc, Bank of America Corp., Credit Suisse Group AG, Intergroup Inc., Morgan Stanley and Wells Fargo & Co. as financial advisers since the deal was announced in May last year.
--With assistance from Caleb Mutua.
(Updates to add BI analyst note in sixth paragraph.)
