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Broadcom banks on early EU approval of $61 billion VMware deal

U.S. chipmaker Broadcom will seek early European Union antitrust approval of its proposed $61 billion buy of cloud computing company VMware by pointing to competition from Amazon, Microsoft and Google, people familiar with the matter said.

Announced in May, the deal is the second biggest globally so far this year and marks Broadcom’s attempt to diversify its business into enterprise software.

Tech deals have drawn intense scrutiny from regulators around the world concerned about power concentration in a few players and the possibility of bigger companies acquiring start-ups only to shut them down.

“This is creating more competition in the cloud market where there are very big players now. This doesn’t have to go to phase two at all,” one of the people said, referring to the European Commission’s four-month long second phase investigation.

“For the Commission to go to phase two, there has to be a real competition problem – horizontal, vertical, foreclosure risk – and I think we can show those risks don’t really exist in this case,” the person said.

Broadcom has yet to seek EU approval for the deal.

“We continue to make progress with our various regulatory filings around the world, with that work moving ahead as expected,” the company said.

In its review of Dell’s $67 billion acquisition of data storage company EMC Corp in 2016, the EU competition enforcer said EMC’s VMware had a strong position but not the ability nor the incentive to shut out competitors.

“In the last five years, what we have seen is an exponential growth of competitive pressure on VMWare on the part of those competitors that the Commission didn’t take into account,” another person said, referring to Amazon, Microsoft and Google, the top three cloud services providers.

“This should be a first phase investigation based on the facts,” the person said, referring to the EU preliminary merger review. Reuters

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