Broadcom Inc. is reportedly in talks to sell VMware Inc.’s End User Compute business to KKR & Co Inc. for $3.8 billion. This move comes as Broadcom aims to streamline its operations following its acquisition of VMware for $69 billion in November.
According to Reuters, KKR has emerged as the preferred buyer in a competitive auction process involving several private equity firms, including EQT Corp. VMware’s End User Compute business focuses on providing software solutions for remote desktop and application access via the cloud.
This potential acquisition is seen as a strategic fit for KKR, particularly given its ownership of Alludo, a company offering virtualization software Parallels. The integration of these businesses could lead to enhanced offerings for remote work environments, addressing the growing demand in this space.
Broadcom has wasted no time in implementing changes within VMware post-acquisition, with efforts to double its earnings to $8.5 billion over the next three years. This includes workforce reductions and the restructuring of the company into four divisions.
The decision to divest VMware’s End User Compute unit reflects Broadcom’s focus on optimizing returns from the acquisition. Analysts believe that while this segment may not be a major revenue driver for VMware, its sale could help mitigate potential risks associated with customer engagement.
KKR’s interest in VMware’s End User Compute business aligns with its investment strategy of acquiring established businesses with stable profitability. The proposed deal is expected to benefit both parties, with KKR capitalizing on the demand for remote work solutions and Broadcom addressing debt obligations from the VMware acquisition.
While the transaction is still pending, financial advisory firms such as Deutsche Bank, Evercore, and Jeffries are reportedly advising KKR, while Citigroup is advising Broadcom. UBS Group, Jeffries, and KKR’s capital market business unit are said to be providing debt financing for the deal.
