BRITAIN today deepened a probe into US semiconductor maker Broadcom’s planned takeover of cloud computing firm VMware, citing competition concerns.

Broadcom’s US$61 billion (RM269 billion) offer “may be expected to result in a substantial lessening of competition” for goods and services in the United Kingdom, the Competition and Markets Authority (CMA) said in a statement.

It comes after the European Union in December launched its own in-depth probe into the deal over concerns it may stifle competition in the server sector.

Broadcom is seeking to expand into the software market to boost its server business and has already acquired two complementary firms, CA Technology and Symantec.

CMA will conduct an in-depth or phase two investigation into Broadcom’s latest pursuit after launching an initial probe last year.

Today’s announcement was sparked after Broadcom declined to address the UK regulator’s initial concerns.

CMA already warned that the deal “could make computer servers more expensive for UK businesses”.

The tie-up could harm innovation and drive up the cost of computer parts used by key clients, including government, banks and telecoms, the watchdog insisted.

It said the deal may result in Broadcom obtaining “commercially sensitive information” that hardware rivals supply to VMware.

CMA will give its ruling by September 12, following the European Union’s antitrust decision by May 11.

The bloc’s competition regulator, the European Commission, said in addition to concerns regarding server competition, a deal could prevent or restrict the use of VMware software.

At the time of the cash-and-stock bid for VMware in May, Broadcom said it wished to offer customers “greater choice and flexibility to build, run, manage, connect and protect applications at scale”.

Under the transaction, VMware shareholders can elect to receive either US$142.50 in cash or slightly more than one-fourth of a Broadcom share for each VMware share.

That represented a premium of almost 50% compared with VMware stock before news reports of the deal surfaced.

Broadcom will also assume US$8 billion of VMware debt.

VMware was spun out of Dell Technologies in 2021.

The CMA said Broadcom’s blockbuster deal was the second largest it had investigated.

The biggest is Microsoft’s proposed US$69 billion purchase of US video game giant Activision, which is also facing an in-depth UK investigation.

However, CMA last week narrowed the scope of its Microsoft/Activision probe to cloud gaming, after concluding it would not harm competition in console gaming in the UK. – AFP, March 29, 2023.