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As filed with the Securities and Exchange Commission on July 15, 2022
Registration No. 333-   
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BROADCOM INC.
(Exact name of registrant as specified in its charter)
Delaware
3674
35-2617337
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
1320 Ridder Park Drive
San Jose, California 95131-2313
(408) 433-8000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Mark Brazeal
Chief Legal and Corporate Affairs Officer
Broadcom Inc.
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
David C. Karp
Ronald C. Chen
Viktor Sapezhnikov
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Amy Fliegelman Olli
Executive Vice President, General
Counsel and Secretary
VMware, Inc.
3401 Hillview Avenue
Palo Alto, California 94304
(650) 427-5000
Barbara L. Becker
Saee Muzumdar
Andrew Kaplan
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon the satisfaction or waiver of all other conditions to consummation of the transactions described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

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The information in this proxy statement/prospectus is subject to completion and amendment. A registration statement relating to the securities described in this proxy statement/prospectus has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy these securities be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration under the securities laws of any such jurisdiction.
PRELIMINARY—SUBJECT TO COMPLETION, DATED JULY 15, 2022

TRANSACTIONS PROPOSED—YOUR VOTE IS VERY IMPORTANT
Dear VMware, Inc. Stockholder:
On May 26, 2022, VMware, Inc. (referred to as VMware), Broadcom Inc. (referred to as Broadcom), Verona Holdco, Inc., a direct wholly owned subsidiary of VMware (referred to as Holdco), Verona Merger Sub, Inc., a direct wholly owned subsidiary of Holdco (referred to as Merger Sub 1), Barcelona Merger Sub 2, Inc., a direct wholly owned subsidiary of Broadcom (referred to as Merger Sub 2) and Barcelona Merger Sub 3, LLC, a direct wholly owned subsidiary of Broadcom (referred to as Merger Sub 3) entered into an Agreement and Plan of Merger that provides for the acquisition of VMware by Broadcom (such agreement, as it may be amended from time to time, is referred to as the merger agreement). Pursuant to the terms of the merger agreement, (i) Merger Sub 1 will merge with and into VMware (referred to as the first merger), with VMware surviving the first merger and becoming a wholly owned subsidiary of Holdco, (ii) following the effective time of the first merger, VMware, the surviving company of the first merger, will be converted (referred to as the LLC conversion) into a Delaware limited liability company, (iii) following the effective time of the LLC conversion, Merger Sub 2 will merge with and into Holdco (referred to as the second merger), with Holdco surviving the second merger and becoming a wholly owned subsidiary of Broadcom and (iv) following the effective time of the second merger, Holdco, the surviving company of the second merger, will merge with and into Merger Sub 3 (referred to as the third merger and collectively with the first merger, the LLC conversion and the second merger, referred to as the transactions), with Merger Sub 3 surviving the third merger as a wholly owned subsidiary of Broadcom. The respective boards of directors of VMware and Broadcom have unanimously approved the merger agreement and the transactions.
Upon the terms and subject to the conditions of the merger agreement, at the effective time of the second merger, each share of Class A common stock, par value $0.01 per share, of VMware (referred to as VMware common stock) that you own immediately prior to the effective time of the second merger will be indirectly converted into the right to receive, at your election and subject to proration in accordance with the merger agreement as described below, (i) $142.50 per share in cash, without interest (referred to as the cash consideration) or (ii) 0.25200 shares of common stock, par value $0.001 per share, of Broadcom (referred to as the stock consideration). You may elect a different form of consideration for each share you own. You may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if you own more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares. The stockholder election will be subject to the election of other VMware stockholders and a proration mechanism, such that the total number of shares of VMware common stock entitled to receive the cash consideration, and the total number of shares of VMware common stock entitled to receive the stock consideration, will, in each case, be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the second merger. Holders of VMware common stock that do not make an election will be treated as having elected to receive the cash consideration or the stock consideration in accordance with the proration methodology in the merger agreement. You will receive cash in lieu of any fractional shares of Broadcom common stock that you would otherwise be entitled to receive.
Contemporaneously and in connection with the execution of the merger agreement, Broadcom entered into voting agreements with each of (i) Michael S. Dell and Susan Lieberman Dell Separate Property Trust and (ii) certain VMware stockholders affiliated with Silver Lake (referred to as the voting agreements). Subject to the terms and conditions of the voting agreements, such stockholders have agreed, among other things, to vote all of the shares of VMware common stock held by them (representing in the aggregate approximately 50.1% of the total outstanding shares of VMware common stock as of May 26, 2022) in favor of the adoption of the merger agreement.
The blended value per share of VMware common stock of $139.69, calculated as of May 20, 2022 (the last trading day prior to market speculation regarding the transactions), and $137.30, calculated as of May 24, 2022, represented a premium of approximately 46% and 43% over the closing price per VMware common stock of $95.71 on May 20, 2022, and a premium of approximately 36% and 34% over the 30-day volume weighted average closing price per VMware common stock ending May 20, 2022 of $102.41, respectively. The implied value of the stock consideration will fluctuate as the market price of Broadcom common stock fluctuates because the stock consideration is payable in a fixed number of shares of Broadcom common stock. As a result, the value of the stock consideration that VMware stockholders will receive upon completion of the transactions could be greater than, less than or the same as the value of the stock consideration on the date of the accompanying proxy statement/prospectus, at the time of the special meeting of the VMware stockholders described in the accompanying proxy statement/prospectus (referred to as the special meeting) or on the date on which VMware stockholders make their election. Accordingly, you should obtain current stock price quotations for Broadcom common stock and VMware common stock before deciding how to vote with respect to the approval of the merger agreement proposal. Broadcom common stock and VMware common stock trade on The Nasdaq Global Select Market and the New York Stock Exchange under the symbols “AVGO” and “VMW,” respectively.
Based on the number of shares of Broadcom common stock and VMware common stock outstanding on July 13, 2022, upon completion of the transactions, former VMware stockholders will own approximately 12.6% of the outstanding shares of Broadcom common stock and Broadcom stockholders immediately prior to the transactions will own approximately 87.4% of the outstanding shares of Broadcom common stock.
The VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests of, VMware and its stockholders, (ii) determined that it is in the best interests of VMware and its stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions upon the terms and subject to the conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement.
At the special meeting, you will be asked to approve the merger agreement proposal and to vote on other transaction-related matters. The VMware board of directors unanimously recommends that VMware stockholders vote “FOR” the merger agreement proposal and “FOR” each of the other proposals described in the accompanying proxy statement/prospectus.
Your vote is very important. Broadcom and VMware cannot complete the transactions without the approval of the merger agreement proposal by VMware stockholders holding at least a majority of the shares of VMware common stock outstanding at the close of business on [  ], 2022, the record date for the special meeting. The failure of any stockholder to vote will have the same effect as a vote against the approval of the merger agreement proposal. It is important that your shares of VMware common stock be represented and voted regardless of the size of your holdings. Whether or not you plan to participate in the special meeting, VMware urges you to submit a proxy in advance of the special meeting to have your shares voted by using one of the methods described in the accompanying proxy statement/prospectus.
More information about Broadcom, VMware, the special meeting, the transactions and the other proposals for consideration at the special meeting is contained in the accompanying proxy statement/prospectus. Please carefully read the entire proxy statement/prospectus, including the section titled “Risk Factors” beginning on page 25, for a discussion of the risks relating to the transactions, and the annexes and documents incorporated by reference.
On behalf of the VMware board of directors, thank you for your continued support.
Sincerely,
Amy Fliegelman Olli
Executive Vice President, General Counsel and Secretary
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSACTIONS OR OTHER TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS OR THE SECURITIES TO BE ISSUED PURSUANT TO THE TRANSACTIONS UNDER THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS NOR HAVE THEY DETERMINED IF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The accompanying proxy statement/prospectus is dated [  ], 2022 and is first being mailed to VMware stockholders on or about [  ], 2022.

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VMWARE, INC.
3401 Hillview Avenue
Palo Alto, California 94304
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [   ], 2022
This is a notice that the special meeting of stockholders of VMware, Inc. (referred to as VMware) will be held on [    ], 2022, beginning at [   ] a.m., Pacific time. The special meeting will be a completely virtual, live audio webcast meeting of stockholders and will be held for the following purposes:
1.
to adopt the Agreement and Plan of Merger, dated as of May 26, 2022 (such agreement, as it may be amended from time to time, is referred to as the merger agreement), by and among VMware, Broadcom Inc. (referred to as Broadcom), Verona Holdco, Inc., a direct wholly owned subsidiary of VMware (referred to as Holdco), Verona Merger Sub, Inc., a direct wholly owned subsidiary of Holdco (referred to as Merger Sub 1), Barcelona Merger Sub 2, Inc., a direct wholly owned subsidiary of Broadcom (referred to as Merger Sub 2) and Barcelona Merger Sub 3, LLC, a direct wholly owned subsidiary of Broadcom (referred to as Merger Sub 3 ), pursuant to which, upon the terms and subject to the conditions of the merger agreement, (i) Merger Sub 1 will merge with and into VMware (referred to as the first merger), with VMware surviving the first merger and becoming a wholly owned subsidiary of Holdco, (ii) following the effective time of the first merger, VMware, the surviving company of the first merger, will be converted (referred to as the LLC conversion) into a Delaware limited liability company, (iii) following the effective time of the LLC conversion, Merger Sub 2 will merge with and into Holdco (referred to as the second merger), with Holdco surviving the second merger and becoming a wholly owned subsidiary of Broadcom and (iv) following the effective time of the second merger, Holdco, the surviving company of the second merger, will merge with and into Merger Sub 3 (referred to as the third merger and collectively with the first merger, the LLC conversion and the second merger, referred to as the transactions), with Merger Sub 3 surviving the third merger as a wholly owned subsidiary of Broadcom (adoption of the merger agreement and approval of the first merger and the second merger referred to as the merger agreement proposal);
2.
to approve on an advisory (non-binding) basis the compensation that may be paid or become payable to VMware’s named executive officers that is based on or otherwise relates to the transactions (referred to as the merger-related compensation proposal); and
3.
to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement proposal (referred to as the adjournment proposal).
The accompanying proxy statement/prospectus describes the proposals listed above in more detail. Please refer to the accompanying proxy statement/prospectus, including the merger agreement and the other annexes and documents included in, or incorporated by reference into, the accompanying proxy statement/prospectus for further information with respect to the business to be transacted at the special meeting. You are encouraged to read the entire proxy statement/prospectus carefully before voting. In particular, see the section titled “Risk Factors” beginning on page 25.
The VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests, of VMware and its stockholders, (ii) determined that it is in the best interests of VMware and its stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions upon the terms and subject to the conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement. The VMware board of directors unanimously recommends that VMware stockholders vote “FOR” the merger

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agreement proposal and “FOR” each of the other proposals listed above and described in more detail in the accompanying proxy statement/prospectus.
The VMware board of directors has fixed the close of business on [   ], 2022 as the record date for determination of VMware stockholders entitled to receive notice of, and to vote at, the special meeting or any adjournments or postponements thereof. Only holders of record of VMware common stock as of the close of business on the record date are entitled to receive notice of, and to vote at, the special meeting.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
The transactions cannot be completed unless the merger agreement proposal is approved by the affirmative vote, virtually or by proxy, of holders of at least a majority of the outstanding shares of VMware common stock entitled to vote thereon.
The affirmative vote of holders of at least a majority of the outstanding shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote thereon is required to approve the merger-related compensation proposal and the adjournment proposal.
Whether or not you expect to participate in the special meeting, VMware urges you to submit a proxy to have your shares voted as promptly as possible either: (1) via the Internet at proxyvote.com (see proxy card for instructions); (2) by telephone (see proxy card for instructions); or (3) by completing, signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the special meeting. If your shares are held in “street name” by a bank, brokerage firm or other nominee, please follow the instructions on the voting instruction card furnished by such bank, brokerage firm or other nominee. Any stockholder of record participating in the special meeting may vote even if such stockholder has returned a proxy card. However, if your shares are held in “street name” you must obtain a legal proxy from the bank, brokerage firm or nominee to vote at the special meeting.
Stockholders of record as of [   ], 2022 will be able to participate in the special meeting by visiting www.virtualshareholdermeeting.com/VMW2022SM and entering the 16-digit control number included on your proxy card or voting instruction card that accompanied your proxy materials.
If you have any questions about the special meeting, the transactions, the proposals or the accompanying proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, need to obtain proxy cards or other information related to this proxy solicitation or need help submitting a proxy or voting your shares of VMware common stock, you should contact:
VMware, Inc.
3401 Hillview Avenue
Palo Alto, California 94304
(650) 427-5000
Attention: Investor Relations
or
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokerage Firms Call: (212) 269-5550
Stockholders Call Toll Free: (800) 628-8532
Email: vmw@dfking.com
By order of the board of directors
Amy Fliegelman Olli
Executive Vice President, General Counsel and Secretary
Dated: [    ], 2022
Palo Alto, California

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ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important information about Broadcom and VMware from other documents that Broadcom and VMware have filed with the U.S. Securities and Exchange Commission (referred to as the SEC) and that are contained in or incorporated by reference into this proxy statement/prospectus. For a listing of documents incorporated by reference into this proxy statement/prospectus, please see the section titled “Where You Can Find More Information.” This information is available for you to review on the SEC’s website at www.sec.gov.
You can obtain copies of this proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus free of charge by requesting them in writing or by telephone at the following addresses and telephone numbers:
For Information Regarding Broadcom:
For Information Regarding VMware:
 
 
Broadcom Inc.
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
Attention: Investor Relations
VMware, Inc.
3401 Hillview Avenue
Palo Alto, California 94304
(650) 427-5000
Attention: Investor Relations
In addition, you may obtain copies of documents filed by Broadcom with the SEC by accessing Broadcom’s website at https://investors.broadcom.com. You may also obtain copies of documents filed by VMware with the SEC by accessing VMware’s website at http://ir.vmware.com. We are not incorporating the contents of the websites of the SEC, Broadcom, VMware or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.
In addition, if you have questions about the special meeting, the transactions, the proposals or this proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, need to obtain proxy cards or other information related to the proxy solicitation or need help submitting a proxy or voting your shares of VMware common stock, you may contact D.F. King & Co., Inc. (referred to as D.F. King or VMware’s proxy solicitor), at the address and telephone number listed below. You will not be charged for any of these documents that you request.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokerage Firms Call: (212) 269-5550
Stockholders Call Toll Free: (800) 628-8532
Email: vmw@dfking.com
If you would like to request any documents, please do so by [   ], 2022, which is the date that is five business days prior to the date of the special meeting, in order to receive them before the special meeting.

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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms part of a registration statement on Form S-4 (Registration No. 333-[   ]) filed with the SEC by Broadcom, constitutes a prospectus of Broadcom under the Securities Act of 1933, as amended (referred to as the Securities Act), with respect to the Broadcom common stock to be issued to VMware stockholders pursuant to the transactions. This proxy statement/prospectus also constitutes a proxy statement for VMware under the Securities Exchange Act of 1934, as amended (referred to as the Exchange Act), and a notice of meeting with respect to the special meeting of VMware stockholders.
You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [ ], 2022, and you should assume that the information contained in this proxy statement/prospectus is accurate only as of such date. You should also assume that the information incorporated by reference into this proxy statement/prospectus is accurate only as of the date of such information.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding Broadcom has been provided by Broadcom, and information contained in this proxy statement/prospectus regarding VMware has been provided by VMware.
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QUESTIONS AND ANSWERS
The following questions and answers are intended to briefly address some commonly asked questions regarding the transactions, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a VMware stockholder. Please refer to the section titled “Summary” and the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to this proxy statement/prospectus and the documents referred to in this proxy statement/prospectus, which you should read carefully and in their entirety. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section titled “Where You Can Find More Information.”
Q:
Why am I receiving this proxy statement/prospectus?
A:
VMware, Inc. (referred to as VMware) is sending these materials to VMware stockholders to help them decide how to vote their shares of VMware common stock with respect to the adoption of the Agreement and Plan of Merger, dated as of May 26, 2022, by and among Broadcom Inc. (referred to as Broadcom), VMware, Verona Holdco, Inc., a wholly owned subsidiary of VMware (referred to as Holdco), Verona Merger Sub, Inc., a wholly owned subsidiary of Holdco (referred to as Merger Sub 1), Barcelona Merger Sub 2, Inc., a wholly owned subsidiary of Broadcom (referred to as Merger Sub 2) and Barcelona Merger Sub 3, LLC, a wholly owned subsidiary of Broadcom (referred to as Merger Sub 3, and collectively, with Merger Sub 2, as Broadcom Merger Subs), which agreement provides for the acquisition of VMware by Broadcom (such agreement, as it may be amended from time to time, is referred to as the merger agreement), a copy of which is included as Annex A to this proxy statement/prospectus, and approval of the first merger and the second merger (each as defined below), and with respect to the other proposals to be considered at the special meeting of VMware stockholders to be held on [ ], 2022 (referred to as the special meeting).
This document constitutes both a proxy statement of VMware and a prospectus of Broadcom. It is a proxy statement because VMware is soliciting proxies from its stockholders. It is a prospectus because Broadcom will issue shares of its common stock, par value $0.001 per share (referred to as Broadcom common stock), in exchange for shares of VMware Class A common stock, par value $0.01 per share (referred to as VMware common stock) in the transactions (as defined below) if the transactions are completed.
Q:
What are the transactions?
A:
VMware has agreed to be acquired by Broadcom under the terms of the merger agreement, which is further described in this proxy statement/prospectus. If the merger agreement is adopted by VMware stockholders and the other closing conditions under the merger agreement are satisfied or waived, the following transactions (collectively referred to as the transactions) will be consummated:
Merger Sub 1 will merge with and into VMware (referred to as the first merger), with VMware surviving the first merger and becoming a wholly owned subsidiary of Holdco;
following the effective time of the first merger, VMware, the surviving company of the first merger, will be converted into a Delaware limited liability company (referred to as the LLC conversion);
following the effective time of the LLC conversion, Merger Sub 2 will merge with and into Holdco (referred to as the second merger), with Holdco surviving the second merger and becoming a wholly owned subsidiary of Broadcom; and
following the effective time of the second merger, Holdco, the surviving company of the second merger, will merge with and into Merger Sub 3 (referred to as the third merger), with Merger Sub 3 surviving the third merger as a wholly owned subsidiary of Broadcom.
Q:
Are there any risks that I should consider in deciding whether to vote for the approval of the merger agreement proposal?
A:
Yes. You should read and carefully consider the risks set forth in the section titled “Risk Factors” beginning on page 25. You should also read and carefully consider the risks related to Broadcom and VMware contained in the documents that are incorporated by reference into this proxy statement/prospectus.
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Q:
What will I receive for my shares if the transactions are completed?
A:
Immediately prior to the effective time of the second merger, the merger consideration is subject to proration so that 50% of VMware common stock issued and outstanding will be converted into cash consideration and 50% will be converted into stock consideration.
At the effective time of the second merger, you will be entitled to receive, at your election and subject to proration, for each share of VMware common stock that you hold (i) $142.50 in cash, without interest (referred to as the cash consideration) or (ii) 0.25200 shares of Broadcom common stock (referred to as the stock consideration and together with the cash consideration, the merger consideration). You will receive cash in lieu of any fractional shares of Broadcom common stock that you would otherwise be entitled to receive.
You may elect a different form of merger consideration for each share you own. You may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if you own more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares. Whether you receive your elected merger consideration will depend on the election of other VMware stockholders and a proration mechanism. The proration of the merger consideration will not be known until immediately prior to or following the effective time of the second merger. VMware stockholders who do not make an election will be treated as having elected to receive cash consideration or stock consideration in accordance with the proration methodology in the merger agreement.
On May 25, 2022 (the last full trading day before the announcement of the transactions), the closing stock price per share of Broadcom common stock was $531.63, which, after giving effect to the exchange ratio of 0.25200, has an implied value of approximately $133.97 per share. Based on this price, with respect to the stock consideration and the cash consideration of $142.50 per share, upon completion of the transactions, VMware stockholders that receive the cash consideration for 50% of their shares of VMware common stock and receive the stock consideration for 50% of their shares of VMware common stock would receive total merger consideration with an implied value of approximately $138.24 per share.
On July 13, 2022 (the most recent practicable date prior to the date of this proxy statement/prospectus), the closing stock price per share of Broadcom common stock was $481.73, which, after giving effect to the exchange ratio of 0.25200, has an implied value of approximately $121.40 per share. Based on this price, with respect to the stock consideration and the cash consideration of $142.50 per share, upon completion of the transactions, VMware stockholders that receive the cash consideration for 50% of their shares of VMware common stock and receive the stock consideration for 50% of their shares of VMware common stock would receive total merger consideration with an implied value of approximately $131.95 per share.
The implied value of the stock consideration will fluctuate as the market price of Broadcom common stock fluctuates because the stock consideration is payable in a fixed number of shares of Broadcom common stock. As a result, the value of the stock consideration that VMware stockholders will receive upon completion of the transactions could be greater than, less than or the same as the value of the stock consideration on the date of this proxy statement/prospectus, at the time of the VMware special meeting or on the date on which VMware stockholders make their election. Accordingly, you should obtain current stock price quotations for Broadcom common stock and VMware common stock before deciding how to vote with respect to the merger agreement proposal. Broadcom common stock trades on The Nasdaq Global Select Market under the symbol “AVGO” and VMware common stock trades on the New York Stock Exchange under the symbol “VMW.”
For additional information regarding the consideration to be received in the transactions, see the section titled “The Transactions—Merger Consideration.”
Q:
What happens if I am eligible to receive a fraction of a share of Broadcom common stock as part of the stock consideration?
A:
If the aggregate number of shares of Broadcom common stock that you are entitled to receive as part of the stock consideration otherwise would include a fraction of a share of Broadcom common stock, you will receive cash in lieu of that fractional share. See the section titled “The Transactions—Exchange of Shares; Elections as to Form of Consideration.”
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Q:
How and when do I make my merger consideration election?
A:
You will receive an election form following the VMware special meeting. You will make your cash and/or stock election by properly completing, signing and returning the election form. In addition, if you hold stock certificates representing VMware common stock, you must return your stock certificates (or guaranty of delivery of such certificates) to the exchange agent in connection with the transactions. If you do not send in the election form with such stock certificates, if applicable, by the election deadline, you will be treated as though you had not made an election. Carefully review and follow the instructions accompanying the election form. If you own VMware common stock in “street name” through a bank, brokerage firm or other nominee and you wish to make an election, you should follow the instructions provided by your bank, brokerage firm or other nominee when making your election.
The mailing of the election form will occur at least 20 business days prior to the anticipated election deadline, which is expected to be 5:00 p.m. local time (in the city in which the principal office of the exchange agent is located) on the date that is five business days prior to Broadcom’s good faith estimate of the closing date or such other date as may be mutually agreed to by the parties. Broadcom and VMware will publicly announce the anticipated election deadline at least three business days prior to the election deadline.
Do NOT submit any stock certificates (or evidence of shares in book-entry form) with your proxy card.
For more details on the election procedures, see “The Transactions—Exchange of Shares; Elections as to Form of Consideration.”
Q:
What do I do if I want to revoke my election?
A:
You may change or revoke your election at any time during the election period, by written notice to the exchange agent prior to the election deadline or by withdrawal of your VMware stock certificates (or of the guarantee of delivery of such stock certificates), if applicable, previously deposited with the exchange agent prior to the election deadline.
Q:
What happens if I do not make a valid merger consideration election?
A:
If you do not return a properly completed election form by the election deadline, your shares of VMware common stock will be considered “non-election” shares and will be converted into the right to receive the cash consideration or the stock consideration according to the allocation procedures specified in the merger agreement. Generally, in the event one form of merger consideration (i.e., cash or shares of Broadcom common stock) is undersubscribed (referred to as the undersubscribed consideration), “non-election” shares will be allocated the undersubscribed consideration.
Q:
If I make a valid merger consideration election, could I receive a form of merger consideration that I did not elect to receive?
A:
If, after the “non-election” shares have been allocated any undersubscribed consideration, there still remains undersubscribed consideration, then shares of VMware common stock electing the oversubscribed form of merger consideration will be allocated the undersubscribed consideration pursuant to the proration and adjustment procedures. Accordingly, there is no guarantee that you will receive your elected form of merger consideration for all of your shares of VMware common stock. In the event proration is necessary, electing shares will be allocated the undersubscribed consideration only after the undersubscribed consideration is allocated to “non-election” shares.
Q:
How will I receive the merger consideration to which I am entitled?
A:
After receiving the proper documentation from you, following the completion of the second merger, the exchange agent will provide to you the cash consideration and/or stock consideration to which you are entitled. More information on the documentation you are required to deliver to the exchange agent may be found in the section titled “The Merger Agreement—Exchange and Payment Procedures.”
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Q:
What will happen to VMware as a result of the transactions?
A:
If the transactions are completed, VMware, as the surviving corporation of the first merger, will be converted to a limited liability company in the LLC conversion and will become an indirect wholly owned subsidiary of Broadcom as a result of the second merger. As a result of the transactions, VMware will no longer be a publicly held company and VMware common stock will be delisted from the New York Stock Exchange and deregistered under the Exchange Act.
Q:
Will the Broadcom common stock received at the time of completion of the second merger be traded on an exchange?
A:
Yes, it is a condition to closing the transactions that the shares of Broadcom common stock to be issued to VMware stockholders in the second merger be approved for listing on The Nasdaq Global Select Market, subject to official notice of issuance.
Q:
When are the transactions expected to be completed?
A:
Broadcom and VMware currently expect the transactions to be completed during Broadcom’s fiscal year 2023, subject to the affirmative vote of the holders of at least a majority of the outstanding shares of VMware common stock in favor of adoption of the merger agreement, the expiration or termination of the waiting period (and any extensions thereof) applicable to the transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (referred to as the HSR Act), the receipt of the clearances and approvals applicable to the transactions under the antitrust laws of the European Union and certain other jurisdictions, and the satisfaction or waiver of the other closing conditions contained in the merger agreement. However, Broadcom and VMware cannot predict the actual date on which the transactions will be completed because completion is subject to conditions beyond their control and it is possible that such conditions could result in the transactions being completed earlier or later or not being completed at all. See the sections titled “The Transactions—Regulatory Clearances and Approvals Required for the Transactions” and “The Merger Agreement—Conditions to the Transactions.”
Q:
What am I being asked to vote on?
A:
You are being asked to vote upon the following proposals:
1.
Proposal 1—The Merger Agreement Proposal: the proposal to adopt the merger agreement, which is further described in the sections titled “The Transactions” and “The Merger Agreement” and a copy of which is attached to this proxy statement/prospectus as Annex A, and to approve the first merger and the second merger;
2.
Proposal 2—The Merger-Related Compensation Proposal: the proposal to approve on an advisory (non-binding) basis the compensation that may be paid or become payable to VMware’s named executive officers that is based on or otherwise relates to the transactions; and
3.
Proposal 3—The Adjournment Proposal: the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement proposal.
Q:
How does the VMware board of directors recommend that I vote at the special meeting?
A:
The VMware board of directors unanimously recommends that VMware stockholders vote “FOR” the merger agreement proposal and “FOR” each of the other proposals described in this proxy statement/prospectus.
Q:
What do I need to do now?
A:
After carefully reading and considering the information contained in this proxy statement/prospectus, please submit your proxy as soon as possible so that your shares of VMware common stock will be represented and voted at the special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction card provided by the record holder if your shares are held in “street name” by your bank, brokerage firm or other nominee.
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Q:
Should I send in my VMware stock certificates now?
A:
No. Please do not send in your VMware stock certificates with your proxy. You should submit your VMware stock certificates with your election form. If a VMware stockholder who holds VMware common stock in certificated form does not submit its, his or her stock certificate(s) with the election form, such VMware stockholder will be sent materials after the transactions close to effect the exchange of such stockholder’s VMware common stock for the merger consideration. See “The Merger Agreement—Exchange and Payment Procedures.”
Q:
When and where is the special meeting of the VMware stockholders?
A:
The special meeting will be held on [  ], 2022, beginning at [  ] a.m., Pacific time, unless postponed to a later date, via live audio webcast at www.virtualshareholdermeeting.com/VMW2022SM. You will need the 16-digit control number provided on your proxy card or voting instruction card in order to participate in the special meeting.
Q:
Who can vote at the special meeting?
A:
Only VMware stockholders who held shares of record as of the close of business on [   ], 2022, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. VMware’s official stock ownership records will conclusively determine whether a stockholder is a “holder of record” as of the record date.
Q:
How many votes do I have?
A:
You are entitled to one vote on each matter properly brought before the special meeting for each share of VMware common stock you hold or beneficially own as of the close of business on the record date. As of the close of business on the record date, there were [  ] shares of VMware common stock outstanding and owned by stockholders (i.e., excluding shares of VMware common stock held in treasury by VMware) held by [  ] holders of record.
Q:
What constitutes a quorum for the special meeting?
A:
The presence of holders of shares representing at least a majority of the total outstanding shares of VMware common stock on the record date entitled to vote at the special meeting, represented virtually or by proxy, constitute a quorum. Stockholders choosing to abstain from voting and broker “non-votes” will be treated as present for purposes of determining whether a quorum is present, but will not be counted as votes cast “FOR” any matter.
Q:
What vote is required to approve each proposal to be considered at the VMware special meeting?
A:
The votes required for each proposal are as follows:
1.
Proposal 1—The Merger Agreement Proposal: The affirmative vote, virtually or by proxy, of holders of at least a majority of the outstanding shares of VMware common stock entitled to vote on the merger agreement proposal is required to approve the merger agreement proposal.
2.
Proposal 2—The Merger-Related Compensation Proposal: The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the merger-related compensation proposal is required to approve, on an advisory (non-binding) basis, the merger-related compensation proposal.
3.
Proposal 3—The Adjournment Proposal: The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the adjournment proposal is required to approve the adjournment proposal.
As of [  ], 2022, the record date, VMware directors and executive officers, as a group, owned and were entitled to vote [  ] shares of VMware common stock, or approximately [  ]% of the outstanding shares of VMware common stock. VMware currently expects that these directors and executive officers will vote their shares in favor of the merger agreement proposal and each of the other proposals described in this proxy statement/prospectus, although none of them are obligated to do so, other than Michael S. Dell.
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Concurrently with the execution of the merger agreement, each of (i) Michael S. Dell (the current chairman and a member of the VMware board of directors) and Susan Lieberman Dell Separate Property Trust (together with Michael S. Dell referred to as the MSD stockholders) and (ii) Silver Lake Partners IV, L.P., Silver Lake Technology Investors IV, L.P., Silver Lake Partners V DE (AIV), L.P., Silver Lake Technology Investors V, L.P., SL SPV-2, L.P. and Silver Lake Group, L.L.C. (the foregoing entities listed in this clause (ii) collectively referred to as the SL stockholders) entered into letter agreements with Broadcom (referred to as the voting agreements) pursuant to which each such party agreed, among other things and subject to the terms and conditions of the voting agreements, to vote the shares of VMware common stock held by such party in favor of the merger agreement proposal. See the section titled “The Voting Agreements.”
As of [  ], 2022, the record date, an aggregate of [  ] shares of VMware common stock, or approximately [  ]% of the outstanding shares of VMware common stock, were subject to the voting agreements, copies of which are attached to this proxy statement/prospectus as Annexes B and C.
Q:
How are proxies counted and what results from a failure to vote, abstention or broker non-vote?
A:
Proposal 1—The Merger Agreement Proposal: If you are a VMware stockholder on the record date and take any action other than voting (or causing your shares to be voted) “FOR” the merger agreement proposal, it will have the same effect as a vote “AGAINST” the merger agreement proposal. For example, if you fail to instruct your bank, brokerage firm or other nominee to vote, it will have the same effect as a vote “AGAINST” the merger agreement proposal.
Proposal 2—The Merger-Related Compensation Proposal: If you are a VMware stockholder on the record date and (i) participate in the special meeting virtually but fail to vote or (ii) mark your proxy card or voting instruction card to abstain, it will have the same effect as a vote “AGAINST” the merger-related compensation proposal. If you do not (i) participate in the special meeting virtually or by proxy, and do not vote or (ii) instruct your bank, brokerage firm or other nominee how to vote your shares, it will have no effect on the merger-related compensation proposal (assuming a quorum is present).
Proposal 3—The Adjournment Proposal: If you are a VMware stockholder on the record date and (i) participate in the special meeting virtually but fail to vote or (ii) mark your proxy card or voting instruction card to abstain, it will have the same effect as a vote “AGAINST” the adjournment proposal. If you do not (i) participate in the special meeting, virtually or by proxy, and do not vote or (ii) instruct your bank, brokerage firm or other nominee how to vote your shares, it will have no effect on the adjournment proposal (assuming a quorum is present).
Q:
What will happen if the merger-related compensation proposal is not approved?
A:
The merger-related compensation proposal is advisory only and not binding on VMware or Broadcom, whether or not the transactions are completed. The vote on the merger-related compensation proposal is separate and apart from the vote to adopt the merger agreement and approve the first merger and the second merger and not a condition to the completion of the transactions. If the transactions are completed, the merger-related compensation that is the subject of this proposal may be paid to VMware’s named executive officers in accordance with the terms of their compensation agreements and arrangements even if the VMware stockholders fail to approve this proposal.
Q:
How do I vote or have my shares voted?
A:
If you are a stockholder of record, you may vote virtually at the special meeting or vote by proxy using one of the methods described below. Whether or not you plan to participate in the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still participate in the special meeting and vote virtually even if you have already voted by proxy.
To vote via the Internet, submit your proxy by using the Internet at proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern time, on [  ], 2022, the day before the special meeting.
To vote by telephone, submit your proxy by using a touch-tone telephone at 1-800-690-6903. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern time, on [  ], 2022, the day before the special meeting.
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To vote using the proxy card, simply complete, sign and return the enclosed proxy card in the postage-paid envelope (if mailed in the United States) included with this proxy statement/prospectus. VMware stockholders who vote this way should mail the proxy card early enough so that it is received before the date of the special meeting. If you return your signed proxy card to us before the special meeting, we will vote your shares as you direct.
To vote virtually at the special meeting, visit www.virtualshareholdermeeting.com/VMW2022SM and enter the 16-digit control number included on your proxy card or voting instruction card that accompanied your proxy materials.
If you are a beneficial owner of shares held in “street name” by your bank, brokerage firm or other nominee, you should have received a voting instruction card with these proxy materials from that organization rather than from VMware. Follow the instructions from your bank, brokerage firm or other nominee to see which of the above choices are available to you to ensure that your vote is counted. To vote virtually at the special meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee.
Q:
How will my proxy be voted?
A:
If you are a holder of record and submit your proxy via the Internet, by telephone or by completing, signing and returning the enclosed proxy card, your shares will be voted in accordance with your instructions contained in the proxy. If you are a holder of record and submit your proxy without specifying how your shares should be voted on one or more matters, your shares will be voted on those matters as the VMware board of directors recommends.
If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee as to how to vote your shares.
Q:
How can I participate in the special meeting?
A:
To virtually participate in the special meeting, visit www.virtualshareholdermeeting.com/VMW2022SM and enter the 16-digit control number included on your proxy card or voting instruction card that accompanied your proxy materials. If you hold your shares in “street name” and wish to vote virtually at the special meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.
Additional information on participating in the special meeting can be found under the section titled “Information About the VMware Special Meeting.”
Q:
If my shares are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares for me?
A:
No. If your shares are held in “street name” by your bank, brokerage firm or other nominee, you must direct your bank, brokerage firm or other nominee on how to vote and you will receive instructions from your bank, brokerage firm or other nominee describing how to vote your shares of VMware common stock. The availability of Internet or telephonic voting will depend on the nominee’s voting process. Please check with your bank, brokerage firm or other nominee and follow the voting procedures your bank, brokerage firm or other nominee provides.
Under applicable stock exchange rules, your bank, brokerage firm or other nominee cannot vote your shares of VMware common stock on “non-routine” matters without your instructions. If you do not provide these instructions, a “non-vote” occurs with respect to those matters. The merger agreement proposal, the merger-related compensation proposal and the adjournment proposal will be considered “non-routine” matters. Accordingly, if you do not provide your bank, brokerage firm or other nominee instructions on how to vote your shares of VMware common stock at the special meeting, your bank, brokerage firm or other nominee generally will not be permitted to vote your shares on any of the proposals at the special meeting. VMware strongly encourages you to provide voting instructions to your bank, brokerage firm or other nominee so that your vote will be counted on all matters.
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Q:
What is the difference between holding shares as a stockholder of record and in “street name”?
A:
If your shares of VMware common stock are registered directly in your name with the transfer agent of VMware, American Stock Transfer & Trust Co., you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote or to grant a proxy for your vote directly to VMware or to a third party to vote at the special meeting.
If your shares are held by a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares held in “street name,” and, for the purposes of this proxy statement/prospectus, a beneficial owner, and your bank, brokerage firm or other nominee is considered the stockholder of record with respect to those shares. If you are a beneficial owner, you have a right to direct your bank, brokerage firm or other nominee on how to vote the shares held in your account. The availability of Internet or telephonic voting will depend on the nominee’s voting process. Please check with your bank, brokerage firm or other nominee and follow the voting procedures your bank, brokerage firm or other nominee provides. You are invited to participate in the special meeting; however, you may not vote your shares virtually at the special meeting unless you obtain a legal proxy from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.
Q:
What should I do if I receive more than one set of voting materials for the special meeting?
A:
You may receive more than one set of voting materials for the special meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your VMware common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please submit each separate proxy card or voting instruction card that you receive by following the instructions set forth in each separate proxy card or voting instruction card.
Q:
What do I do if I am a VMware stockholder and I want to revoke my proxy?
A:
Stockholders of record may revoke their proxies at any time prior to the voting at the special meeting in any of the following ways:
signing and delivering a new proxy relating to the same shares and bearing a later date than the original proxy;
sending a signed, written notice of revocation, which is dated later than the date of the proxy and states that the proxy is revoked, to Attention: Secretary, VMware, Inc. Legal Department, 3401 Hillview Avenue, Palo Alto, California 94304; or
participating in the special meeting and voting virtually. Participation in the virtual special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.
Beneficial owners of shares held in “street name” may change their voting instructions only by following the directions received from their bank, brokerage firm or other nominee for changing their voting instructions.
Q:
What happens if I sell my shares of VMware common stock before the special meeting?
A:
The record date is earlier than both the date of the special meeting and the closing of the transactions. If you transfer your shares of VMware common stock after the record date but before the special meeting, you will, unless the transferee requests a proxy from you, retain your right to vote at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares upon completion of the transactions.
Q:
Do VMware stockholders have appraisal rights?
A:
Yes. VMware stockholders are entitled to appraisal rights under Section 262 of the General Corporation Law of the State of Delaware (referred to as the DGCL) in connection with the second merger, provided they follow the procedures and satisfy the conditions set forth in Section 262 of the DGCL. VMware stockholders do not, however, have appraisal rights in connection with the first merger. For more
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information regarding appraisal rights, see the section titled “Appraisal Rights of VMware Stockholders.” In addition, a copy of Section 262 of the DGCL is attached as Annex F to this proxy statement/prospectus. Failure to strictly comply with Section 262 of the DGCL may result in your waiver of, or inability to, exercise appraisal rights.
Q:
Who will solicit and pay the cost of soliciting proxies?
A:
VMware will pay for the proxy solicitation costs related to the special meeting. VMware has engaged D.F. King to assist in the solicitation of proxies for the special meeting. VMware estimates that it will pay D.F. King a fee of approximately $17,500, plus reasonable out-of-pocket expenses. VMware will also reimburse banks, brokerage firms, custodians, trustees, nominees and fiduciaries who hold shares for the benefit of another party for their expenses incurred in sending proxies and proxy materials to beneficial owners of VMware common stock. VMware’s directors, officers and employees also may solicit proxies in person by telephone or over the Internet. They will not be paid any additional amounts for soliciting proxies.
Q:
How can I find more information about Broadcom and VMware?
A:
You can find more information about Broadcom and VMware from various sources described in the section titled “Where You Can Find More Information.”
Q:
Who can answer any questions I may have about the special meeting or the proxy materials?
A:
If you have any questions about the special meeting, the transactions, the proposals or this proxy statement/prospectus, would like additional copies of the proxy statement/prospectus, need to obtain proxy cards or other information related to this proxy solicitation or need help submitting a proxy or voting your shares of VMware common stock, you should contact:
VMware, Inc.
3401 Hillview Avenue
Palo Alto, California 94304
(650) 427-5000
Attention: Investor Relations

or

D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Banks and Brokerage Firms Call: (212) 269-5550
Stockholders Call Toll Free: (800) 628-8532
Email: vmw@dfking.com
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SUMMARY
The following summary highlights selected information described in more detail elsewhere in this proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus, and may not contain all the information that may be important to you. To understand the transactions and the matters being voted on by VMware stockholders at the special meeting more fully, and to obtain a more complete description of the legal terms of the merger agreement, you should carefully read this entire proxy statement/prospectus, including the annexes, and the documents to which Broadcom and VMware refer you. Each item in this summary includes a page reference directing you to a more complete description of that topic. See the section titled “Where You Can Find More Information.”
The Parties (see pages 33 and 34)
VMware, Inc.
VMware, Inc., a Delaware corporation (referred to as VMware), is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. VMware originally pioneered the development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware, and then evolved to become the private cloud and mobility management leader. VMware is focused on becoming a multi-cloud leader, aiming to help organizations take on information technology-related challenges through a multi-cloud strategy by providing the multi-cloud platform for all applications. VMware common stock trades on the New York Stock Exchange under the symbol “VMW.” The corporate headquarters of VMware are located at 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
Verona Holdco, Inc.
Verona Holdco, Inc., a Delaware corporation (referred to as Holdco), is a wholly owned subsidiary of VMware. Holdco was formed by VMware solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Holdco are located at c/o VMware, Inc., 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
Verona Merger Sub, Inc.
Verona Merger Sub, Inc., a Delaware corporation (referred to as Merger Sub 1), is a wholly owned subsidiary of Holdco. Merger Sub 1 was formed by Holdco solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 1 are located at c/o VMware, Inc., 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
Broadcom Inc.
Broadcom Inc., a Delaware corporation (referred to as Broadcom), is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. Broadcom’s category-leading product portfolio serves critical markets including data center, networking, enterprise software, broadband, wireless, storage and industrial. Broadcom’s solutions include data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation. Broadcom common stock trades on The Nasdaq Global Select Market under the symbol “AVGO.” The principal executive offices of Broadcom are located at 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433-8000.
Barcelona Merger Sub 2, Inc.
Barcelona Merger Sub 2, Inc., a Delaware corporation (referred to as Merger Sub 2), is a wholly owned subsidiary of Broadcom. Merger Sub 2 was formed by Broadcom solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 2 are located at c/o Broadcom Inc., 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433­8000.
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Barcelona Merger Sub 3, LLC
Barcelona Merger Sub 3, LLC, a Delaware limited liability company (referred to as Merger Sub 3), is a wholly owned subsidiary of Broadcom. Merger Sub 3 was formed by Broadcom solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 3 are located at c/o Broadcom Inc., 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433-8000.
The Transactions and the Merger Agreement (see pages 43 and 88)
The terms and conditions of the transactions are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. VMware encourages you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the transactions.
The merger agreement provides that, through a series of transactions including the first merger and the second merger, VMware will become an indirect, wholly owned subsidiary of Broadcom.
Upon the terms and subject to the conditions set forth in the merger agreement and in accordance with Delaware law:
Merger Sub 1 will merge with and into VMware (referred to as the first merger), with VMware surviving the first merger and becoming a wholly owned subsidiary of Holdco;
following the effective time of the first merger, VMware, the surviving company of the first merger, will be converted (referred to as the LLC conversion) into a Delaware limited liability company;
following the effective time of the LLC conversion, Merger Sub 2 will merge with and into Holdco (referred to as the second merger), with Holdco surviving the second merger and becoming a wholly owned subsidiary of Broadcom; and
following the effective time of the second merger, Holdco, the surviving company of the second merger, will merge with and into Merger Sub 3 (referred to as the third merger), with Merger Sub 3 surviving the third merger as a wholly owned subsidiary of Broadcom.
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Set forth below is a diagram depicting the structure of the first merger and the LLC conversion described under the first and second bullet points above.

*
Circled entities are disregarded for U.S. federal income tax purposes.
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Set forth below is a diagram depicting the structure of the second merger and the third merger described under the third and fourth bullet points above.

*
Circled entities are disregarded for U.S. federal income tax purposes.
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The first merger, the second merger, the third merger and the LLC conversion are collectively referred to as the transactions. In structuring the transactions as described above, the parties took into account, among other things, the effect of the transactions on certain contractual obligations of VMware, as well as the expected U.S. federal income tax treatment of potential transaction structures.
At the effective time of the first merger, each share of VMware common stock issued and outstanding immediately prior to the effective time of the first merger will be converted into one share of common stock of Holdco, and each outstanding VMware equity award will be converted into a Holdco award that relates to a number of shares of Holdco common stock that is equal to the number of shares of VMware common stock that were subject to such award prior to such conversion.
For more information, see the section titled “The Merger Agreement—Effects of the Transactions.”
Merger Consideration (see page 46)
At the effective time of the second merger, each issued and outstanding share of VMware common stock (other than shares (i) owned or held in treasury by VMware or by Merger Sub 2 or in the treasury of VMware as the surviving company in the first merger (referred to as cancelled shares), (ii) owned by stockholders that did not vote in favor of the adoption of the merger agreement and approval of the first merger and the second merger and have validly made a demand for appraisal and not validly withdrawn such demand or otherwise lost their rights of appraisal with respect to such shares pursuant to Section 262 of the DGCL (referred to as dissenting shares) and (iii) owned by any wholly owned subsidiary of VMware (referred to as excluded shares)) will be converted into the right to receive, at the election of the holder of such share and subject to proration, $142.50 in cash, without interest, or 0.25200 of a share of Broadcom common stock. No fractional shares of Broadcom common stock will be issued in the second merger, and holders of VMware common stock will instead receive cash in lieu of fractional shares of Broadcom common stock.
The merger consideration is subject to proration so that 50% of VMware common stock issued and outstanding immediately prior to the effective time of the second merger will be converted into cash consideration and 50% will be converted into stock consideration. A holder of VMware common stock may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if the holder of VMware common stock owns more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares. The election will be subject to the election of other holders of VMware common stock and a proration. A holder of VMware common stock who does not make an election will be treated as having elected to receive cash consideration or stock consideration in accordance with the proration methodology in the merger agreement, which is described in the section titled “The Merger Agreement—Effect of the Transactions—Proration and Allocation of Merger Consideration.”
On May 25, 2022 (the last full trading day before the announcement of the transactions), the closing stock price per share of Broadcom common stock was $531.63, which, after giving effect to the exchange ratio of 0.25200, has an implied value of approximately $133.97 per share. Based on this price, with respect to the stock consideration and the cash consideration of $142.50 per share, upon completion of the transactions, VMware stockholders that receive the cash consideration for 50% of their shares of VMware common stock and receive the stock consideration for 50% of their shares of VMware common stock would receive total merger consideration with an implied value of approximately $138.24 per share.
On July 13, 2022 (the most recent practicable date prior to the date of this proxy statement/prospectus), the closing stock price per share of Broadcom common stock was $481.73, which, after giving effect to the exchange ratio of 0.25200, has an implied value of approximately $121.40 per share. Based on this price, with respect to the stock consideration and the cash consideration of $142.50 per share, upon completion of the transactions, VMware stockholders that receive the cash consideration for 50% of their shares of VMware common stock and receive the stock consideration for 50% of their shares of VMware common stock would receive total merger consideration with an implied value of approximately $131.95 per share.
The implied value of the stock consideration will fluctuate as the market price of Broadcom common stock fluctuates because the stock consideration is payable in a fixed number of shares of Broadcom common stock. As a result, the value of the stock consideration that VMware stockholders will receive upon completion of the second merger could be greater than, less than or the same as the value of the stock consideration on the date of this proxy statement/prospectus, at the time of the VMware special meeting or on the date on which VMware
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stockholders make their election. Accordingly, Broadcom and VMware encourage you to obtain current stock price quotations for Broadcom common stock and VMware common stock before deciding how to vote with respect to the merger agreement proposal. Broadcom common stock and VMware common stock trade on The Nasdaq Global Select Market and the New York Stock Exchange, respectively, under the symbols “AVGO” and “VMW,” respectively.
VMware Special Meeting (see page 35)
Purposes of the Special Meeting
At the special meeting, VMware stockholders will be asked to vote upon the following proposals:
the merger agreement proposal;
the merger-related compensation proposal; and
the adjournment proposal.
Record Date
The record date for the determination of stockholders entitled to notice of and to vote at the special meeting is [   ], 2022 (referred to as the record date). Only VMware stockholders who held shares of record as of the close of business on the record date are entitled to receive notice of and vote at the special meeting and any adjournment or postponement of the special meeting, as long as such shares remain outstanding on the date of the special meeting. VMware’s official stock ownership records will conclusively determine whether a stockholder is a “holder of record” as of the record date.
Required Vote
Proposal 1—The Merger Agreement Proposal. The affirmative vote, virtually or by proxy, of holders of at least a majority of the outstanding shares of VMware common stock entitled to vote on the merger agreement proposal is required to approve the merger agreement proposal.
Proposal 2—The Merger-Related Compensation Proposal. The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the merger-related compensation proposal is required to approve, on an advisory (non-binding) basis, the merger-related compensation proposal.
Proposal 3—The Adjournment Proposal. The affirmative vote of holders of at least a majority of the shares of VMware common stock present virtually or represented by proxy and entitled to vote on the adjournment proposal is required to approve the adjournment proposal.
As of the record date, VMware directors and executive officers, as a group, owned and were entitled to vote [   ] shares of VMware common stock, or approximately [   ]% of the outstanding shares of VMware common stock. VMware currently expects that these directors and executive officers will vote their shares in favor of approving the merger agreement proposal and each of the other proposals described in this proxy statement/prospectus, although none of them are obligated to do so, other than Michael S. Dell.
Concurrently with the execution of the merger agreement, each of (i) the MSD stockholders and (ii) the SL stockholders have agreed to vote all of the shares of VMware common stock held by them (representing in the aggregate approximately [   ]% of the total outstanding shares of VMware common stock as of the record date) in favor of the merger agreement proposal, as described in more detail in the section titled “The Voting Agreements.”
VMware’s Reasons for the Transactions; Recommendation of the VMware Board of Directors (see page 52)
At its May 26, 2022 meeting held to evaluate the transactions, the VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests, of VMware and the VMware stockholders, (ii) determined that it is in the best interests of VMware and the VMware stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions upon the terms and subject to the conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement.
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The VMware board of directors unanimously recommends that VMware stockholders vote “FOR” the merger agreement proposal, “FOR” the merger-related compensation proposal, and “FOR” the adjournment proposal.
In evaluating the transactions and the merger agreement and arriving at its determination, the VMware board of directors consulted with VMware’s senior management, VMware’s financial advisors, Goldman Sachs & Co. LLC (referred to as Goldman Sachs) and J.P. Morgan Securities LLC (referred to as J.P. Morgan), and VMware’s outside legal counsel, and considered a number of substantive factors, both positive and negative, and potential benefits and detriments of the transactions to VMware and its stockholders, as described in more detail in the section titled “The Transactions—VMware’s Reasons for the Transactions; Recommendation of the VMware Board of Directors.”
Opinions of VMware’s Financial Advisors (see page 60)
Opinion of Goldman Sachs (see page 60)
Goldman Sachs rendered its oral opinion, subsequently confirmed by delivery of its written opinion, dated May 26, 2022, to the VMware board of directors that, as of the date of such written opinion and based upon and subject to the various limitations, qualifications and assumptions set forth therein, the aggregate merger consideration to be paid to the holders (other than Broadcom and its affiliates) of shares of VMware common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated May 26, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this proxy statement/prospectus. Goldman Sachs provided advisory services and its opinion for the information and assistance of the VMware board of directors in connection with its consideration of the transactions. The Goldman Sachs opinion is not a recommendation as to how any holder of VMware common stock should vote with respect to the transactions or any other matter.
Opinion of J.P. Morgan (see page 68)
J.P. Morgan rendered its oral opinion, subsequently confirmed by delivery of its written opinion, dated May 26, 2022, to the VMware board of directors that, as of the date of such written opinion and based upon and subject to the various limitations, qualifications and assumptions set forth therein, the merger consideration to be paid to the holders of shares of VMware common stock in the transactions was fair from a financial point of view to such holders.
The full text of the written opinion of J.P. Morgan, dated May 26, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex E to this proxy statement/prospectus. J.P. Morgan provided advisory services and its opinion for the information and assistance of the VMware board of directors in connection with its consideration of the transactions. The J.P. Morgan opinion is not a recommendation as to how any holder of VMware common stock should vote with respect to the transactions or any other matter.
Interests of VMware’s Directors and Executive Officers in the Transactions (see page 75)
When considering the recommendation of the VMware board of directors with respect to the transactions, you should be aware that VMware’s directors and executive officers may have interests in the transactions that are different from, or in addition to, those of VMware stockholders more generally. The VMware board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement, in reaching its decision to approve the merger agreement and the consummation of the transactions and in recommending that VMware stockholders vote in favor of the merger agreement proposal. These interests include, among others, the treatment of outstanding VMware equity awards in connection with the transactions and certain potential severance payments in connection with the transactions and a qualifying termination of employment upon or following the transactions, as described in more detail in the section titled “The Transactions—Interests of VMware’s Directors and Executive Officers in the Transactions.”
Material U.S. Federal Income Tax Consequences (see page 80)
For U.S. federal income tax purposes, the transactions are intended to be treated as follows: (i) the first merger and the LLC conversion, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (referred to as the Code) and (ii) the
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second merger and the third merger, taken together, are intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code (clauses (i) and (ii) together, collectively referred to as the Intended Tax Treatment). VMware’s obligation to complete the transactions is conditioned upon the delivery by Gibson, Dunn & Crutcher LLP, counsel to VMware (referred to as Gibson Dunn) (or other nationally recognized tax counsel or Big 4 accounting firm as may be reasonably acceptable to VMware), of its opinion that the transactions will qualify for the Intended Tax Treatment (referred to as the Tax Opinion).
Provided the transactions qualify for the Intended Tax Treatment, the U.S. federal income tax treatment of the transactions to a U.S. holder (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) of VMware common stock will depend primarily on whether such holder exchanges its shares of VMware common stock solely for shares of Broadcom common stock, solely for cash, or for a combination of shares of Broadcom common stock and cash:
U.S. holders of VMware common stock who exchange their shares of common stock solely for shares of Broadcom common stock generally will not recognize gain or loss on the exchange, except with respect to cash received in lieu of a fractional share of Broadcom common stock.
U.S. holders of VMware common stock who exchange their shares of common stock solely for cash generally will recognize gain or loss on the exchange. Such gain or loss generally will be equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares of VMware common stock surrendered.
U.S. holders of VMware common stock who exchange their shares of common stock for a combination of shares of Broadcom common stock and cash generally will recognize gain, but not loss, on the exchange. If the sum of the fair market value of the Broadcom common stock and the amount of cash received by a U.S. holder in exchange for such holder’s shares of VMware common stock exceeds the tax basis in the shares of VMware common stock, such holder generally will recognize taxable gain on the exchange equal to the lesser of the amount of such excess and the amount of cash received in the exchange.
Under certain circumstances, a holder of shares of VMware common stock could be treated as receiving a dividend in an amount up to the cash consideration received by that holder in the transactions. If the applicable withholding agent is unable to determine whether such cash consideration should be so treated, a holder of VMware common stock that is not a U.S. holder may be subject to United States withholding tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the entire amount of cash payable to such holder in the transactions.
Each VMware stockholder should read the discussion under the section titled “Material U.S. Federal Income Tax Consequences” and should consult his, her or its tax advisor with respect to the particular tax considerations of the transactions to such holder.
Accounting Treatment of the Transactions (see page 80)
The transactions will be accounted for as a business combination, with Broadcom using the acquisition method of accounting in accordance with Accounting Standard Codification 805, Business Combinations, and, accordingly, will generally result in the recognition of VMware assets acquired and liabilities assumed at fair value. However, as of the date of this proxy statement/prospectus, the valuation studies necessary to estimate the fair values of the assets acquired (including intangible assets, such as completed technology, customer relationships and customer lists, and trademarks and trade names) and liabilities assumed have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations to the type of information that can be exchanged between Broadcom and VMware at this time. Until the transactions are complete, Broadcom will not have complete access to all the relevant information. Differences between these preliminary estimates and the final acquisition accounting will occur and there can be no assurances that the final valuations will not result in material changes to this preliminary purchase price allocation. The excess of the consideration transferred over the identifiable net assets acquired reflected in the unaudited pro forma condensed combined financial information will be allocated to goodwill. A final determination of these fair values will reflect appraisals prepared by independent third-parties
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and will be based on the actual tangible and intangible assets and liabilities that exist as of the acquisition date. The actual allocation of the consideration transferred may differ from the allocation assumed in the unaudited pro forma condensed combined financial information and may result in adjustments to the unaudited pro forma condensed combined financial information.
Regulatory Clearances and Approvals Required for the Transactions (see pages 84 and 85)
HSR Act and U.S. Antitrust Matters. The transactions are subject to the requirements of the HSR Act, which prevents VMware and Broadcom from completing the transactions until required information and materials are furnished to the Antitrust Division of the Department of Justice (referred to as the DOJ) and the Federal Trade Commission (referred to as the FTC) and the HSR Act waiting period is terminated or expires. VMware and Broadcom submitted the requisite notification and report forms under the HSR Act on June 10, 2022. On July 11, 2022 VMware and Broadcom each received a request for additional information, often referred to as a “second request,” from the FTC under the HSR Act.
Foreign Regulatory Clearances. The completion of the transactions is subject to clearance under the antitrust laws of the European Union and certain other jurisdictions, and the parties will file merger notifications pursuant to antitrust and competition laws with the appropriate regulators in the European Union and certain other jurisdictions. The parties must observe mandatory waiting periods and/or obtain the necessary approvals, clearances or consents pursuant to certain of these foreign laws before completing the transactions.
Other state or foreign antitrust, competition and foreign investment authorities may take action under the laws of their jurisdictions, which could include seeking to enjoin the completion of the transactions. For more information about regulatory approvals relating to the transactions, see the sections titled “The Transactions—Regulatory Clearances and Approvals Required for the Transactions” and “The Merger Agreement—Conditions to the Transactions.”
Although the parties expect that all required regulatory clearances and approvals will be obtained, the parties cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the transactions, including the requirement to divest assets, create or modify contractual rights or obligations or enter into supply or services agreements. These conditions could result in the conditions to the transactions not being satisfied.
Expected Timing of the Transactions
Broadcom and VMware currently expect the transactions to be completed during Broadcom’s fiscal year 2023, subject to the satisfaction or waiver of customary closing conditions, including the adoption of the merger agreement by the affirmative vote of at least a majority of the outstanding shares of VMware common stock, the expiration or termination of the waiting period under the HSR Act and the receipt of approvals or clearances required under the antitrust laws of the European Union and certain other jurisdictions. However, Broadcom and VMware cannot predict the actual date on which the transactions will be completed because completion is subject to conditions beyond their control and it is possible that such conditions could result in the transactions being completed earlier or later or not being completed at all. See the sections titled “The Merger Agreement—Efforts to Obtain Regulatory Approvals” and “The Merger Agreement—Conditions to the Transactions.” Also, see the section titled “The Transactions—Regulatory Clearances and Approvals Required for the Transaction.”
Treatment of VMware Equity Awards (see pages 95 and 96)
Treatment of Stock Options
At the effective time of the second merger, each outstanding and in-the-money VMware stock option will become vested and will be cancelled in exchange for the right of the holder to receive, in respect of each net option share subject to such stock option, a payment equal to 50% of the cash consideration and 50% of the stock consideration, less applicable tax withholding. For this purpose, net option shares are calculated as the number of shares of VMware common stock having a value equal to the in-the-money value of the stock option based on the value of the merger consideration, with the value of the stock consideration calculated for such purpose based on the volume weighted average sale price of Broadcom common stock over the ten consecutive trading days ending on the second to last trading day immediately preceding the effective time of the second merger (referred to as the Broadcom trading price).
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Treatment of Restricted Stock Units
At the effective time of the second merger:
each outstanding VMware restricted stock unit award held by a non-employee director will become vested and will be cancelled in exchange for the right of the holder to receive, in respect of each share of VMware common stock subject to such award, a payment equal to 50% of the cash consideration and 50% of the stock consideration;
each outstanding time-based VMware restricted stock unit award that is not held by a non-employee director will be converted into a Broadcom restricted stock unit award based on an equity award exchange ratio calculated as the sum of (i) 50% of the stock consideration and (ii) 50% of the cash consideration divided by the Broadcom trading price; and
each outstanding performance-based VMware restricted stock unit award will be converted into a Broadcom restricted stock unit award using the same formula described in the above bullet, provided that (i) for each such award granted under the VMware operating performance stock unit plan, performance goals will be deemed achieved (1) at the actual level with respect to performance periods completed prior to the closing of the transactions, or (2) at target level with respect to performance periods not completed prior to the closing of the transactions and (ii) for each such award that was granted under the VMware total shareholder return (TSR) performance stock unit plan, performance will be measured at the closing of the transactions based on the actual level of achievement of the applicable performance goals based on the value of merger consideration (with the value of the stock consideration calculated for such purpose based on the Broadcom trading price).
Employee Stock Purchase Plan
Pursuant to the terms of the merger agreement, VMware, the VMware board of directors or the compensation committee of the VMware board of directors, as applicable, will take all actions necessary pursuant to the terms of VMware’s employee stock purchase plan, as amended (referred to as the ESPP), to terminate the ESPP effective as of immediately prior to the effective time of the second merger, contingent upon the occurrence of the second merger, and to provide that, (i) no offering or purchase period will be continued or commenced under the ESPP, except for any offering or purchase period under VMware’s ESPP that was in effect on the date of the merger agreement (referred to as the current ESPP offering period); (ii) no new participants may elect to participate in the ESPP during the current ESPP offering period; and (iii) no participant may increase the participant’s payroll deductions with respect to the current ESPP offering period. The final exercise date under the current ESPP offering period shall be the earlier of (A) the normal exercise date for the current ESPP offering period and (B) five business days prior to the effective time of the second merger (such earlier date is referred to as the final exercise date). Each ESPP participant’s accumulated contributions under the ESPP will be used to purchase shares of VMware common stock in accordance with the terms of the ESPP as of the final exercise date, which shares will be treated in accordance with the terms of the merger agreement, and as promptly as practicable following the purchase of such shares in accordance with this sentence, VMware will return to each participant the funds, if any, that remain in such participant’s account after such purchase.
Listing of Broadcom Common Stock; Delisting of VMware Common Stock (see page 87)
It is a condition to the consummation of the transactions that the shares of Broadcom common stock to be issued to VMware stockholders in the second merger be approved for listing on The Nasdaq Global Select Market, subject to official notice of issuance. As a result of the second merger, shares of VMware common stock will cease to be listed on the New York Stock Exchange.
Appraisal Rights of VMware Stockholders (see page 154)
VMware stockholders who do not vote in favor of approval of the merger agreement proposal, who continuously hold their shares of Holdco common stock received in connection with the first merger through the effective time of the second merger and who otherwise comply precisely with the applicable provisions of Section 262 of the DGCL will be entitled to seek appraisal of the fair value of their shares of VMware common stock, as determined by the Delaware Court of Chancery, if the second merger is completed. The “fair value” of your shares of VMware common stock as determined by the Delaware Court of Chancery could be greater than,
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the same as, or less than the value of the merger consideration that you would otherwise be entitled to receive under the terms of the merger agreement. VMware stockholders who wish to exercise the right to seek an appraisal of their shares must so advise VMware by submitting a written demand for appraisal in the form described in this proxy statement/prospectus prior to the vote to approve the merger agreement proposal, and must otherwise follow the procedures prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of VMware common stock held of record in the name of another person, such as a nominee or intermediary, must act promptly to cause the record holder to follow the steps summarized in this proxy statement/prospectus and in a timely manner to perfect appraisal rights.
The text of Section 262 of the DGCL is attached as Annex F to this proxy statement/prospectus. You are encouraged to read these provisions carefully and in their entirety. Due to the complexity of the procedures for exercising appraisal rights, VMware stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel and their financial advisors. Failure to strictly comply with these provisions may result in the loss of appraisal rights.
Go Shop; No Solicitation of Other Offers by VMware (see page 104)
The merger agreement provides that from the date thereof until 11:59 p.m. Pacific time, on July 5, 2022 (referred to as the no-shop period start date), VMware and its subsidiaries and their respective representatives may solicit, encourage or facilitate any acquisition proposal and any proposal, inquiry or offer that could be reasonably expected to lead to, result in or constitute an acquisition proposal, including providing information regarding VMware to any person pursuant to an acceptable confidentiality agreement, and engaging in discussions or negotiations with respect to such acquisition proposal.
Under the terms of the merger agreement, from and after the no-shop period start date and except as permitted under the prior paragraph, VMware has agreed not to solicit, encourage or facilitate any competing acquisition proposals for VMware, enter into discussions or negotiations with any third parties regarding any competing acquisition proposals for VMware or enter into any agreements with a third party regarding any competing acquisition proposals for VMware.
Notwithstanding the foregoing restrictions, from and following the no-shop period start date, if VMware receives an unsolicited competing acquisition proposal, prior to VMware stockholders adopting the merger agreement at the special meeting, that the VMware board determines to be superior to the transactions or reasonably be expected to lead to a proposal that is superior to the transactions, subject to certain conditions set forth in the merger agreement, VMware is permitted to engage in discussions and negotiations with the party that sent the competing acquisition proposal (and its representatives, advisors and financing sources) and furnish non-public information to that party (and its representatives, advisors and debt financing sources).
Under the terms of the merger agreement and subject to certain conditions set forth therein (including the payment of a $1.5 billion termination fee or $750 million termination fee, as applicable), prior to VMware stockholders adopting the merger agreement at the special meeting, VMware may terminate the merger agreement to accept a competing acquisition proposal that the VMware board of directors has determined to be superior to the transactions from a financial point of view. See “The Merger Agreement—Go Shop; No Solicitation of Other Offers by VMware” and “The Merger Agreement—Change of Recommendation; Match Rights.”
Conditions to the Transactions (see page 111)
The respective obligations of VMware, Holdco, Merger Sub 1, Broadcom and Broadcom Merger Subs to consummate the transactions are subject to the satisfaction (or waiver if permitted under the merger agreement) of customary conditions, including the adoption of the merger agreement by VMware’s stockholders by the affirmative vote of at least a majority of the outstanding shares of VMware common stock, the expiration or termination of the waiting period under the HSR Act and the receipt of approvals or clearances required under the antitrust laws of the European Union and certain other jurisdictions.
The obligations of Broadcom and Broadcom Merger Subs to consummate the transactions are also subject to the absence of a VMware material adverse effect (as defined in the section titled “The Merger Agreement—Representations and Warranties”) after the date of the merger agreement that is continuing, the accuracy of VMware, Holdco and Merger Sub 1 representations and warranties and compliance by VMware,
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Holdco and Merger Sub 1 with its obligations and agreements under the merger agreement, as described in the section titled “The Merger Agreement—Representations and Warranties.”
The merger agreement does not include a financing condition.
Under the terms of the merger agreement, the parties are required to close the transactions on the third business day following the date on which the closing conditions to the transactions are satisfied. However, if the closing date would occur within 35 days of the end of Broadcom’s fiscal year or any other fiscal quarter, Broadcom may, upon written notice to VMware, choose to defer the closing of the transactions to the first business day of its next fiscal year or fiscal quarter, respectively (or to another date agreed to between VMware and Broadcom). See the section titled “The Merger Agreement—Closing; Effective Time.”
Termination of the Merger Agreement (see page 114)
Among other customary circumstances, Broadcom or VMware may terminate the merger agreement if:
any governmental entity of competent jurisdiction has issued a final, non-appealable order, injunction, decree or ruling permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions;
the effective time of the second merger has not occurred on or before February 26, 2023 (which we refer to as the outside date); however, (i) if, on the outside date, all of the conditions to the transactions (other than those conditions relating to antitrust approvals or no injunction (to the extent the relevant injunction or order is in respect of, or any such law is, the HSR Act or any other antitrust law) or those conditions that by their nature are to be satisfied or waived on the closing date (if such conditions would be satisfied or validly waived were the closing of the transactions to occur at such time)) shall have been satisfied or waived, then the outside date may be extended, by either VMware or Broadcom by providing written notice five business days prior to the outside date, for a period of three months, (ii) if, on the outside date, as extended, all of the conditions to the transactions (other than those conditions relating to antitrust approvals or no injunction (to the extent the relevant injunction or order is in respect of, or any such law is, the HSR Act or any other antitrust law) or those conditions that by their nature are to be satisfied or waived on the closing date of the transactions (if such conditions would be satisfied or validly waived were the closing of the transactions to occur at such time)) shall have been satisfied or waived, then the outside date may be further extended, by either VMware or Broadcom by providing written notice five business days prior to the as extended outside date, for a period of three months, (iii) if, on the outside date, as extended, all of the conditions to the transactions (other than those conditions relating to antitrust approvals or no injunction (to the extent the relevant injunction or order is in respect of, or any such law is, the HSR Act or any other antitrust law) or those conditions that by their nature are to be satisfied or waived on the closing date of the transactions (if such conditions would be satisfied or validly waived were the closing of the transactions to occur at such time)) shall have been satisfied or waived, then the outside date may be further extended, by either VMware or Broadcom by providing written notice five business days prior to the as extended outside date, for a period of three months and (iv) this right to terminate will not be available to any party whose action or failure to fulfill any obligation was a proximate cause of the failure of the effective time of the second merger to occur prior to the outside date and such action or failure to act constitutes a material breach of the merger agreement; and
the special meeting (including any adjournments or postponements thereof) has concluded and the VMware stockholders have not adopted the merger agreement by the affirmative vote of at least a majority of the outstanding shares of VMware common stock.
Termination Fee and Expenses (see page 116)
VMware must pay Broadcom a termination fee of $1.5 billion if the merger agreement is terminated in certain circumstances including VMware entering into a definitive agreement with respect to a superior proposal, an adverse recommendation change or a willful breach in a material respect of VMware’s non-solicitation obligations under the merger agreement, unless VMware terminates the merger agreement in order to enter into a definitive agreement with respect to a superior proposal prior to the no-shop period start date, in which case VMware will be required to pay Broadcom a lower termination fee in the amount of $750 million.
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Broadcom must pay VMware a termination fee of $1.5 billion if the merger agreement is terminated in certain circumstances including as a result of certain required regulatory clearances not being obtained by the outside date.
All other expenses relating to the transactions will generally be paid by the party incurring the expense.
Comparison of Rights of Common Stockholders of Broadcom and VMware (see page 137)
Upon the completion of the transactions, VMware stockholders receiving shares of Broadcom common stock will become stockholders of Broadcom, and their rights will be governed by the governing corporate documents of Broadcom in effect at the effective time of the second merger, which are different from VMware’s governing corporate documents, as further described in the section titled “—Comparison of Rights of Common Stockholders of Broadcom and VMware.”
Risk Factors (see page 25)
You should consider all the information about the risks related to the transactions set forth under the section titled “Risk Factors,” together with information contained in or incorporated by reference into this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. See the section titled “Where You Can Find More Information.”
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts but reflect Broadcom’s and VMware’s current beliefs, expectations or intentions regarding future events. These forward-looking statements include but are not limited to statements that relate to the expected future business and financial performance, the anticipated benefits of the transactions, the anticipated impact of the transactions on the combined business, the expected amount and timing of the synergies from the transactions and the anticipated closing date of the transactions. These forward-looking statements are identified by words such as “will,” “expect,” “believe,” “anticipate,” “estimate,” “should,” “intend,” “plan,” “potential,” “predict,” “project,” “aim,” and similar words or phrases. These forward-looking statements are based on current expectations and beliefs of management and current market trends and conditions.
These forward-looking statements involve risks and uncertainties that are outside Broadcom’s and VMware’s control and may cause actual results to differ materially from those contained in forward-looking statements. These risks and uncertainties include, among others, those set forth under “Risk Factors” beginning on page 25, as well as risks and uncertainties relating to:
the effect of the transactions on the ability to maintain relationships with customers, suppliers and other business partners or operating results and business;
the ability to implement plans, achieve forecasts and meet other expectations with respect to the business after the completion of the transactions and realize expected synergies;
business disruption following the transactions;
difficulties in retaining and hiring key personnel and employees due to the transactions and business combination;
the diversion of management time on transaction-related issues;
the satisfaction of the conditions precedent to consummation of the transactions, including the ability to secure regulatory approvals on the terms expected, at all or in a timely manner;
significant indebtedness, including indebtedness incurred in connection with the transactions, and the need to generate sufficient cash flows to service and repay such debt;
the disruption of current plans and operations;
the outcome of any legal proceedings related to the transactions;
the ability to consummate the transactions on a timely basis or at all;
the ability to successfully integrate VMware’s operations;
the impact of public health crises, such as pandemics (including COVID-19) and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets;
cyber-attacks, information security and data privacy;
global political and economic conditions, including rising interest rates, the impact of inflation and challenges in manufacturing and the global supply chain; and
events and trends on a national, regional and global scale, including the cyclicality in the semiconductor industry and other target markets and those of a political, economic, business, competitive and regulatory nature.
Broadcom and VMware caution that the foregoing list of factors is not exhaustive. Additional information concerning these and other risk factors is contained in Broadcom’s and VMware’s most recently filed Annual Reports on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other SEC filings, as such filings may be amended from time to time. All of the forward-looking statements made by Broadcom or VMware contained or incorporated by reference in this proxy statement/prospectus and all
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subsequent written and oral forward-looking statements concerning Broadcom, VMware, the transactions or other matters attributable to Broadcom or VMware or any person acting on either of their behalf are expressly qualified in their entirety by the cautionary statement above.
Readers are cautioned not to place undue reliance on forward-looking statements contained in this proxy statement/prospectus, which speak only as of the date such statements were made. Neither Broadcom nor VMware undertakes any obligation to update or revise any of these forward-looking statements to reflect events or circumstances that may arise after the date hereof, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by applicable law.
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RISK FACTORS
In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, including, among other things, the matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking Statements,” VMware stockholders should carefully consider the following risks before deciding whether to vote in favor of the merger agreement proposal and the other proposals described in this proxy statement/prospectus. In addition, VMware stockholders should read and consider the risks associated with each of the businesses of Broadcom and VMware because these risks will relate to Broadcom following the completion of the transactions. Descriptions of some of these risks can be found in Broadcom’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021 and VMware’s Annual Report on Form 10-K for the fiscal year ended January 28, 2022 and, in each case, any amendments thereto, as such risk factors may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this proxy statement/prospectus. You should also consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See the section titled “Where You Can Find More Information.”
Risks Relating to the Transactions
Because the stock election exchange ratio is fixed and will not be adjusted for stock price changes and the market price of Broadcom common stock has fluctuated and will continue to fluctuate, VMware stockholders cannot be sure of the value of the consideration they will receive.
Upon completion of the second merger, each issued and outstanding share of VMware common stock (other than (i) cancelled shares, (ii) dissenting shares and (iii) excluded shares) will be converted into the right to receive, at the election of the stockholder and subject to proration, $142.50 in cash, without interest, or 0.25200 of a share of Broadcom common stock. Each VMware stockholder may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if the VMware stockholder owns more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares.
The market price of Broadcom common stock at the time of completion of the transactions may vary significantly from the market price of Broadcom common stock on the date the merger agreement was executed, the date of this proxy statement/prospectus, the date of the VMware special meeting and the date on which VMware stockholders make their election. Because the stock consideration is payable in a fixed number of shares of Broadcom common stock, the value of the stock consideration that VMware stockholders receive upon completion of the transactions may be higher or lower than the value of the stock consideration on such earlier dates. In addition, as discussed below, the merger consideration will be subject to proration. Accordingly, VMware stockholders will not know or be able to calculate at the time of the VMware special meeting the market value of the stock consideration they will receive upon completion of the transactions.
If a VMware stockholder makes a stock election and the market value of Broadcom common stock falls between the time of the election and the time the merger consideration is actually received, the value of the merger consideration received may be less than the value of the merger consideration such stockholder would have received under a cash election. Conversely, if a VMware stockholder makes a cash election and the market value of Broadcom common stock rises between the time of the election and the time the merger consideration is actually received, the value of the merger consideration received may be less than the value of the merger consideration such stockholder would have received under a stock election.
Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Broadcom’s and VMware’s respective businesses, operations and prospects, market assessments of the likelihood that the transactions will be completed, the timing of the transactions, regulatory considerations and other risk factors set forth or incorporated by reference in this proxy statement/prospectus. Many of these factors are beyond Broadcom’s and VMware’s control. VMware stockholders are urged to obtain current market quotations for Broadcom common stock and VMware common stock when they make their elections.
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VMware stockholders may not receive all consideration in the form they elect, and the form of consideration that they receive may have a lower value or different tax consequences than the form of consideration that they elect to receive.
VMware stockholders’ consideration will be subject to proration, such that the total number of shares of VMware common stock entitled to receive the cash consideration and the total number of shares of VMware common stock entitled to receive the stock consideration, will, in each case, be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the second merger. Accordingly, some of the merger consideration a VMware stockholder receives may differ from the type of consideration selected and such difference may be significant. This may result in, among other things, tax consequences that differ from those that would have resulted if the VMware stockholder had received solely the form of consideration elected. A discussion of the proration mechanism can be found under the section titled “The Transactions—Merger Consideration” and a discussion of the material U.S. federal income tax consequences of the transactions can be found under the section titled “The Transactions—Material U.S. Federal Income Tax Consequences.”
Completion of the transactions is subject to the conditions contained in the merger agreement and if these conditions are not satisfied or waived, the transactions will not be completed.
The obligations of Broadcom and VMware to complete the transactions are subject to the satisfaction or waiver of a number of conditions, including, among others, the adoption of the merger agreement by VMware’s stockholders by the affirmative vote of at least a majority of the outstanding shares of VMware common stock, the expiration or termination of the waiting period under the HSR Act and the receipt of approvals or clearances required under the antitrust laws of the European Union and certain other jurisdictions. For a more complete summary of the required regulatory approvals and the closing conditions, see the sections titled “The Transactions—Regulatory Clearances and Approvals for the Transactions” and “The Merger Agreement—Conditions to the Transactions.”
Although Broadcom and VMware have agreed in the merger agreement to use their reasonable best efforts to complete the transactions as promptly as practicable, many of the closing conditions are not within Broadcom’s or VMware’s control, and neither company can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to February 26, 2023, which deadline may be extended to November 26, 2023 under certain circumstances, it is possible that the merger agreement will be terminated. The failure to satisfy all of the required conditions could delay the completion of the transactions for a significant period of time or prevent it from occurring. Any delay in completing the transactions could cause Broadcom not to realize some or all of the benefits that it expects to achieve if the transactions are successfully completed within their expected timeframe. There can be no assurance that the closing conditions will be satisfied or waived or that the transactions will be completed. See the risk factor titled “—Failure to complete the transactions could negatively affect the stock price and the future business and financial results of VMware,” below.
In addition, upon termination of the merger agreement under specified circumstances, including the termination by either party because certain required regulatory clearances either are not obtained before the outside date or are denied, Broadcom would be required to pay VMware a reverse termination fee of $1.5 billion. For additional information, see the section titled “The Merger Agreement—Termination Fee and Expenses.”
The transactions are subject to the expiration of applicable waiting periods and the receipt of approvals, consents or clearances from regulatory authorities in the United States, the European Union and certain other jurisdictions that may impose conditions that could have an adverse effect on Broadcom, VMware or following the completion of the transactions, Broadcom or, if not obtained, could prevent completion of the transactions.
Before the transactions may be completed, any waiting period (or extension thereof) applicable to the transactions must have expired or been terminated, and any approvals, consents or clearances required in connection with the transactions must have been obtained, in each case, under the HSR Act and under the antitrust laws of the European Union and certain other jurisdictions. In addition, the transactions may be reviewed under antitrust statutes or foreign direct investment regimes of other governmental authorities, including U.S. state laws. In deciding whether to grant the required regulatory approval, consent or clearance, the relevant governmental entities will consider the effect of the transactions on competition within their relevant jurisdiction.
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The terms and conditions of the approvals, consents and clearances that are granted may impose requirements, limitations or costs or place restrictions on the conduct of Broadcom’s business following the completion of the transactions. Under the merger agreement, Broadcom and VMware have agreed to use their reasonable best efforts to obtain such approvals, consents and clearances and therefore may be required to comply with conditions, terms, obligations or restrictions imposed by governmental authorities. There can be no assurance that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the transactions or imposing additional material costs on or materially limiting the revenues of Broadcom following the completion of the transactions. In addition, neither Broadcom nor VMware can provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the transactions. See the sections titled “The Transactions—Regulatory Clearances and Approvals Required for the Transactions” and “The Merger Agreement—Conditions to the Transactions.”
The transactions could cause VMware’s spin-off from Dell Technologies, Inc. to become a taxable transaction, which would result in material indemnification obligations on the part of VMware (and as a result, Broadcom).
Under current U.S. federal income tax law, an acquisition of a corporation that was a distributing or controlled corporation in a spin-off intended to qualify as a tax-free transaction under Section 355 of the Code can render the spin-off taxable to the distributing corporation and, if applicable, its shareholders if such acquisition is deemed to occur pursuant to a “plan” that includes the spin-off or violates the “device” prohibition. The tax matters agreement (referred to as the tax matters agreement) entered into by Dell Technologies, Inc. (referred to as Dell), VMware and certain other parties in connection with VMware’s spin-off from Dell (referred to as the VMware spin-off), generally provides that VMware is responsible for any taxes imposed on Dell or any of its affiliates (or any of its shareholders that are required to be paid or reimbursed by Dell or any of its affiliates) resulting from a failure of the VMware spin-off to qualify as a tax-free transaction under Section 355 of the Code if such failure is caused by an acquisition of VMware common stock. In addition, the tax matters agreement prohibits VMware from taking certain actions, such as engaging in the transactions, during the two-year period following the VMware spin-off, unless VMware provides Dell with an opinion of counsel or Internal Revenue Service (referred to as the IRS) private letter ruling confirming that such action will not cause the VMware spin-off to fail to qualify as a tax-free transaction under Section 355 of the Code.
In connection with the execution of the merger agreement, VMware received an opinion from Gibson Dunn, counsel to VMware, to the effect that the transactions will not result in the VMware spin-off failing to qualify as a tax-free transaction under Section 355 of the Code. Moreover, the closing of the transactions is conditioned on such opinion not having been revoked, substantively modified or withdrawn (unless an acceptable replacement opinion has been received). The opinion is based on, among other things, various assumptions and the accuracy of representations made by VMware, Broadcom, Dell and certain other persons. If any of these assumptions or representations were, or were to become, inaccurate or incomplete, the opinion may be invalid. No ruling from the IRS is being sought regarding the U.S. federal income tax consequences of the transactions, and an opinion of counsel is not binding on the IRS or any court. Accordingly, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions in the opinion of counsel or that a court will not sustain such a challenge.
If the VMware spin-off were determined to be taxable as a result of the transactions, Dell, its affiliates and, potentially, its stockholders would incur significant tax liabilities and, under the tax matters agreement, VMware may be required to indemnify Dell and its affiliates for any such tax liabilities, which would be material.
VMware’s directors and executive officers have interests in the transactions that may be different from, or in addition to, your interests as a stockholder of VMware more generally.
When considering the recommendation of the VMware board of directors that VMware stockholders approve the merger agreement proposal and the merger-related compensation proposal, VMware stockholders should be aware that directors and executive officers of VMware have certain interests in the transactions that may be different from, or in addition to, the interests of VMware stockholders more generally. These interests generally include, among others, treatment of outstanding VMware equity awards in connection with the transactions and certain potential severance payments in connection with the transactions and a qualifying termination of employment upon or following the transactions. See the section titled “The Transactions— Interests of VMware’s Directors and Executive Officers in the Transactions” for a more detailed description of
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these interests. The VMware board of directors was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement, in reaching its decision to approve the merger agreement and the consummation of the transactions, and in recommending that VMware stockholders vote in favor of the merger agreement proposal.
The merger agreement limits VMware’s ability to pursue alternatives to the transactions and may discourage other companies from trying to acquire VMware.
The merger agreement contains provisions that make it more difficult for VMware to sell its business to a party other than Broadcom. These provisions include a general prohibition on VMware soliciting any company takeover proposal or offer for a competing transaction following the expiration of the go-shop period, which expired on July 5, 2022. In addition, upon termination of the merger agreement, VMware is required to pay Broadcom a termination fee of $1.5 billion if the merger agreement is terminated in certain circumstances including VMware entering into a definitive agreement with respect to a superior proposal, an adverse recommendation change or a willful breach in a material respect of VMware’s non-solicitation obligations under the merger agreement.
Although the go-shop provision was intended to provide VMware the ability to conduct a reasonable market check on the adequacy of the merger consideration payable to VMware stockholders pursuant to the merger agreement, it is possible that the go-shop provision, the no-shop provision or the other provisions of the merger agreement could discourage a potential acquiror that might have had an interest in acquiring all or a significant part of VMware from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the consideration Broadcom proposes to pay in the transactions or might result in a potential competing acquiror proposing to pay a lower per share price to acquire VMware than it might otherwise have proposed to pay because of the termination fee that may become payable to Broadcom in certain circumstances described in the section titled “The Merger Agreement—Termination Fee and Expenses.”
The merger agreement subjects VMware to restrictions on its business activities.
The merger agreement subjects VMware to restrictions on its business activities and obligates VMware to generally conduct its business in a commercially reasonable manner and in all material respects in the ordinary course of business consistent with past practice. These restrictions could have an adverse effect on VMware’s results of operations, cash flows and financial position.
The business relationships of Broadcom and VMware and their respective subsidiaries may be subject to disruption due to uncertainty associated with the transactions, which could have an adverse effect on the results of operations, cash flows and financial position of Broadcom, VMware and, following the completion of the transactions, Broadcom.
Parties with which Broadcom and VMware, or their respective subsidiaries, do business may be uncertain as to the effects the transactions may have on them, including with respect to current or future business relationships with Broadcom, VMware or their respective subsidiaries. These relationships may be subject to disruption as customers, suppliers and other persons with whom Broadcom and VMware have a business relationship may delay or defer certain business decisions or might decide to terminate, change or renegotiate their relationships with Broadcom or VMware, as applicable, or consider entering into business relationships with parties other than Broadcom, VMware or their respective subsidiaries. These disruptions could have an adverse effect on the results of operations, cash flows and financial position of Broadcom or VMware, including an adverse effect on Broadcom’s ability to realize the expected synergies and other benefits of the transactions. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the transactions or termination of the merger agreement.
Failure to complete the transactions could negatively affect the stock price and the future business and financial results of VMware.
If the transactions are not completed for any reason, including as a result of VMware stockholders failing to approve the merger agreement proposal, the ongoing business of VMware may be adversely affected and, without realizing any of the benefits of having completed the transactions, VMware could be subject to a number of negative consequences, including the following:
VMware may experience negative reactions from the financial markets, including negative impacts on its stock price;
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VMware may experience negative reactions from its customers and suppliers;
VMware may experience negative reactions from its employees and may not be able to retain key management personnel and other key employees;
VMware will have incurred, and will continue to incur, significant non-recurring costs in connection with the transactions that it may be unable to recover;
the merger agreement places certain restrictions on the conduct of VMware’s business prior to completion of the transactions, the waiver of which is subject to the consent of Broadcom (not to be unreasonably withheld, conditioned or delayed), which may prevent VMware from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the transactions that may be beneficial to VMware (see the section titled “The Merger Agreement—Conduct of Businesses of VMware and Broadcom Prior to Completion of the Transactions” for a description of the restrictive covenants applicable to VMware); and
matters relating to the transactions (including integration planning) will require substantial commitments of time and resources by VMware management, which could otherwise be devoted to day-to-day operations and other opportunities that may be beneficial to VMware as an independent company.
In addition, upon termination of the merger agreement, under certain circumstances, VMware is required to pay Broadcom a termination fee of $1.5 billion, including VMware entering into a definitive agreement with respect to a superior proposal, an adverse recommendation change or a willful breach in a material respect of VMware’s non-solicitation obligations under the merger agreement. Finally, VMware could be subject to litigation related to any failure to complete the transactions or related to any enforcement proceeding commenced against VMware to perform its obligations under the merger agreement. If the transactions are not completed, any of these risks may materialize and may adversely affect VMware’s businesses, financial condition, financial results and stock price.
Broadcom expects to obtain financing in connection with the transactions and cannot guarantee that it will be able to obtain such financing on favorable terms or at all.
Broadcom anticipates that the funds needed to complete the transactions will be derived from a combination of (i) available cash on hand and (ii) third-party debt financing. See “The Transactions—Financing of the Transactions” for additional information regarding the anticipated financing of the transactions. Broadcom’s ability to obtain any such new debt financing will depend on, among other factors, prevailing market conditions and other factors beyond Broadcom’s control. Broadcom cannot assure you that it will be able to obtain new debt financing on terms acceptable to it or at all, and any such failure could materially adversely affect its operations and financial condition. Broadcom’s obligation to complete the transactions is not conditioned upon the receipt of any financing.
The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is preliminary and the actual financial condition and results of operations after the transactions may differ materially from them.
The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Broadcom’s actual financial condition or results of operations would have been had the transactions been completed on the dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon assumptions, preliminary estimates and accounting reclassifications, to record the VMware identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this proxy statement/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of VMware as of the date of the completion of the transactions. Accordingly, the final accounting adjustments as a result of the acquisition may differ materially from the pro forma adjustments reflected in this proxy statement/prospectus. For more information, see the section titled “Unaudited Pro Forma Condensed Combined Financial Information.”
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Completion of the transactions may trigger change in control provisions in certain agreements to which VMware is a party.
The completion of the transactions may trigger change in control provisions in certain agreements to which VMware is a party. If VMware and Broadcom are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if VMware and Broadcom are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to VMware or Broadcom.
Lawsuits may in the future be filed against VMware, its directors, Broadcom, Holdco, Merger Sub 1 and/or Broadcom Merger Subs challenging the transactions or any one of them, and an adverse ruling in any such lawsuit may prevent completing the transactions or completing the transactions within the expected timeframe and/or result in substantial costs to Broadcom and VMware.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements like the merger agreement. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Broadcom’s and VMware’s respective liquidity and financial condition.
Further, one of the conditions to the completion of the transactions is that no injunction or law by any governmental entity of competent jurisdiction will be in effect that has the effect of restraining, enjoining or otherwise prohibiting the consummation of the transactions. As such, if an injunction prohibiting the consummation of the transactions is obtained, that injunction may prevent the transactions from becoming effective or from becoming effective within the expected timeframe.
Risks Relating to Broadcom Following Completion of the Transactions
Failure to realize the benefits expected from the transactions could adversely affect the value of Broadcom common stock.
Although Broadcom expects significant benefits to result from the transactions, there can be no assurance that Broadcom will actually realize any of them, or realize them within the anticipated timeframe. Achieving these benefits will depend, in part, on Broadcom’s ability to integrate VMware’s business successfully and efficiently. The challenges involved with the transactions, which will be complex and time consuming, include the following:
preserving customer and other important relationships of VMware and attracting new business and operational relationships;
integrating financial forecasting and controls, procedures and reporting cycles;
consolidating and integrating corporate, information technology, finance and administrative infrastructures;
coordinating sales and marketing efforts to effectively position Broadcom’s capabilities;
coordinating and integrating operations in countries in which Broadcom has not previously operated; and
integrating employees and related HR systems and benefits, maintaining employee morale and retaining key employees.
If these issues and the other challenges inherent in integrating an acquired business are not successfully managed, then Broadcom may not achieve the anticipated benefits of the transactions on Broadcom’s anticipated timeframe or at all, and Broadcom’s revenue, expenses, operating results, financial condition and stock price could be materially adversely affected. The successful completion of the transactions will require significant management attention both before and after the transactions, and may divert the attention of management from Broadcom’s business and operational issues.
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After the transactions, VMware stockholders will have a significantly lower ownership and voting interest in Broadcom than they currently have in VMware and will exercise less influence over management.
Based on the number of shares of VMware common stock outstanding as of July 13, 2022, and the number of shares of Broadcom common stock outstanding as of July 13, 2022, it is expected that, immediately after completion of the transactions, former VMware stockholders will own approximately 12.6% of the outstanding shares of Broadcom common stock. Consequently, former VMware stockholders will have less influence over the management and policies of Broadcom than they currently have over the management and policies of VMware.
The shares of Broadcom common stock have rights different from the shares of VMware common stock.
As a result of the transactions, VMware stockholders will no longer be stockholders of VMware. Former VMware stockholders who receive stock consideration in the second merger will become Broadcom stockholders, and their rights as stockholders will be governed by the terms of Broadcom’s governing corporate documents. See the section titled “Comparison of Rights of Common Stockholders of Broadcom and VMware” for a discussion of the different rights associated with Broadcom common stock.
Broadcom and VMware will incur direct and indirect costs as a result of the transactions.
Broadcom and VMware will incur substantial expenses in connection with and as a result of completing the transactions. Following completion of the transactions, Broadcom expects to incur additional expenses in connection with the integration of VMware’s business. Broadcom may incur additional costs or suffer loss of business under third-party contracts that are terminated or that contain change in control or other provisions that may be triggered by the completion of the transactions, and/or losses of, or decreases in orders by, customers, and may also incur costs to maintain employee morale and to retain certain key management personnel and employees. Broadcom and VMware will also incur transaction fees and costs related to formulating integration plans, and the execution of these plans may lead to additional unanticipated costs and time delays. These incremental transaction-related costs may exceed the cost synergies Broadcom expects to achieve, particularly in the near term. Factors beyond Broadcom’s control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately. See “Failure to realize the benefits expected from the transactions could adversely affect the value of Broadcom’s common stock” for additional integration risks.
Uncertainties associated with the transactions may cause a loss of management personnel and other key employees of Broadcom or VMware, which could adversely affect the future business and operations of Broadcom following the transactions.
Broadcom and VMware are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Broadcom’s success after the transactions will depend in part upon its ability to retain key management personnel and other key employees of Broadcom and VMware. Current and prospective employees of Broadcom and VMware may be uncertain about their future roles with Broadcom following the transactions, which may materially adversely affect the ability of each of Broadcom and VMware to attract and retain key personnel during the pendency of the transactions. Accordingly, there can be no assurance that Broadcom will be able to retain key management personnel and other key employees of Broadcom and VMware.
The market price of Broadcom common stock after the transactions are completed may be affected by factors different from those affecting shares of VMware common stock before the transactions are completed.
Upon completion of the transactions, certain holders of VMware common stock will become holders of Broadcom common stock. Broadcom’s business differs in important respects from that of VMware, and accordingly, the market price of Broadcom common stock after the completion of the transactions may be affected by factors different from those currently affecting the independent results of operations of each of Broadcom and VMware. As a result, the market price of Broadcom common stock may fluctuate significantly following completion of the transactions and holders of VMware common stock could lose the value of their investment in Broadcom common stock. For a discussion of the businesses of Broadcom and VMware and of some important factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus and referred to under “Where You Can Find More Information.” In addition, if former VMware stockholders sell substantial amounts of Broadcom common stock in the public market following consummation of the transactions, this could decrease the market price of Broadcom common stock.
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In connection with the transactions, Broadcom will incur new indebtedness. Broadcom’s substantial indebtedness could adversely affect Broadcom’s financial health and its ability to execute its business strategy.
Broadcom’s aggregate indebtedness as of July 13, 2022 was approximately $41.2 billion (excluding finance leases). Broadcom’s pro forma indebtedness as of July 13, 2022, after giving effect to the transactions and the anticipated incurrence of indebtedness in connection therewith, will be as much as $82.5 billion (excluding finance leases).
Broadcom’s substantial indebtedness could have important consequences including:
increasing its vulnerability to adverse general economic and industry conditions;
exposing it to interest rate risk due to its variable rate term facilities, which Broadcom does not typically hedge against;
limiting its flexibility in planning for, or reacting to, changes in the economy and the semiconductor industry;
placing Broadcom at a competitive disadvantage compared to its competitors with less indebtedness;
making it more difficult to borrow additional funds in the future to fund growth, acquisitions, working capital, capital expenditures and other purposes; and
potentially requiring Broadcom to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of its cash flow to fund its other business needs.
Broadcom receives debt ratings from the major credit rating agencies in the U.S. Factors that may impact its credit ratings include debt levels, planned asset purchases or sales and near-term and long-term production growth opportunities. Liquidity, asset quality, cost structure, reserve mix and commodity pricing levels could also be considered by the rating agencies. While Broadcom is focused on maintaining investment grade ratings from these agencies, it may be unable to do so. Any downgrade in Broadcom’s credit rating or the ratings of its indebtedness, or adverse conditions in the debt capital markets, could:
adversely affect the trading price of, or market for, its debt securities;
increase interest expense under its term facilities;
increase the cost of, and adversely affect its ability to refinance, its existing debt; and
adversely affect its ability to raise additional debt.
Certain of the indebtedness to be incurred in connection with the transactions may bear interest at variable interest rates. If interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect Broadcom’s cash flows.
Other Risks of Broadcom and VMware
Broadcom’s and VMware’s businesses are and will be subject to the risks described above. In addition, Broadcom and VMware are, and will continue to be, subject to the risks described in Broadcom’s Annual Report for the fiscal year ended October 31, 2021 and VMware’s Annual Report on Form 10-K for the fiscal year ended January 28, 2022, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. The risks described above and in those filings represent all known material risks with respect to Broadcom’s and VMware’s businesses. See the section titled “Where You Can Find More Information” for the location of information incorporated by reference into this proxy statement/prospectus.
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INFORMATION ABOUT VMWARE
VMware, Inc.
VMware, Inc., a Delaware corporation (referred to as VMware), is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. VMware originally pioneered the development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware, and then evolved to become the private cloud and mobility management leader. VMware is focused on becoming a multi-cloud leader, aiming to help organizations take on information technology-related challenges through a multi-cloud strategy by providing the multi-cloud platform for all applications. VMware common stock trades on the New York Stock Exchange under the symbol “VMW.” The corporate headquarters of VMware are located at 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
Verona Holdco, Inc.
Verona Holdco, Inc., a Delaware corporation (referred to as Holdco), is a wholly owned subsidiary of VMware. Holdco was formed by VMware solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Holdco are located at c/o VMware, Inc., 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
Verona Merger Sub, Inc.
Verona Merger Sub, Inc., a Delaware corporation (referred to as Merger Sub 1), is a wholly owned subsidiary of Holdco. Merger Sub 1 was formed by Holdco solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 1 are located at c/o VMware, Inc., 3401 Hillview Avenue, Palo Alto, California 94304, and its telephone number is (650) 427-5000.
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INFORMATION ABOUT BROADCOM
Broadcom Inc.
Broadcom Inc., a Delaware corporation (referred to as Broadcom), is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. Broadcom’s category-leading product portfolio serves critical markets including data center, networking, enterprise software, broadband, wireless, storage and industrial. Broadcom’s solutions include data center networking and storage, enterprise, mainframe and cyber security software focused on automation, monitoring and security, smartphone components, telecoms and factory automation. Broadcom common stock trades on The Nasdaq Global Select Market under the symbol “AVGO.” The principal executive offices of Broadcom are located at 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433-8000.
Barcelona Merger Sub 2, Inc.
Barcelona Merger Sub 2, Inc., a Delaware corporation (referred to as Merger Sub 2), is a wholly owned subsidiary of Broadcom. Merger Sub 2 was formed by Broadcom solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 2 are located at c/o Broadcom Inc., 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433­8000.
Barcelona Merger Sub 3, LLC
Barcelona Merger Sub 3, Inc., a Delaware limited liability company (referred to as Merger Sub 3), is a wholly owned subsidiary of Broadcom. Merger Sub 3 was formed by Broadcom solely in contemplation of the transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. The principal executive offices of Merger Sub 3 are located at c/o Broadcom Inc., 1320 Ridder Park Drive, San Jose, California 95131, and its telephone number is (408) 433-8000.
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INFORMATION ABOUT THE VMWARE SPECIAL MEETING
General
This proxy statement/prospectus is first being mailed on or about [  ], 2022 and constitutes notice of the special meeting in conformity with the requirements of the DGCL and the VMware bylaws.
This proxy statement/prospectus is being provided to VMware stockholders as part of a solicitation of proxies by the VMware board of directors for use at the special meeting of VMware stockholders and at any adjournments or postponements of such special meeting. This proxy statement/prospectus provides VMware stockholders with information about the special meeting and should be read carefully in its entirety.
Date, Time and Place of the Special Meeting
The special meeting will be held on [  ], 2022, beginning at [  ] a.m., Pacific time, unless postponed to a later date, via live audio webcast at [  ] (referred to as the special meeting). To virtually participate in the special meeting, visit www.virtualshareholdermeeting.com/VMW2022SM and enter the 16-digit control number provided on your proxy card or voting instruction card in order to participate in the special meeting.
Purposes of the Special Meeting
At the special meeting, VMware stockholders will be asked to vote upon the following proposals:
Proposal 1—The Merger Agreement Proposal: the proposal to adopt the merger agreement, which is further described in the sections titled “The Transactions” and “The Merger Agreement” and a copy of which is attached to this proxy statement/prospectus as Annex A and to approve the first merger and the second merger;
Proposal 2—The Merger-Related Compensation Proposal: the proposal to approve on an advisory (non-binding) basis the compensation that may be paid or become payable to VMware’s named executive officers that is based on or otherwise relates to the transactions; and
Proposal 3—The Adjournment Proposal: the proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement proposal.
Only the approval of the merger agreement proposal is required for completion of the transactions. VMware will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof.
Record Date
The record date for the determination of stockholders entitled to notice of and to vote at the special meeting is [   ], 2022 (referred to as the record date).
Virtual Participation at Special Meeting
The special meeting will be a completely virtual meeting of stockholders conducted via live audio webcast through the website described above under the heading “Date, Time and Place of the Special Meeting.” Only VMware stockholders who held shares of record as of the close of business on the record date are entitled to receive notice of and vote at the special meeting and any adjournment or postponement of the special meeting, as long as such shares remain outstanding on the date of the special meeting. VMware’s official stock ownership records will conclusively determine whether a stockholder is a “holder of record” as of the record date.
VMware will have technicians ready to assist VMware stockholders with any technical difficulties they may have accessing the virtual meeting. If VMware stockholders encounter any difficulties accessing the virtual meeting or during the meeting time, VMware stockholders should navigate to [   ] where a phone number for IT support will be posted.
Outstanding Shares as of Record Date
As of the record date, there were [   ] shares of VMware common stock outstanding and owned by stockholders (i.e., excluding shares of VMware common stock held in treasury by VMware), held by [   ]
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holders of record. Each share of VMware common stock is entitled to one vote on each matter considered at the special meeting.
Stockholders may request an appointment to inspect a complete list of stockholders entitled to vote at the special meeting for any purpose germane to the special meeting at VMware’s headquarters located at 3401 Hillview Avenue, Palo Alto, California, during ordinary business hours within ten days prior to the special meeting by sending an email request to IR@vmware.com.
Shares and Voting of VMware’s Directors and Executive Officers
As of the record date, VMware directors and executive officers, as a group, owned and were entitled to vote [   ] shares of VMware common stock, or approximately [   ]% of the outstanding shares of VMware common stock. VMware currently expects that these directors and executive officers will vote their shares in favor of the merger agreement proposal and each of the other proposals described in this proxy statement/prospectus, although none of the directors and executive officers are obligated to do so, other than Michael S. Dell.
Mr. Dell is the current chairman and a member of the VMware board of directors. Further, Egon Durban, a member of the VMware board of directors, is the Co-Chief Executive Officer and Managing Partner of Silver Lake. As noted above, pursuant to the voting agreements, each of the MSD stockholders and the SL stockholders have agreed to vote all of the shares of VMware common stock held by them (representing in the aggregate approximately [   ]% of the total outstanding shares of VMware common stock as of the record date) in favor of the merger agreement proposal. See the section titled “The Voting Agreements.”
Quorum and Broker Non-Votes
In order to conduct any business at the special meeting, a quorum must be present virtually or represented by proxy. Holders of shares representing at least a majority of the total outstanding shares of VMware common stock on the record date entitled to vote at the special meeting, represented virtually or by proxy, constitute a quorum. Stockholders choosing to abstain from voting will be treated as present for purposes of determining whether a quorum is present, but will not be counted as votes cast “FOR” any matter.
Banks, brokerage firms and other nominees who hold shares in “street name” for the accounts of their clients may vote such shares either as directed by their clients or in their own discretion on “routine” matters. When a broker does not receive instructions from a beneficial owner on how to vote shares with respect to a “non-routine” matter, a broker “non-vote” occurs. Broker “non-votes” will be treated as present for purposes of determining whether a quorum is present, but will not be counted as votes cast “FOR” any matter.
Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, if you (1) participate in the special meeting, or (2) have voted via the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail.
Required Vote
The votes required for each proposal are as follows:
Proposal 1—The Merger Agreement Proposal. The affirmative vote, virtually or by proxy, of holders of at least a majority of the outstanding shares of VMware common stock entitled to vote on the merger agreement proposal is required to approve the merger agreement proposal. If you are a VMware stockholder on the record date and take any action other than voting (or causing your shares to be voted) “FOR” the merger agreement proposal, it will have the same effect as a vote “AGAINST” the merger agreement proposal. For example, if you fail to instruct your bank, brokerage firm or other nominee to vote, it will have the same effect as a vote “AGAINST” the merger agreement proposal.
Proposal 2—The Merger-Related Compensation Proposal. The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the merger-related compensation proposal is required to approve, on an advisory (non-binding) basis, the merger-related compensation proposal. If you are a VMware stockholder on the record date and (i) participate in the special meeting but fail to vote or (ii) mark your proxy card or voting instruction card to abstain, it will have the same effect as a vote “AGAINST” the merger-related compensation proposal. If you do
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not (i) participate in }the special meeting, virtually or by proxy, and do not instruct your bank, brokerage firm or other nominee how to vote your shares, it will have no effect on the merger-related compensation proposal (assuming a quorum is present).
Proposal 3—The Adjournment Proposal. The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the adjournment proposal is required to approve the adjournment proposal. If you are a VMware stockholder on the record date and (i) participate in the special meeting but fail to vote or (ii) mark your proxy card or voting instruction card to abstain, it will have the same effect as a vote “AGAINST” the adjournment proposal. If you do not (i) participate in the special meeting, virtually or by proxy, and do not instruct your bank, brokerage firm or other nominee how to vote your shares, it will have no effect on the adjournment proposal (assuming a quorum is present).
As noted above, pursuant to the voting agreements, each of the MSD stockholders and the SL stockholders have agreed to vote all of the shares of VMware common stock held by them (representing in the aggregate approximately [   ]% of the total outstanding shares of VMware common stock as of the record date) in favor of the merger agreement proposal. See the section titled “The Voting Agreements.”
How to Vote or Have Your Shares Voted
VMware stockholders of record may vote their shares of VMware common stock or submit a proxy to have their shares of VMware common stock voted at the special meeting in one of the following ways:
Internet: VMware stockholders may submit their proxy by using the Internet at proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern time, on [   ], 2022, the day before the special meeting.
Telephone: VMware stockholders may submit their proxy by using a touch-tone telephone at 1-800-690-6903. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern time, on [   ], 2022, the day before the special meeting.
Mail: VMware stockholders may submit their proxy by properly completing, signing, dating and mailing their proxy card in the postage-paid envelope (if mailed in the United States) included with this proxy statement/prospectus. VMware stockholders who vote this way should mail the proxy card early enough so that it is received before the date of the special meeting.
To Vote Virtually at the Special Meeting: To vote virtually at the special meeting, visit www.virtualshareholdermeeting.com/VMW2022SM and enter the 16-digit control number included on your proxy card or voting instruction card that accompanied your proxy materials.
Whether or not you plan to participate in the special meeting, VMware urges you to submit your proxy by completing and returning the proxy card as promptly as possible, or by submitting your proxy by telephone or via the Internet, prior to the special meeting to ensure that your shares of VMware common stock will be represented and voted at the special meeting if you are unable to participate.
The VMware board of directors has appointed certain persons as proxy holders to vote proxies in accordance with the instructions of VMware stockholders. If you are a stockholder of record and you authorize these proxy holders to vote your shares of VMware common stock with respect to any matter to be acted upon, your shares will be voted in accordance with your instructions in your proxy. If you are a stockholder of record and you authorize these proxy holders to vote your shares but do not specify how your shares should be voted on a proposal, these proxy holders will vote your shares on such proposals as the VMware board of directors recommends, except if you indicate that you wish to vote against the merger agreement proposal, in which case your shares of VMware common stock will only be voted in favor of the merger-related compensation proposal and the adjournment proposal if you indicate that you wish to vote in favor of such proposals. If any other matter properly comes before the special meeting, these proxy holders will vote on that matter in their discretion.
If, as of the record date, your shares were registered directly in your name with our transfer agent, American Stock Transfer and Trust Company, LLC, you are considered the stockholder of record with respect to those shares, and the proxy notice was sent directly to you by VMware. If, as of the record date, your shares were held in an account at a bank, brokerage firm or other similar organization, then you are the beneficial owner of shares held in “street name,” and the proxy notice was forwarded to you by that organization. The organization holding
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your account is considered the stockholder of record for purposes of voting at the special meeting. As a beneficial owner, you must direct your bank, brokerage firm or other nominee on how to vote the shares of VMware common stock held in your account and you will receive instructions from your bank, brokerage firm or other nominee describing how to vote your shares of VMware common stock. The availability of Internet or telephonic voting will depend on the nominee’s voting process. Please check with your bank, brokerage firm or other nominee and follow the voting procedures your bank, brokerage firm or other nominee provides.
If you are a beneficial owner and do not provide your bank, brokerage firm or other nominee instructions on how to vote your shares of VMware common stock with respect to “non-routine” matters, a broker “non-vote” occurs with respect to those matters. Under applicable stock exchange rules, the organization that holds your shares of VMware common stock (i.e., your bank, brokerage firm or other nominee) may generally vote on routine matters at its discretion but cannot vote your shares on “non-routine” matters without your instructions. If you are a beneficial owner and the organization that holds your shares of VMware common stock does not receive instructions from you on how to vote your shares of VMware common stock on a non-routine matter, the organization that holds your shares of VMware common stock will inform the inspector of elections that it does not have the authority to vote your shares on such matters. The merger agreement proposal, the merger-related compensation proposal and the adjournment proposal will be considered “non-routine.” Accordingly, if you are a beneficial owner and do not provide your bank, brokerage firm or other nominee instructions on how to vote your shares of VMware common stock, your bank, brokerage firm or other nominee generally will not be permitted to vote your shares on any of the proposals. If you are a beneficial holder, VMware strongly encourages you to provide voting instructions to your bank, brokerage firm or other nominee so that your vote will be counted on all matters.
If you are a beneficial owner, you are invited to participate in the special meeting; however, you may not vote your shares at the special meeting unless you obtain a legal proxy from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.
Revocation of Proxies
VMware stockholders of record may revoke their proxies at any time prior to the voting at the special meeting in any of the following ways:
signing and delivering a new proxy relating to the same shares and bearing a later date than the original proxy;
sending a signed, written notice of revocation, which is dated later than the date of the proxy and states that the proxy is revoked, to Attention: Secretary, VMware, Inc. Legal Department, 3401 Hillview Avenue, Palo Alto, California 94304; or
participating in and voting during the virtual special meeting. Participation in the virtual special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.
VMware beneficial owners may change their voting instruction only by following the directions received from their bank, brokerage firm or other nominee for changing their voting instructions.
Solicitation of Proxies
VMware will pay for the proxy solicitation costs related to the special meeting. In addition to sending and making available these materials, some of VMware’s directors, officers and employees may solicit proxies in person by contacting VMware stockholders by telephone or over the Internet. VMware stockholders may also be solicited by press releases issued by VMware, postings on VMware’s websites and advertisements in periodicals. None of VMware’s directors, officers or employees will receive additional compensation for their solicitation services. VMware has engaged D.F. King to assist in the solicitation of proxies for the special meeting. VMware estimates that it will pay D.F. King a fee of approximately $17,500, plus reasonable out-of-pocket expenses. Certain banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries who hold shares for the benefit of another party may solicit proxies for VMware. If so, they will mail proxy information to, or otherwise communicate with, the beneficial owners of shares of VMware common stock held by them. VMware will also reimburse banks, brokerage firms, custodians, trustees, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of VMware common stock.
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Adjournments
The special meeting may be adjourned by the chairman of the meeting or the holders of shares representing at least a majority of the votes entitled to be cast by VMware stockholders present virtually or represented by proxy, if sufficient votes are cast in favor of the adjournment proposal, whether or not there is a quorum.
Notice need not be given of any adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken unless the adjournment is for more than 30 days, in which case a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. If, after any adjournment, a new record date for the stockholders entitled to vote is fixed for any adjourned meeting, notice of the place, if any, date, and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present and vote at such adjourned meeting must be given to each stockholder of record entitled to vote at the meeting.
Questions and Additional Information
You may contact VMware’s proxy solicitor, D.F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, New York 10005, with any questions about the special meeting, the transactions, the proposals or this proxy statement/prospectus, if you would like additional copies of the proxy statement/prospectus, if you need to obtain proxy cards or other information related to the proxy solicitation or if you need help submitting a proxy or voting your shares of VMware common stock. Stockholders may call toll-free at (800) 628-8532, and banks and brokers may call collect at (212) 269-5550.
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PROPOSAL 1: THE MERGER AGREEMENT PROPOSAL
As discussed throughout this proxy statement/prospectus, VMware is asking its stockholders to approve the merger agreement proposal. Pursuant to the merger agreement, (i) Merger Sub 1 will merge with and into VMware, with VMware surviving the first merger and becoming a wholly owned subsidiary of Holdco, (ii) following the effective time of the first merger, VMware, the surviving company of the first merger, will be converted into a Delaware limited liability company, (iii) following the effective time of the LLC conversion, Merger Sub 2 will merge with and into Holdco, with Holdco surviving the second merger and becoming a wholly owned subsidiary of Broadcom and (iv) following the effective time of the second merger, Holdco, the surviving company of the second merger, will merge with and into Merger Sub 3, with Merger Sub 3 surviving the third merger as a wholly owned subsidiary of Broadcom. The merger agreement proposal that VMware is asking its stockholders to approve is the adoption of the merger agreement and approval of the first merger and the second merger. If the transactions are completed, VMware will cease to be publicly traded and VMware common stock will be delisted from the New York Stock Exchange and deregistered under the Exchange Act.
As described in further detail in the sections titled “Questions and Answers,” “Summary,” “The Transactions” and “The Merger Agreement,” the VMware board of directors has unanimously approved the merger agreement and the transactions. For a discussion of certain factors considered by the VMware board of directors in determining to approve the merger agreement and recommend that VMware stockholders vote for the merger agreement proposal, see the section titled “The Transactions—VMware’s Reasons for the Transactions; Recommendation of the VMware Board of Directors.” A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. You are urged to read the merger agreement carefully and in its entirety.
The transactions are subject to the satisfaction of the conditions set forth in the merger agreement, including approval of the merger agreement proposal by the stockholders of VMware at the special meeting. Accordingly, the approval of the merger agreement proposal by VMware stockholders is a condition to the obligations of Broadcom and VMware to complete the transactions.
The affirmative vote, virtually or by proxy, of the holders of at least a majority of the outstanding shares of VMware common stock entitled to vote on the merger agreement proposal is required to approve the merger agreement proposal.
THE VMWARE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT VMWARE STOCKHOLDERS VOTE “FOR” THE MERGER AGREEMENT PROPOSAL.
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PROPOSAL 2: THE MERGER-RELATED COMPENSATION PROPOSAL
VMware is providing its stockholders with the opportunity to cast a vote, on an advisory (non-binding) basis, to approve the compensation payments that may be paid or become payable by VMware to its named executive officers, as determined in accordance with Item 402(t) of Regulation S-K, in connection with the transactions as disclosed in the section titled “Quantification of Potential Payments and Benefits to VMware’s Named Executive Officers in Connection with the Transactions,” including the table titled “Golden Parachute Compensation” and the accompanying footnotes, and the related narrative disclosure under the section titled “The Transactions—Interests of VMware’s Directors and Executive Officers in the Transactions” (referred to as the “golden parachute” compensation), as required by Section 14A of the Exchange Act.
Through this proposal, VMware is asking its stockholders to indicate their approval, on an advisory (non-binding) basis, of the compensation that VMware’s named executive officers will or may be eligible to receive in connection with the transactions as described in the sections of this proxy statement/prospectus referred to above.
You should carefully review the golden parachute compensation information disclosed in the sections of this proxy statement/prospectus referred to above. The VMware board of directors unanimously recommends that VMware stockholders approve the following resolution:
RESOLVED, that the stockholders of VMware approve, solely on an advisory, non-binding basis, the golden parachute compensation that will or may be paid or become payable to VMware’s named executive officers in connection with the transactions, as disclosed pursuant to Item 402(t) of Regulation S-K in the section titled “Quantification of Potential Payments and Benefits to VMware’s Named Executive Officers in Connection with the Transactions,” including the table titled “Golden Parachute Compensation” and the accompanying footnotes, and the related narrative disclosure under the section titled “The Transactions—Interests of VMware’s Directors and Executive Officers in the Transactions.”
The vote on the merger-related compensation proposal is a vote separate and apart from the vote on the merger agreement proposal. Accordingly, you may vote to approve the merger agreement proposal and vote not to approve the merger-related compensation proposal and vice versa. Because the vote on the merger-related compensation proposal is advisory only, it will not be binding on either VMware or Broadcom. Accordingly, if the merger agreement proposal is approved and the transactions are completed, the compensation payments that are contractually required to be paid by VMware to its named executive officers will or may be paid or become payable, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of VMware stockholders on the merger-related compensation proposal.
The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the merger-related compensation proposal at the special meeting is required to approve, on an advisory (non-binding) basis, the merger-related compensation proposal.
THE VMWARE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT VMWARE STOCKHOLDERS VOTE “FOR” THE MERGER-RELATED COMPENSATION PROPOSAL.
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PROPOSAL 3: THE ADJOURNMENT PROPOSAL
VMware stockholders are being asked to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the merger agreement proposal at the time of the special meeting.
If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you indicate that you wish to vote in favor of the merger agreement proposal but do not indicate a choice on the adjournment proposal, your shares of VMware common stock will be voted in favor of the adjournment proposal. If you indicate, however, that you wish to vote against the merger agreement proposal, your shares of VMware common stock will only be voted in favor of the adjournment proposal if you indicate that you wish to vote in favor of the adjournment proposal. If the special meeting is so adjourned, VMware stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.
The affirmative vote of holders of at least a majority of the shares of VMware common stock represented at the special meeting, virtually or by proxy, and entitled to vote on the adjournment proposal at the special meeting is required to approve the adjournment proposal.
THE VMWARE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT VMWARE STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL.
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THE TRANSACTIONS
This section of the proxy statement/prospectus describes the material aspects of the transactions. This section may not contain all of the information that is important to you. You should carefully read this entire proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus, including the full text of the merger agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, for a more complete understanding of the transactions. In addition, important information about each of Broadcom and VMware is included in or incorporated by reference into this proxy statement/prospectus. See the section titled “Where You Can Find More Information.”
Effects of the Transactions
Broadcom and VMware, among others, have entered into the merger agreement, pursuant to which, through a series of transactions, VMware will become a wholly owned subsidiary of Broadcom.
First Merger and LLC Conversion
Upon satisfaction or waiver of the closing conditions, Merger Sub 1 will merge with and into VMware (referred to as the first merger). VMware will be the surviving company in the first merger and become a wholly owned subsidiary of Holdco. At the effective time of the first merger, each share of VMware common stock issued and outstanding immediately prior to the effective time of the first merger will be converted into one share of common stock of Holdco, and each outstanding VMware equity award will be converted into a Holdco award that relates to a number of shares of Holdco common stock that is equal to the number of shares of VMware common stock that were subject to such award prior to such conversion. All terms and conditions applicable to each such VMware security (including any VMware equity awards) immediately prior to the effective time of the first merger will, except as described in the immediately preceding sentence, remain in effect immediately after the effective time of the first merger. After the consummation of the first merger, all references in this proxy statement/prospectus to VMware, including VMware common stock, VMware stock options, VMware restricted stock unit awards, VMware equity awards and other securities of VMware will be deemed, where applicable, to be references to Holdco and the same securities of Holdco, and all references to VMware stockholders will be deemed to be references to common stockholders of Holdco. Immediately after the consummation of the first merger, VMware will be converted into a Delaware limited liability company (referred to as the LLC conversion) and will remain a wholly owned subsidiary of Holdco.
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Set forth below is a diagram depicting the structure of the first merger and the LLC conversion.

*
Circled entities are disregarded for U.S. federal income tax purposes.
Second Merger
Following completion of the first merger and LLC conversion, Merger Sub 2 will, on the closing date, merge with and into Holdco (referred to as the second merger). Holdco will be the surviving company in the second merger and will become a wholly owned subsidiary of Broadcom.
Third Merger
Following completion of the second merger, Holdco will, on the closing date, merge with and into Merger Sub 3 (referred to as the third merger). Merger Sub 3 will be the surviving limited liability company in the third merger and will be a wholly owned subsidiary of Broadcom.
In this proxy statement/prospectus, we refer to the first merger, the second merger, the third merger and the LLC conversion collectively as the transactions.
In structuring the transactions depicted above, the parties took into account, among other things, the effect of the transactions on certain contractual obligations of VMware, as well as the expected U.S. federal income tax treatment of potential transaction structures.
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Set forth below is a diagram depicting the structure of the second merger and the third merger.

*
Circled entities are disregarded for U.S. federal income tax purposes.
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Merger Consideration
Upon completion of the second merger, each issued and outstanding share of VMware common stock (other than (i) cancelled shares, (ii) dissenting shares and (iii) excluded shares) will be converted into the right to receive, at the election of the holder of such share and subject to proration, $142.50 in cash, without interest, or 0.25200 of a share of Broadcom common stock. VMware stockholder may elect a different form of consideration for each share such VMware stockholder owns. VMware stockholders may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if VMware stockholders own more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares. No fractional shares of Broadcom common stock will be issued in the second merger, and holders of VMware common stock will instead receive cash in lieu of fractional shares of Broadcom common stock.
The merger consideration is subject to proration so that 50% of VMware common stock issued and outstanding immediately prior to the effective time of the second merger will be converted into cash consideration and 50% will be converted into stock consideration, based on an exchange ratio of 0.25200 of a share of Broadcom common stock. Holders of VMware common stock who do not make an election will be treated as having elected to receive cash consideration or stock consideration in accordance with the proration methodology in the merger agreement.
Based on the number of shares of VMware common stock outstanding as of July 13, 2022, plus shares of VMware common stock that may be delivered pursuant to unvested equity awards and equity awards that may be issued through the completion of the second merger, Broadcom would issue up to approximately 58,548,216 shares of Broadcom common stock to VMware stockholders pursuant to the second merger. The actual number of shares of Broadcom common stock to be issued pursuant to the second merger will be determined at completion of the second merger based on the exchange ratio and the number of shares of VMware common stock outstanding at such time. Based on up to 58,548,216 shares of Broadcom common stock that may be issued to VMware stockholders, and the number of shares of Broadcom common stock outstanding as of July 13, 2022, immediately after completion of the second merger, former VMware stockholders would own approximately 12.6% of the outstanding shares of Broadcom common stock.
On July 13, 2022 (the most recent practicable date prior to the date of this proxy statement/prospectus), the closing stock price per share of Broadcom common stock was $481.73, which, after giving effect to the exchange ratio of 0.25200, has an implied value of approximately $121.40 per share. Based on this price, with respect to the stock consideration and the cash consideration of $142.50 per share, upon completion of the transactions, VMware stockholders that receive the cash consideration for 50% of their shares of VMware common stock and receive the stock consideration for 50% of their shares of VMware common stock would receive total merger consideration with an implied value of approximately $131.95 per share.
The implied value of the stock consideration will fluctuate, however, as the market price of Broadcom common stock fluctuates because the stock consideration is payable in a fixed number of shares of Broadcom common stock. As a result, the value of the stock consideration that VMware stockholders will receive upon completion of the second merger could be greater than, less than or the same as the value of the stock consideration on the date of this proxy statement/prospectus, at the time of the VMware special meeting or on the date on which VMware stockholders make their election. Accordingly, VMware and Broadcom encourage you to obtain current stock price quotations for Broadcom common stock and VMware common stock before deciding how to vote with respect to approval of the merger agreement proposal.
Background of the Transactions
VMware’s senior management and the VMware board of directors regularly review VMware’s performance, strategy, competitive position, opportunities and prospects in light of current business and economic environments and developments in the software industry and the opportunities and challenges facing participants in the industry. These reviews have included consideration by VMware’s senior management and the VMware board of directors of potential strategic alternatives, including acquisitions, business combinations and other strategic transactions. However, VMware’s recent focus, both before and after the VMware spin-off on November 1, 2021, had been on executing its standalone plan.
On April 26, 2022, the assistant to Hock E. Tan, the President and Chief Executive Officer of Broadcom, contacted the assistant to Michael S. Dell, the Chairman of the VMware board of directors and a large VMware
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stockholder, to request a meeting between Mr. Tan and Mr. Dell. The topic of the meeting was not specified. Mr. Tan’s and Mr. Dell’s assistants scheduled the meeting for May 6, 2022. At the May 6 meeting, Mr. Tan told Mr. Dell that Broadcom would be interested in a potential combination with VMware on a friendly basis. Mr. Tan and Mr. Dell discussed Broadcom’s strategic rationale with respect to such a transaction, but did not discuss the price or any other terms of a potential transaction. Mr. Dell suggested that Mr. Tan also have a discussion with Egon Durban, a member of the VMware board of directors and the Co-Chief Executive Officer of Silver Lake, another large stockholder of VMware, to discuss a potential transaction. Silver Lake was formerly an investor in Broadcom until 2019. Following the meeting, Mr. Dell contacted Paul Sagan, the lead independent director of the VMware board of directors, as well as Mr. Durban, and informed them each of the discussion with Mr. Tan. Additionally, on May 6, 2022, following the meeting with Mr. Dell, Mr. Tan placed a telephone call to Mr. Durban to arrange a subsequent conversation regarding a potential transaction. On May 7, 2022, Mr. Tan and Mr. Durban discussed a potential transaction by telephone and, on May 12, 2022, Mr. Tan met with Mr. Durban, along with executives of Silver Lake and Broadcom, to discuss a potential transaction.
On May 13, 2022, Broadcom delivered an unsolicited confidential proposal letter (referred to as the May 13 Letter) to Messrs. Dell, Durban and Sagan, proposing the acquisition of VMware by Broadcom in a cash and stock transaction. The May 13 Letter was addressed to the VMware board of directors, and was promptly made available to the entire VMware board of directors. The May 13 Letter noted that Broadcom was prepared to offer VMware stockholders $142.50 per share of VMware common stock, in the form of either $142.50 in cash or 0.2422 shares of Broadcom common stock, at the election of each VMware stockholder and subject to proration so that the total transaction consideration would be 50% cash and 50% stock. The May 13 Letter also noted that the proposed transaction would not be subject to Broadcom stockholder approval nor a financing condition and would be funded through a combination of cash on hand and committed debt financing. The May 13 Letter also included letters from each of Barclays, Citi, Credit Suisse and Morgan Stanley providing that the foregoing banks were highly confident that they would be able to arrange the necessary debt financing. Broadcom also indicated in the May 13 Letter its desire to move quickly toward a definitive agreement with VMware, with announcement of a transaction to coincide with VMware’s scheduled earnings announcement on May 26, 2022, and stated that Broadcom was prepared to provide for a go-shop period immediately following execution of the definitive agreement, on customary terms. Broadcom also requested that VMware provide Dell with the requisite tax opinion required by the tax matters agreement between VMware and Dell in order for VMware to engage in a proposed transaction with Broadcom, in form and substance satisfactory to Dell, VMware and Broadcom, prior to the signing of a definitive agreement with VMware. Broadcom also expressed its expectation that Mr. Dell and Silver Lake would enter into voting agreements to support the transaction and indicated that Broadcom would offer a member of the VMware board of directors, with such member to be mutually agreed by Broadcom and VMware, a seat on the Broadcom board of directors, effective upon the closing of the proposed transaction. Together with the May 13 Letter, Broadcom delivered a mutual non-disclosure agreement and a high-priority diligence request list.
On May 15, 2022, the VMware board of directors met with representatives of VMware management, as well as representatives of J.P. Morgan, Goldman Sachs and Gibson Dunn. During the meeting, the VMware board of directors reviewed the terms of the May 13 Letter with VMware management and its advisors. The VMware board of directors discussed its fiduciary duties in connection with the review of an unsolicited proposal and the fiduciary duties that may apply to the transaction proposed in the May 13 Letter. Representatives of J.P. Morgan and Goldman Sachs also made a presentation regarding the proposal in the May 13 Letter from a financial perspective based upon publicly available market information. After discussion, the VMware board of directors determined to continue discussions with Broadcom. In addition, the VMware board of directors established a committee comprised of Mr. Dell, Mr. Durban, Karen E. Dykstra, a member of the VMware board of directors, and Mr. Sagan (referred to as the VMware transaction committee) for administrative efficiency purposes, with authority to, among other things, review, evaluate, consider, investigate, discuss, negotiate and determine the advisability of any potential strategic alternatives available to VMware, including a potential business combination with Broadcom. The VMware transaction committee was also authorized to recommend to the full VMware board of directors what action or actions should be taken with respect to a potential transaction, which could include a recommendation that the full VMware board of directors reject the proposal from Broadcom. It was noted that the full VMware board of directors retained authority with respect to approval of any proposed transaction. It was also understood that the VMware board of directors would continue to have an active role in the consideration of strategic transactions and that each director would be invited to all meetings of
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the VMware transaction committee. The VMware board of directors did not provide for the payment of any compensation to the members of the VMware transaction committee in consideration of their service on the committee (other than, for Ms. Dykstra and Mr. Sagan, their ordinary-course compensation as members of the VMware board of directors).
Later on May 15, 2022, at the direction of the VMware board of directors, Mr. Durban spoke with Tom Krause, President of Broadcom Software Group, to coordinate due diligence meetings for the upcoming week and to discuss the process for preparing the initial draft of the merger agreement.
Also on May 15, 2022, representatives of Gibson Dunn delivered a revised draft of the non-disclosure agreement to Wachtell, Lipton, Rosen & Katz, legal counsel to Broadcom (referred to as Wachtell Lipton).
On May 16, 2022, the VMware transaction committee met with other members of the VMware board of directors and representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake. Mr. Durban provided an update on his discussion with Mr. Krause, and the VMware transaction committee discussed the upcoming due diligence meetings with Broadcom, including regarding VMware’s reverse due diligence on Broadcom in light of the stock component of the proposed consideration.
On May 16, 2022, following the meeting of the VMware transaction committee, VMware and Broadcom executed the non-disclosure agreement, which contained a customary mutual standstill provision.
Later on May 16, 2022, representatives of VMware and Broadcom commenced due diligence, which included in-person meetings between the parties and their respective representatives at Silver Lake’s offices.
On May 17, 2022 and May 18, 2022, the VMware transaction committee met with other members of the VMware board of directors and representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake to receive updates on the due diligence meetings and discuss potential structuring of a transaction.
Additionally, on May 17, 2022, VMware provided Broadcom access to a virtual data room.
Also on May 17, 2022, J.P. Morgan provided the VMware board of directors with customary relationship disclosures regarding J.P. Morgan’s relationships with VMware, Broadcom and Silver Lake.
On May 19, 2022, representatives of Wachtell Lipton delivered an initial draft of the merger agreement to representatives of Gibson Dunn.
Also on May 19, 2022, and again on May 20, 2022, representatives of VMware and Broadcom held meetings in which representatives of VMware conducted due diligence on Broadcom.
Later on May 19, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake. The VMware board of directors received an update regarding Broadcom’s due diligence investigation of VMware and the reverse due diligence being performed on Broadcom. Representatives of J.P. Morgan and Goldman Sachs also discussed certain preliminary financial metrics regarding Broadcom’s offer, past synergies achieved by Broadcom in connection with their past acquisitions and a benchmarking analysis of termination fees in similar transactions in the industry, as well as updates based on recent stock price performance of VMware and Broadcom since the May 13 Letter. Representatives of Gibson Dunn also discussed with the VMware board of directors a summary of the draft merger agreement and certain points for negotiation therein, including, among other things, (i) the cap on the amount of stock consideration to be issued by Broadcom to VMware stockholders in the proposed transaction, (ii) the length of the go-shop period, (iii) the termination fees that would be paid during the go-shop period and afterward if VMware were to terminate the merger agreement to accept a superior proposal, (iv) the regulatory construct, including the obligations on Broadcom to seek regulatory approvals and the limitations on such obligations, (v) the potential inclusion of a reverse termination fee to be payable by Broadcom due to a failure to obtain regulatory approvals and (vi) VMware’s and Broadcom’s representations, warranties and interim operating covenants and other terms. Following discussion of the draft merger agreement, the VMware board of directors discussed and then approved a waiver under Section 203 of the DGCL regarding potential voting agreements to be entered into by each of the MSD stockholders and the SL stockholders with Broadcom.
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Also on May 19, 2022, Goldman Sachs provided the VMware board of directors with customary relationship disclosures regarding Goldman Sachs’ relationships with VMware, Broadcom and MSD Capital L.P. and Silver Lake and their respective affiliates.
On May 20, 2022, the VMware transaction committee met with other members of the VMware board of directors and representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake to further discuss the draft merger agreement and points for negotiation therein.
Later on May 20, 2022, representatives of Wachtell Lipton delivered to representatives of Gibson Dunn a draft voting agreement to be entered into by each of the MSD stockholders and SL stockholders with Broadcom. Representatives of Gibson Dunn then shared the draft with counsel to Mr. Dell and Silver Lake.
Also on May 20, 2022, a representative of VMware management provided to representatives of Goldman Sachs and J.P. Morgan financial forecasts of VMware’s long-term financial performance as extended through fiscal year 2027 (referred to as the VMware management financial projections and more fully described in the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors”) for purposes of performing their preliminary financial analyses.
On May 21, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake. At this meeting, the VMware board of directors was provided with financial information relating to VMware and Broadcom, including a discussion of the VMware fiscal first quarter earnings report which would report revenue of approximately $3.088 billion as compared to Wall Street consensus estimates of $3.186 billion, earnings before interest and taxes of $771 million as compared to Wall Street consensus estimates of $861 million and earnings per share of $1.28 as compared to Wall Street consensus estimates of $1.56 and the Broadcom fiscal second quarter earnings report which would report revenue of approximately $8.103 billion as compared to Wall Street consensus estimates of $7.914 billion, earnings before interest, taxes, depreciation and amortization of $5.111 billion as compared to Wall Street consensus estimates of $4.971 billion and earnings per share of $9.07 as compared to Wall Street consensus estimates of $8.73. The VMware board of directors was also provided by the representatives of VMware management the VMware management financial projections. Following discussion, the VMware board of directors approved the use of the VMware management financial projections by J.P. Morgan and Goldman Sachs for purposes of performing their respective financial analyses in connection with their respective fairness opinions to the VMware board of directors (as more fully described in the sections titled “—Opinion of J.P. Morgan” and “—Opinion of Goldman Sachs”). Representatives of J.P. Morgan and Goldman Sachs also provided an updated summary of the implied metrics of Broadcom’s proposal based on recent stock price fluctuations and certain preliminary financial matters relating to VMware based on the VMware management financial projections. The VMware board of directors then discussed a potential counterproposal to Broadcom, including (i) an increase in headline price from $142.50 to $150 per share, (ii) an increase in exchange ratio from 0.242 to 0.2602, (iii) an increase in the cap on the amount of stock consideration to be issued by Broadcom to VMware stockholders in the proposed transaction from 50% to 60%, (iv) a heightened regulatory-efforts standard, (v) an extended outside date timeline from 15 months to 18 months, (vi) a reverse termination fee payable by Broadcom equal to 2.5% of VMware’s implied equity value giving effect to the proposed transaction and (vii) an extended go-shop period from 35 days to 40 days, with an additional 15-day window where the lower termination fee of $500 million would be payable by VMware to Broadcom if VMware accepted a superior proposal, with a termination fee payable by VMware following such extended period equal to 2.5% of VMware’s implied equity value. The counterproposal also removed as a condition to closing Broadcom’s receipt of a tax opinion with respect to the tax treatment of the transaction. The VMware board of directors authorized Mr. Durban to provide and negotiate the counterproposal with Mr. Tan.
Later on May 21, 2022, Mr. Durban and Mr. Tan met to discuss the counterproposal. During the meeting, Mr. Tan communicated that $142.50 was Broadcom’s best and final price and that Broadcom was unwilling to increase the maximum amount of stock consideration to be issued by Broadcom to VMware stockholders in the proposed transaction; however, Mr. Tan indicated Broadcom would increase the exchange ratio from 0.2422 to 0.2520. Mr. Durban and Mr. Tan also discussed VMware employee matters, including, among other things, change of control and severance protections and a cash retention program to retain key VMware employees.
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Later on May 21, 2022, representatives of Gibson Dunn transmitted a revised draft of the merger agreement to Wachtell Lipton, and representatives of Simpson Thacher & Bartlett LLP (referred to as Simpson Thacher), counsel to Silver Lake, also delivered revised drafts of the voting agreements to Wachtell Lipton.
On May 22, 2022, the VMware transaction committee met with other members of the VMware board of directors and representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake to discuss Mr. Durban’s meeting with Mr. Tan. Mr. Dell was unable to attend the meeting of the VMware transaction committee and Mr. Durban noted that the Chief Executive Officer of a large publicly traded corporation (referred to as Party A) had reached out to Mr. Dell to have a discussion, without specifying the topic, while both were in Davos, Switzerland for the World Economic Forum meetings.
Later on May 22, 2022, Bloomberg published an article reporting that Broadcom was in talks to acquire VMware.
On May 23, 2022, Mr. Dell met with the Chief Executive Officer of Party A. During the meeting, the Chief Executive Officer of Party A asked Mr. Dell if Mr. Dell could comment on the rumors that VMware was in discussions regarding a potential transaction, to which Mr. Dell said he had no comment. The Chief Executive Officer of Party A did not make any offer or proposal regarding a potential strategic combination between Party A and VMware.
Also on May 23, 2022, representatives of Wachtell Lipton transmitted a revised draft of the merger agreement to representatives of Gibson Dunn. Between May 23, 2022 and May 26, 2022, representatives of Broadcom, VMware, Silver Lake, Wachtell Lipton, Gibson Dunn and Simpson Thacher exchanged drafts of, and had multiple conference calls to discuss and resolve the open items in, the draft merger agreement, draft voting agreements and related documentation. A separate team at Wachtell Lipton representing Mr. Dell, with the consent of the parties, was included in discussions with respect to Mr. Dell’s voting agreement. Between May 18, 2022 and May 26, 2022, legal executives at Broadcom and Silver Lake also had multiple discussions, including about certain matters in the draft merger agreement, such as regulatory approval requirements, and VMware employee matters, such as change of control and severance protections and a cash retention program to retain key VMware employees.
Later on May 23, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn and Silver Lake. Representatives of J.P. Morgan and Goldman Sachs reviewed with the VMware board of directors their respective preliminary financial analyses of VMware and representatives of J.P. Morgan also reviewed preliminary financial analyses of Broadcom. Representatives of J.P. Morgan and Goldman Sachs also discussed the market reaction to the news reports regarding the potential acquisition of VMware by Broadcom, including market speculation regarding other potential suitors for VMware. Representatives of Gibson Dunn also reviewed the open issues in the revised draft merger agreement from Wachtell Lipton, including, among other things, (i) the deletion of the reverse termination fee payable by Broadcom in connection with regulatory review, (ii) a more limited divestiture obligation on Broadcom in connection with obtaining regulatory approvals providing that no divestiture would be required if such divestiture was with respect to assets, products or businesses of Broadcom not included in the Broadcom Software Group and (iii) the increased termination fee payable by VMware during the 40-day go-shop period of $900 million, with a termination fee payable by VMware of $1.8 billion thereafter in connection with any termination for a superior proposal.
On May 24, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn, Silver Lake and Axinn, Veltrop & Harkrider LLP (referred to as Axinn), co-counsel to VMware regarding regulatory matters. Representatives of J.P. Morgan and Goldman Sachs reviewed with the VMware board of directors the potential go-shop process, including potential counterparties to contact, including certain key metrics for each party and the potential strategic rationale for a potential combination and potential considerations each potential party may have regarding a potential transaction. Mr. Rangarajan (Raghu) Raghuram, Chief Executive Officer of VMware, noted that a senior executive of a large publicly traded corporation (referred to as Party B) had reached out following the news reports regarding a potential Broadcom transaction and expressed interest in a potential transaction. Mr. Dell noted that he had interacted with another senior executive of Party B in Davos the day prior and such executive did not mention anything regarding a potential transaction. The VMware board of directors discussed the terms of a revised draft merger agreement to be transmitted to Broadcom, including (i) reinserting the reverse termination fee payable by
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Broadcom in the amount of $1.8 billion, which was the same amount as the post-go-shop termination fee payable by VMware, (ii) revising the go-shop termination fee payable by VMware to $700 million, which was between VMware’s initial $500 million go-shop termination fee proposal and Broadcom’s $900 million counterproposal and (iii) accepting that Broadcom would not be required to make regulatory divestitures if such divested asset, product or business was not included in the Broadcom Software Group. Representatives of Gibson Dunn also discussed VMware’s and Broadcom’s representations, warranties and interim operating covenants and other terms.
Following the meeting of the VMware board of directors, on May 24, 2022, representatives of Gibson Dunn transmitted a revised draft merger agreement to Wachtell Lipton.
Also on May 24, 2022, Goldman Sachs provided the VMware board of directors with additional relationship disclosures regarding Goldman Sachs’ relationships with potential counterparties that Goldman Sachs proposed to contact during the go-shop period and their respective affiliates.
Early in the morning on May 25, 2022, representatives of Wachtell Lipton transmitted a further revised draft of the merger agreement to Gibson Dunn.
Later in the morning on May 25, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn, Silver Lake and Axinn. Among other things, representatives of Gibson Dunn reviewed the open items in the draft merger agreement and potential resolutions. The VMware board of directors discussed the terms of a revised draft merger agreement to be transmitted to Broadcom, including accepting a lowered reverse termination fee of $1.5 billion, the same amount as the proposed post-go-shop termination fee payable by VMware, accepting an increased go-shop termination fee of $750 million, but continuing to negotiate to expand the obligations on Broadcom to seek regulatory approvals and narrow the limitations on such obligations.
Following the meeting of the VMware board of directors, on May 25, 2022, representatives of Gibson Dunn transmitted a further revised draft of the merger agreement to Wachtell Lipton.
Later on May 25, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Silver Lake, Gibson Dunn and Axinn to discuss the status of the negotiation of the merger agreement and open issues. The representatives of each of Goldman Sachs and J.P. Morgan reviewed with the VMware board of directors Goldman Sachs’ and J.P. Morgan’s respective financial analyses of the aggregate merger consideration to be paid to the holders of shares of VMware common stock (other than Broadcom and its affiliates) pursuant to the merger agreement. The VMware board of directors noted the customary relationship disclosures previously provided by Goldman Sachs regarding Goldman Sachs’ relationships with VMware, Broadcom and MSD Capital L.P. and Silver Lake and their respective affiliates and the customary relationship disclosures previously provided by J.P. Morgan regarding their relationships with VMware, Broadcom and Silver Lake and the VMware board of directors did not identify any concerns with these disclosures. The representatives of Goldman Sachs and J.P. Morgan each discussed the procedures and process in connection with delivery of their respective opinions, assuming successful completion of the negotiations and finalization of the terms of the merger agreement and related transaction documents. Representatives of Gibson Dunn also reviewed the key terms of the merger agreement and the voting agreements to be entered into by each of the MSD stockholders and the SL stockholders.
Early in the morning on May 26, 2022, the VMware board of directors met with representatives of VMware management, J.P. Morgan, Goldman Sachs, Gibson Dunn, Silver Lake and Axinn. Representatives of Gibson Dunn reviewed with the VMware board of directors their fiduciary duties in the context of considering the proposed transaction. Representatives of Gibson Dunn also provided an update on the negotiation of the merger agreement and related transaction documents, including updates to the final terms of the merger agreement since the earlier meeting of the VMware board of directors on May 25. The representatives of each of Goldman Sachs and J.P. Morgan again reviewed with the VMware board of directors Goldman Sachs’ and J.P. Morgan’s respective financial analyses of the aggregate merger consideration to be paid to the holders of shares of VMware common stock (other than Broadcom and its affiliates) pursuant to the merger agreement. The representatives of Goldman Sachs then rendered the oral opinion of Goldman Sachs, subsequently confirmed by delivery of its written opinion, dated May 26, 2022, to the VMware board of directors that, as of the date of the written opinion and based upon and subject to the various limitations, qualifications and assumptions set forth therein, the aggregate merger consideration to be paid to the holders (other than Broadcom and its affiliates) of
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shares of VMware common stock pursuant to the merger agreement was fair from a financial point of view to such holders. The representatives of J.P. Morgan then also rendered the oral opinion of J.P. Morgan subsequently confirmed by delivery of its written opinion dated May 26, 2022 to the VMware board of directors that, as of the date of such opinion and based upon and subject to the various limitations, qualifications and assumptions set forth therein, the merger consideration to be paid to holders of VMware common stock in the transactions was fair, from a financial point of view, to such holders. Following discussion, and taking into consideration various factors, including those described in the section titled “—VMware’s Reasons for the Merger; Recommendation of the VMware Board of Directors,” the VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests of, VMware and the VMware stockholders, (ii) determined that it is in the best interests of VMware and the VMware stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions substantially upon the terms and conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement.
Before the opening of New York Stock Exchange normal trading hours on May 26, 2022, the applicable parties executed the merger agreement and the voting agreements, Broadcom delivered to VMware fully executed versions of the debt commitment letter and Gibson Dunn delivered the legal opinion required by the tax matters agreement between VMware and Dell for VMware to engage in the transactions contemplated by the merger agreement. Promptly following execution of the merger agreement, VMware and Broadcom publicly announced the merger agreement.
Later on May 26, 2022, in accordance with the go-shop provisions in the merger agreement, at the direction of the VMware board of directors, representatives of J.P. Morgan and Goldman Sachs began contacting parties about their interest in participating in the go-shop process. During the go-shop period, representatives of J.P. Morgan and Goldman Sachs contacted 10 potential strategic acquirors (including Party A and Party B). Of such contacted parties, two potential strategic acquirors executed acceptable confidentiality agreements. During the go-shop period, VMware provided confidential information in response to due diligence inquiries made by these two potential strategic acquirors. At 11:59 p.m. Pacific time on July 5, 2022, the go-shop period expired without any party submitting a proposal to acquire VMware.
VMware’s Reasons for the Transactions; Recommendation of the VMware Board of Directors
At its May 26, 2022 meeting held to evaluate the transactions, the VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests, of VMware and the VMware stockholders, (ii) determined that it is in the best interests of VMware and the VMware stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions upon the terms and subject to the conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement. The VMware board of directors recommends that VMware stockholders vote:
1.
“FOR” the merger agreement proposal;
2.
“FOR” the merger-related compensation proposal; and
3.
“FOR” the adjournment proposal.
In evaluating the transactions and the merger agreement and arriving at its determination, the VMware board of directors consulted with VMware’s senior management, representatives of VMware’s financial advisors, Goldman Sachs and J.P. Morgan and VMware’s outside legal counsel, Gibson Dunn, and considered a number of substantive factors, both positive and negative, and potential benefits and detriments of the transactions to VMware and its stockholders. The VMware board of directors believed that, taken as a whole, the following factors supported its decision to approve the transactions:
Merger Consideration. The value of the merger consideration to be received by VMware stockholders in relation to the market prices of VMware common stock prior to the VMware board of directors’ approval of the merger agreement.
Premium to Trading Price of VMware Common Stock. The fact that the implied value per share of VMware common stock of $142.50 assuming a cash election and no proration, the implied value per
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share of VMware common stock of $136.88 assuming a stock election and no proration and a blended value per share of VMware common stock of $139.69 (assuming proration of 50% cash and 50% equity based on the treatment of VMware common stock, stock options, restricted stock units and performance stock units pursuant to the merger agreement), each calculated as of May 20, 2022 (the last trading day prior to market speculation regarding the transactions), represented a premium of 49%, 43% and 46%, respectively, over the closing price per share of VMware common stock of $95.71 on May 20, 2022. The VMware board of directors also considered the fact that the implied value per share of VMware common stock of $142.50 assuming a cash election and no proration, the implied value per share of VMware common stock of $132.10 assuming a stock election and no proration and a blended value per share of VMware common stock of $137.30 (assuming proration of 50% cash and 50% equity based on the treatment of VMware common stock, stock options, restricted stock units and performance stock units pursuant to the merger agreement), each calculated as of May 24, 2022, represented a premium of 49%, 38% and 43%, respectively, over the closing price per share of VMware common stock of $95.71 on May 20, 2022.
Uncertainty of Future Common Stock Market Price. The uncertainty of VMware’s future stock market price if VMware remained independent. The VMware board of directors considered VMware’s business, assets, financial condition, results of operations, management, competitive position and prospects, as well as current industry, economic and stock and credit market conditions. The VMware board of directors also considered VMware’s long range plan and the initiatives and the potential execution risks associated with such plan. In connection with these considerations, the VMware board of directors considered the attendant risk that if VMware remained independent, VMware common stock might not trade at levels equal to or greater than the value of the merger consideration in the near term, over an extended period of time or at all.
Negotiations with Broadcom. The benefits that VMware and its advisors were able to obtain during its negotiations with Broadcom. The VMware board of directors believed that the consideration reflected in the merger agreement was the best transaction that could be obtained by VMware stockholders at the time, and that there was no assurance that a more favorable opportunity to sell VMware would arise later or through any alternative transaction.
Stockholder Election Opportunity. The fact that VMware stockholders would have the right to elect to receive the merger consideration either in cash or shares of Broadcom common stock, subject to proration.
Significant Portion of Merger Consideration in Cash. The fact that 50% of the merger consideration will be paid in cash, giving VMware stockholders the opportunity to immediately realize value for a significant portion of their investment and providing certainty of value. The VMware board of directors also considered the fact that VMware stockholders would be able to reinvest the cash consideration received in the transactions in shares of Broadcom common stock if they desired to do so.
Participation in Potential Upside. The benefits of Broadcom that could result from the transactions, including the potential to realize synergies. The VMware board of directors also considered the fact that, since a portion of the merger consideration will be paid in shares of Broadcom common stock, VMware stockholders will benefit from an approximately 12% pro forma continuing equity ownership in Broadcom (based on share data of VMware and Broadcom on May 24, 2022) and have the opportunity to participate in any future earnings or growth of Broadcom and future appreciation in the value of Broadcom common stock following the transactions should they determine to retain the shares of Broadcom common stock payable in the transactions.
Fixed Exchange Ratio for Stock Portion of Merger Consideration. The fact that because the stock consideration is based on a fixed exchange ratio of 0.25200 of a share of Broadcom common stock, VMware stockholders receiving a portion of the merger consideration in shares of Broadcom common stock will have the opportunity to benefit from any increase in the trading price of shares of Broadcom common stock between the announcement of the merger agreement and the completion of the transactions and that the cash portion of the merger consideration will limit the impact of a decline in the trading price of Broadcom common stock on the aggregate value of the merger consideration.
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Tax Treatment. The fact that the transactions are intended to qualify for the Intended Tax Treatment, as described in greater detail under “Material U.S. Federal Income Tax Consequences.”
Expected Cost Synergies. The expectation that Broadcom will recognize anticipated cost synergies following consummation of the transactions, which VMware stockholders will benefit from as continuing stockholders of Broadcom. The VMware board of directors also considered that there could be no assurance that any particular amount of such synergies would be achieved following completion of the transactions or the timeframe in which they would be achieved.
Financial Analyses and Opinion of Goldman Sachs. The oral opinion of Goldman Sachs rendered to the VMware board of directors, subsequently confirmed by delivery of the written opinion of Goldman Sachs, dated May 26, 2022, that, as of the date of such written opinion and based upon and subject to the various limitations, qualifications and assumptions set forth therein, the aggregate merger consideration to be paid to the holders (other than Broadcom and its affiliates) of shares of VMware common stock pursuant to the merger agreement was fair from a financial point of view to such holders. The opinion is more fully described in the section titled “—Opinion of Goldman Sachs” and the full text of the opinion is attached as Annex D to this proxy statement/prospectus. The VMware board of directors considered that Goldman Sachs, in connection with delivering its opinion, performed a variety of financial and comparative analyses described in the section titled “—Opinion of Goldman Sachs.”
Financial Analyses and Opinion of J.P. Morgan. The oral opinion of J.P. Morgan rendered to the VMware board of directors on May 26, 2022, which was subsequently confirmed by delivery of its written opinion, dated May 26, 2022, that, as of such date and based upon and subject to the various limitations, qualifications and assumptions set forth in its opinion, the merger consideration to be paid to holders of VMware common stock in the transactions was fair, from a financial point of view, to such holders. The opinion is more fully described in the section titled “—Opinion of J.P. Morgan” and the full text of the opinion is attached as Annex E to this proxy statement/prospectus. The VMware board of directors considered that J.P. Morgan, in connection with delivering its opinion, performed a variety of financial and comparative analyses described in the section titled “—Opinion of J.P. Morgan.”
Likelihood of Consummation. The likelihood that the transactions would be completed, in light of, among other things, the conditions to the transactions, the absence of a financing condition, and the efforts required to obtain regulatory approvals.
Board Representation. The fact that one member of the VMware board of directors, to be mutually agreed by VMware and Broadcom, will join the Broadcom board of directors.
Terms of the Merger Agreement. The terms and conditions of the merger agreement, including:
the representations, warranties and covenants of the parties, the conditions to the parties’ obligations to complete the transactions and their ability to terminate the merger agreement;
the provisions of the merger agreement that permit VMware, during a 40-day go-shop period, to solicit alternative proposals from third parties;
the provisions of the merger agreement that allow VMware to engage in negotiations with, and provide information to, a third party that makes a written bona fide acquisition proposal following the go-shop period that did not result from a breach of VMware’s non-solicitation obligations, if the VMware board of directors has determined in good faith, after consultation with its outside legal counsel and financial advisors, that such proposal constitutes or could reasonably be expected to lead to a transaction that is superior to the transactions and VMware complies with certain procedural requirements;
the provisions of the merger agreement that allow the VMware board of directors to change its recommendation in favor of the adoption of the merger agreement in response to a superior proposal and terminate the merger agreement in order to accept a superior proposal if the VMware board of directors has determined in good faith, after consultation with its outside legal counsel and financial advisors, that an acquisition proposal is a superior proposal and, after consultation
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with its outside legal counsel, that failure to take such action would reasonably be expected to be inconsistent with the VMware board of directors’ fiduciary duties (including taking into account any modifications to the terms of the merger agreement that are proposed by Broadcom and, in connection with the termination of the merger agreement, payment to Broadcom of a $750 million termination fee for termination during the go-shop period or a $1.5 billion termination fee for termination following the go-shop period), subject to VMware’s compliance with certain procedural requirements;
the provisions of the merger agreement that allow the VMware board of directors to change its recommendation in favor of the adoption of the merger agreement (other than in response to the receipt of a written bona fide acquisition proposal, which is subject to the preceding sub-bullet above) if the VMware board of directors has determined in good faith, after consultation with its outside legal counsel, that failure to take such action would reasonably be expected to be inconsistent with its directors’ fiduciary duties (including taking into account any modifications to the terms of the merger agreement that are proposed by Broadcom), subject to VMware’s compliance with certain procedural requirements;
the belief of the VMware board of directors that the payment of either the $1.5 billion termination fee or the $750 million termination fee, as applicable, were not likely to unduly discourage competing third-party proposals or reduce the price of such proposals and that the lower $750 million termination fee would make it more likely for potential acquirors to consider making a superior proposal, that such termination fees and provisions are customary for transactions of this size and type, and that the sizes of the respective termination fees were reasonable in the context of comparable transactions;
the fact that upon termination of the merger agreement in certain circumstances, Broadcom would be required to pay to VMware a $1.5 billion termination fee that would help offset some of the costs of the transaction; and
the ability of VMware to specifically enforce the terms of the merger agreement.
Timing Considerations. The belief of the VMware board of directors that the benefits of soliciting interest from other potential parties were outweighed by a number of risks, including that such solicitation would further increase market speculation and jeopardize or, at a minimum, delay the transactions. The VMware board of directors also observed that VMware had the right to solicit alternative proposals during the go-shop period and that VMware retained the ability to consider unsolicited proposals after the go-shop period until the meeting of the VMware stockholders to vote on the merger agreement proposal and to enter into an agreement with respect to an acquisition proposal under certain circumstances (concurrently with terminating the merger agreement and paying the $1.5 billion termination fee or the $750 million termination fee, as applicable).
Strategic Benefits. The VMware board of directors considered that the transactions are expected to provide a number of significant strategic opportunities, including the following (not necessarily listed in order of relative importance):
the transaction would synergistically combine VMware’s proven technology offerings with Broadcom’s broader capabilities. Broadcom would facilitate a diversity of service offerings, client relationships, geographies and end markets and offer enterprise customers greater choice, value and flexibility to address complex IT infrastructure challenges;
the complementary nature of each company’s solutions and platforms; and
the expectation that the transactions would result in a company with increased capabilities and world-class products in core market segments that will be uniquely positioned to serve, facilitate and power the markets of the future.
Broadcom’s Business and Reputation. The results of the due diligence investigation that VMware’s senior management conducted with the assistance of its advisors on Broadcom with respect to certain
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matters and Broadcom’s business reputation and capabilities of Broadcom and its management. The VMware board of directors also considered Broadcom’s strong track record as an experienced acquirer, which is likely to facilitate an effective and timely integration of VMware’s business and operations.
Financing Strength of Broadcom. The fact that Broadcom has obtained committed debt financing for the transactions from reputable financial institutions and likelihood that Broadcom would be able to finance the transactions given Broadcom’s financial resources and financial profile.
Availability of Appraisal Rights. The fact that appraisal rights would be available to holders of VMware common stock under Delaware law and that there was no condition in the merger agreement relating to the maximum number of shares of VMware common stock that could exercise appraisal rights.
MSD Stockholders and SL Stockholders Voting Agreements. The support of the transactions by the MSD stockholders and the SL stockholders, as evidenced by the execution of the voting agreements.
The VMware board of directors also considered certain potentially negative factors in its deliberations concerning the transactions, including the following:
Fixed Stock Ratio of Merger Consideration. The fact that because the stock portion of the merger consideration is a fixed exchange ratio of shares of Broadcom common stock to VMware common stock, VMware stockholders could be adversely affected by a decrease in the trading price of Broadcom common stock during the pendency of the transactions and the fact that the merger agreement does not provide VMware with a termination right or other similar protection relating to the trading price of Broadcom common stock. The VMware board of directors determined that this structure was appropriate and the risk acceptable in view of factors such as:
the VMware board of directors’ review of the relative intrinsic values and financial performance of Broadcom and VMware; and
the fact that VMware stockholders may elect cash consideration, subject to proration, which limits the impact of a decline in the trading price of Broadcom common stock on the value of the merger consideration.
Possible Failure to Achieve Synergies. The risk that the potential benefits and synergies sought in the transactions will not be realized or will not be realized within the expected time period, and the risk associated with the integration by Broadcom of VMware.
Smaller Ongoing Equity Participation in Broadcom by VMware Stockholders. The fact that because only 50% of the merger consideration will be in the form of Broadcom common stock, VMware stockholders will have a smaller ongoing equity participation in Broadcom (and, as a result, a smaller opportunity to participate in any future earnings or growth of Broadcom and future appreciation in the value of Broadcom common stock following the completion of the transactions) than they have in VMware.
Risk of Non-Completion. The possibility that the transactions might not be completed, including as a result of the failure to obtain regulatory approvals or the failure of VMware stockholders to approve the merger agreement proposal, and the effect the resulting public announcement of the termination of the merger agreement may have on:
the trading price of VMware common stock; and
VMware’s business and operating results, particularly in light of the costs incurred in connection with the transactions.
Possible Deterrence of Competing Offers. The risk that various provisions of the merger agreement, including the requirement that VMware must pay to Broadcom a termination fee of either $750 million if the merger agreement is terminated under certain circumstances during the go-shop period or $1.5 billion if the merger agreement is terminated under certain circumstances following the expiration of the go-shop period, may discourage other parties potentially interested in an acquisition of, or combination with, VMware from pursuing that opportunity.
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Possible Disruption of the Business and Costs and Expenses. The possible disruption to VMware’s business that may result from the transactions, the resulting distraction of VMware’s management and potential attrition of VMware’s employees, as well as the costs and expenses associated with completing the transactions.
Restrictions on Operation of VMware’s Business. The requirement that VMware conduct its business in a commercially reasonable manner and in all material respects in the ordinary course of business consistent with past practice prior to completion of the transactions.
Impact of Announcement. The uncertainty about the effect of the transactions, regardless of whether the transactions are completed, on VMware’s employees, customers and other parties, may impair VMware’s ability to attract, retain and motivate key personnel, and could cause customers, suppliers and others to seek to change existing business relationships with VMware, and the potential for litigation arising in connection with the transactions.
Need to Obtain Required Regulatory Clearances. The fact that completion of the transactions would require approval, or expiration or termination of the applicable waiting periods, under the HSR Act and other applicable non-U.S. antitrust laws.
Other Risks. The risks described under “Risk Factors” beginning on page 25.
The VMware board of directors concluded that the potentially negative factors associated with the transactions were significantly outweighed by the potential benefits that it expected the VMware stockholders would achieve as a result of the transactions, including the belief of the VMware board of directors that the transactions would maximize the immediate value of VMware stockholders’ shares and minimize the risks and uncertainty affecting the future prospects of VMware, including the potential execution risks associated with its stand-alone financial plan. Accordingly, the VMware board of directors unanimously (i) determined that the terms of the merger agreement and the transactions are fair to, and in the best interests, of VMware and the VMware stockholders, (ii) determined that it is in the best interests of VMware and the VMware stockholders, and declared it advisable, to enter into the merger agreement, (iii) approved the execution and delivery by VMware of the merger agreement, the performance by VMware of its covenants and agreements contained therein and the consummation of the transactions upon the terms and subject to the conditions set forth in the merger agreement and (iv) resolved to recommend that the VMware stockholders vote to adopt the merger agreement.
In addition, the VMware board of directors was aware of and considered the interests that VMware’s directors and executive officers may have with respect to the transactions that differ from, or are in addition to, the interests of stockholders of VMware generally, as described under “—Interests of VMware’s Directors and Executive Officers in the Transactions.”
The foregoing discussion of the information and factors considered by the VMware board of directors is not exhaustive, but VMware believes it includes all the material factors considered by the VMware board of directors. In view of the wide variety of factors considered in connection with its evaluation of the transactions and the complexity of these matters, the VMware board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors. Rather, the VMware board of directors viewed its position and recommendation as being based on an overall analysis and on the totality of the information presented to and factors considered by it. In addition, in considering the factors described above, individual directors may have given different weights to different factors. The VMware board of directors based its unanimous recommendation on the totality of the information presented.
This explanation of VMware’s reasons for the transactions and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described under “Cautionary Statement Regarding Forward-Looking Statements.”
Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors
While VMware has from time to time provided limited financial guidance to investors, VMware’s management does not, as a matter of course, otherwise publicly disclose forecasts or internal projections as to future performance due to, among other things, the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. In connection with the transactions, VMware provided certain unaudited non-public financial projections regarding
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VMware to the VMware board of directors, which are referred to as the “VMware management financial projections.” At the direction of the VMware board of directors, the VMware management financial projections were also provided to, and approved for use by, Goldman Sachs and J.P. Morgan for purposes of performing their respective financial analyses in connection with rendering their respective opinions to the VMware board of directors (as more fully described in the sections titled “—Opinion of Goldman Sachs” and “—Opinion of J.P. Morgan”). In addition, VMware management provided to the VMware board of directors, Goldman Sachs and J.P. Morgan certain unaudited non-public financial projections for Broadcom, which were informed by Wall Street consensus estimates for Broadcom and due diligence discussions between VMware’s management and Broadcom during VMware’s reverse due diligence process and are referred to as the “VMware-approved Broadcom financial projections” and, together with the VMware management financial projections, the “financial projections.” The financial metrics set forth in the section titled “—VMware-Approved Broadcom Financial Projections” were arithmetically calculated by J.P. Morgan solely using information provided in the VMware-approved Broadcom financial projections and were approved by VMware for use by J.P. Morgan for purposes of performing its financial analyses in connection with rendering its opinion to the VMware board of directors (as more fully described in the section titled “—Opinion of J.P. Morgan”). However, the VMware-approved Broadcom financial projections were not utilized by Goldman Sachs for purposes of performing its financial analyses in connection with rendering its opinion to the VMware board of directors (as more fully described in the section titled “—Opinion of Goldman Sachs”). A summary of these financial projections is included below to give VMware stockholders access to certain information that was considered by the VMware board of directors for purposes of evaluating the transactions. These projections are not, and should not be viewed as, public guidance or even targets.
The financial projections, while presented with numerical specificity, were based on numerous variables and assumptions, including about future performance, that are inherently uncertain and many of which are beyond VMware’s and Broadcom’s control. The financial projections reflect numerous estimates, assumptions and judgments made by VMware management, based on information available at the time the financial projections were developed, with respect to industry performance and competition, general business, economic, regulatory, market and financial conditions, other future events and matters specific to VMware’s and Broadcom’s business, all of which are difficult to predict and many of which are beyond VMware’s and Broadcom’s control. There can be no assurances that the financial projections accurately reflect future trends or accurately estimate VMware’s or Broadcom’s future financial and operating performance. The financial projections also reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and cause the financial projections not to be achieved include, but are not limited to, risks and uncertainties relating to VMware’s and Broadcom’s business (including the ability to achieve strategic goals, objectives and targets over the applicable periods), industry performance, general business and economic conditions and other factors described in or referenced under “Cautionary Statement Regarding Forward-Looking Statements” and those risks and uncertainties detailed in VMware’s and Broadcom’s public filings with the SEC. Further, the financial projections cover multiple years and by their nature become subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the financial projections will be realized, and actual results may vary materially from those shown. Modeling and forecasting the future performance of a software company is a highly speculative endeavor. Since the financial projections cover a long period of time, the financial projections by their nature are unlikely to anticipate each circumstance that will have an effect on the commercial value of VMware’s and Broadcom’s products and services.
The financial projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comply with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information or generally accepted accounting principles in the United States (referred to as GAAP).
The financial projections included in this document, including the financial projections set forth below in the sections titled “—VMware Management Financial Projections” and “—VMware-Approved Broadcom Financial Projections,” are the responsibility of VMware’s management. PricewaterhouseCoopers LLP, VMware’s independent registered public accounting firm, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the financial projections and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers
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LLP report on VMware’s consolidated financial statements incorporated by reference from VMware’s Annual Report on Form 10-K for the fiscal year ended January 28, 2022 relates to VMware’s previously issued financial statements. It does not extend to the financial projections and should not be read to do so.
The financial projections are not being included in this proxy statement/prospectus in order to influence any VMware stockholder’s decision as to whether or not to approve the transactions or whether or not to seek appraisal rights with respect to shares of VMware common stock held by such stockholder. The summary of the financial projections is being included in this proxy statement/prospectus solely because these financial projections were made available to the VMware board of directors, Goldman Sachs and J.P. Morgan.
The financial projections do not take into account any circumstances or events occurring after the date they were prepared, including the announcement of the transactions and transaction-related expenses. The financial projections also do not take into account the effect of any failure of the transactions to close and should not be viewed as accurate or continuing in that context.
The inclusion of the financial projections in this proxy statement/prospectus should not be regarded as an indication that VMware, Broadcom, Goldman Sachs or J.P. Morgan or any of their respective affiliates, advisors or representatives considered or consider the financial projections to be predictive of actual future events, and the financial projections should not be relied on as such. None of VMware, Broadcom, Goldman Sachs or J.P. Morgan or any of their respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from these financial projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the financial projections to reflect circumstances existing after the date such financial projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the financial projections are shown to be in error or no longer appropriate. Neither VMware nor Broadcom intends to make publicly available any update or other revision to the financial projections, except as required by law. None of VMware, Broadcom, Goldman Sachs or J.P. Morgan or any of their respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any stockholder or other investor regarding the ultimate performance of VMware or Broadcom compared to the information contained in the financial projections or that projected results will be achieved.
VMware’s and Broadcom’s respective stockholders are cautioned not to place undue, if any, reliance on the financial projections included in this proxy statement/prospectus.
The financial projections incorporate certain financial measures which are not GAAP measures. Such financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. VMware’s calculations of these financial measures may differ from others in its industry and are not necessarily comparable with information presented under similar captions used by other companies. Financial measures provided to a financial advisor are excluded from the SEC’s definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which may otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure to be presented. Reconciliations of these financial measures were not relied upon by Goldman Sachs or J.P. Morgan for purposes of performing their respective financial analyses in connection with rendering their respective opinions to the VMware board of directors (as described in the sections titled “—Opinion of Goldman Sachs” and “—Opinion of J.P. Morgan”) or by the VMware board of directors. Accordingly, a reconciliation of the financial measures included in the financial projections is not provided.
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Subject to the foregoing qualifications, the following is a summary of the financial projections:
VMware Management Financial Projections
 
Fiscal Year(5)
($ in millions)
2023E
2024E
2025E
2026E
2027E
Revenue
$13,350
$14,546
$16,160
$17,494
$18,938
Non-GAAP Operating Income(1)
$3,671
$4,146
$4,848
$5,336
$5,871
Adjusted EBITDA(2)
$4,537
$5,102
$5,928
$6,543
$7,221
Unlevered Free Cash Flow(3)
$3,940
$4,086
$4,340
$4,753
$5,255
Unlevered Free Cash Flow (Less Stock-Based Compensation Expenses)(4)
$2,686
$2,776
$2,983
$3,283
$3,664
(1)
Non-GAAP Operating Income for VMware is calculated as GAAP operating income adjusted to exclude stock-based compensation expense, employer payroll taxes on employee stock transactions, intangible amortization, and acquisition, disposition and other items.
(2)
Adjusted EBITDA for VMware is calculated as Non-GAAP Operating Income, adding depreciation and amortization (excluding intangible amortization).
(3)
Unlevered Free Cash Flow for VMware was arithmetically calculated by Goldman Sachs and J.P. Morgan solely using information provided in the VMware management financial projections and was approved by VMware’s management for use by Goldman Sachs and J.P. Morgan for purposes of their respective opinions and financial analyses. Unlevered Free Cash Flow for VMware is calculated as Non-GAAP Operating Income, subtracting the impact of cash taxes and capital expenditures, adding the impact of depreciation and amortization (excluding intangible amortization) and adding or subtracting, as applicable, changes in net working capital.
(4)
Unlevered Free Cash Flow (Less Stock-Based Compensation Expense) for VMware was arithmetically calculated by Goldman Sachs and J.P. Morgan solely using information provided in the VMware management financial projections and was approved by VMware’s management for use by Goldman Sachs and J.P. Morgan for purposes of their respective opinions and financial analyses. Unlevered Free Cash Flow (Less Stock-Based Compensation Expense) for VMware is calculated as Non-GAAP Operating Income, subtracting the impact of cash taxes, capital expenditures and stock-based compensation, adding the impact of depreciation and amortization (excluding intangible amortization) and adding or subtracting, as applicable, changes in net working capital.
(5)
VMware’s fiscal year is the 52 or 53 weeks ending on the Friday nearest to January 31.
VMware-Approved Broadcom Financial Projections
 
Fiscal Year Ending October 31,
($ in millions)
2022E
2023E
2024E
2025E
2026E
Revenue
$32,666
$34,625
$36,307
$38,123
$40,029
Non-GAAP Operating Income(1)
$19,893
$21,122
$22,147
$23,255
$24,418
Adjusted EBITDA(2)
$20,416
$21,641
$22,692
$23,827
$25,018
Unlevered Free Cash Flow(3)
$17,494
$18,717
$19,645
$20,625
$21,656
Unlevered Free Cash Flow (Less Stock-Based Compensation Expense)(4)
$15,697
$16,813
$17,648
$18,528
$19,455
(1)
Non-GAAP Operating Income for Broadcom is calculated as GAAP operating income adjusted to exclude stock-based compensation expense, amortization of acquisition-related intangible assets, restructuring, impairment and disposal charges, and acquisition-related costs.
(2)
Adjusted EBITDA for Broadcom is calculated as Non-GAAP Operating Income, adding depreciation and amortization (excluding amortization of acquisition-related intangible assets).
(3)
Unlevered Free Cash Flow for Broadcom is calculated as Non-GAAP Operating Income, subtracting the impact of cash taxes and capital expenditures, adding the impact of depreciation and amortization (excluding amortization of acquisition-related intangible assets) and adding or subtracting, as applicable, changes in net working capital.
(4)
Unlevered Free Cash Flow (Less Stock-Based Compensation Expense) for Broadcom is calculated as Non-GAAP Operating Income, subtracting the impact of cash taxes, capital expenditures and stock-based compensation, adding the impact of depreciation and amortization (excluding amortization of acquisition-related intangible assets) and adding or subtracting, as applicable, changes in net working capital.
For additional information on VMware’s and Broadcom’s actual results and historical financial information, see the section titled “Where You Can Find More Information.”
Opinions of VMware’s Financial Advisors
Opinion of Goldman Sachs
Goldman Sachs rendered its oral opinion, subsequently confirmed by delivery of its written opinion, dated May 26, 2022, to the VMware board of directors that, as of the date of such written opinion and based upon and
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subject to the various limitations, qualifications and assumptions set forth therein, the aggregate merger consideration to be paid to the holders (other than Broadcom and its affiliates) of shares of VMware common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated May 26, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this proxy statement/prospectus. Goldman Sachs provided advisory services and its opinion for the information and assistance of the VMware board of directors in connection with its consideration of the transactions. The Goldman Sachs opinion is not a recommendation as to how any holder of VMware common stock should vote with respect to the transactions or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
the merger agreement;
annual reports to stockholders and Annual Reports on Form 10-K of VMware for the five fiscal years ended January 28, 2022, for Broadcom for the four fiscal years ended October 31, 2021 and for Broadcom Limited, Broadcom’s predecessor, for the fiscal year ended October 29, 2017;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of VMware and Broadcom;
certain other communications from VMware and Broadcom to their respective stockholders;
certain publicly available research analyst reports for VMware and Broadcom; and
certain internal financial analyses and forecasts for VMware prepared by its management, as approved for Goldman Sachs’ use by VMware (referred to in this section titled “—Opinion of Goldman Sachs” as VMware management financial projections and summarized in the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors—VMware Management Financial Projections”), certain financial analyses and forecasts for Broadcom stand-alone prepared by the management of VMware, as approved for Goldman Sachs’ use by VMware, and certain operating synergies projected by the management of VMware to result from the transactions.
Goldman Sachs also held discussions with members of the senior managements of VMware and Broadcom regarding their assessment of the strategic rationale for, and the potential benefits of, the transactions and the past and current business operations, financial condition and future prospects of Broadcom and with members of the senior management of VMware regarding their assessment of the past and current business operations, financial condition and future prospects of VMware; reviewed the reported price and trading activity for the shares of VMware common stock and Broadcom common stock; compared certain financial and stock market information for VMware and Broadcom with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the technology, media and telecom industry; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For purposes of rendering its opinion, Goldman Sachs, with the consent of the VMware board of directors, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the consent of the VMware board of directors that the VMware management financial projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of VMware. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of VMware or Broadcom or any of their respective subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transactions would be obtained without any adverse effect on VMware or Broadcom or on the expected benefits of the
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transactions in any way meaningful to its analysis. Goldman Sachs also assumed that the transactions would be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
Goldman Sachs’ opinion does not address the underlying business decision of VMware to engage in the transactions or the relative merits of the transactions as compared to any strategic alternatives that may be available to VMware; nor does it address any legal, regulatory, tax or accounting matters or the fairness of the proration and other procedures and limitations contained in the merger agreement. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, VMware or any other alternative transaction. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than Broadcom and its affiliates) of shares of VMware common stock, as of the date of the written opinion, of the aggregate merger consideration to be paid to such holders pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the transactions or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transactions, including the fairness of the transactions to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of VMware; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of VMware, or class of such persons, in connection with the transactions, whether relative to the aggregate merger consideration to be paid to the holders of shares of VMware common stock (other than Broadcom and its affiliates) pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion does not express any opinion as to the prices at which shares of Broadcom common stock or VMware common stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on VMware or Broadcom or the transactions, or as to the impact of the transactions on the solvency or viability of VMware or Broadcom or the ability of VMware or Broadcom to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ advisory services and its opinion expressed were provided for the information and assistance of the VMware board in connection with its consideration of the transactions and such opinion does not constitute a recommendation as to how any holder of shares of VMware common stock should vote or make any election with respect to the transactions or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
Summary of Material Financial Analysis
The following is a summary of the material financial analyses presented by Goldman Sachs to the VMware board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before May 25, 2022, the last trading day before the public announcement of the transactions and is not necessarily indicative of current market conditions.
Implied Premia Analysis. Goldman Sachs calculated and compared certain implied premia described below using implied values of the merger consideration to be paid to the holders (other than Broadcom and its affiliates) of shares of VMware common stock pursuant to the merger agreement. For purposes of this analysis, Goldman Sachs calculated implied values for the merger consideration, reflecting an implied value per share of VMware common stock assuming a cash election and no proration, an implied value per share of VMware common stock assuming a stock election and no proration and a blended value per share of VMware common stock (assuming proration of 50% cash and 50% equity based on the treatment of VMware common stock, stock options, restricted stock units and performance stock units pursuant to the merger agreement), each calculated as of May 20, 2022 (the last trading day prior to market speculation regarding the transactions) (referred to in this section titled “—Opinion of Goldman Sachs” as the Undisturbed Date), and as of May 24, 2022, the last trading
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day prior to the May 25th meeting of the VMware board of directors at which Goldman Sachs reviewed with the VMware board of directors its financial analyses of the aggregate merger consideration to be paid to the holders of shares of VMware common stock (other than Broadcom and its affiliates) pursuant to the merger agreement.
Goldman Sachs calculated the implied premia represented by the implied values of the merger consideration per share of VMware common stock relative to:
$95.71, the closing price for VMware common stock on the Undisturbed Date; and
$115.94, the closing price for VMware common stock on May 24, 2022.
The results of these calculations are as follows:
 
As of May 20, 2022
As of May 24, 2022
 
Cash
Election
Stock
Election
Blended
Value
Cash
Election
Stock
Election
Blended
Value
Implied Value per Share of VMware Common Stock
$142.50
$136.88
$139.69
$142.50
$132.10
$137.30
Implied Premium to:
 
 
 
 
 
 
Share Price as of May 20, 2022 of $95.71
49%
43%
46%
49%
38%
43%
Share Price as of May 24, 2022 of $115.94
23%
18%
20%
23%
14%
18%
Illustrative Discounted Cash Flow Analysis. Using the VMware management financial projections, Goldman Sachs performed an illustrative discounted cash flow analysis on VMware to derive a range of illustrative present values per share of VMware common stock. Using the mid-year convention for discounting cash flows and discount rates ranging from 7.5% to 8.5%, reflecting estimates of VMware’s weighted average cost of capital, Goldman Sachs discounted to present value as of April 29, 2022 (i) estimates of unlevered free cash flow for VMware, as arithmetically calculated by Goldman Sachs solely using information provided in the VMware management financial projections and approved by VMware’s management for use by Goldman Sachs for purposes of its opinion and financial analyses and referred to as “Unlevered Free Cash Flow (Less Stock-Based Compensation Expenses)” in the section titled “The Merger—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors,” for the nine months ended January 28, 2023 and fiscal years 2024 through 2027 and (ii) a range of illustrative terminal values for VMware, which were calculated by applying illustrative perpetuity growth rates ranging from 2.0% to 3.0% to a terminal year estimate of the unlevered free cash flow to be generated by VMware, as approved by VMware management for use by Goldman Sachs for purposes of its opinion and financial analyses. Based on the foregoing, Goldman Sachs also calculated implied terminal value to next twelve months unlevered free cash flow multiples ranging from 10.9x to 15.8x. Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model (referred to in this section titled “—Opinion of Goldman Sachs” as “CAPM”), which requires certain company-specific inputs, including VMware’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for VMware, as well as certain financial metrics for the United States financial markets generally. The range of illustrative perpetuity growth rates for VMware was estimated by Goldman Sachs using its professional judgment and experience, taking into account, among other things, the VMware management financial projections and market expectations regarding long-term real growth of gross domestic product and inflation.
Goldman Sachs derived a range of illustrative enterprise values for VMware by adding the ranges of present values it derived as described above. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for VMware the amount of VMware’s total debt and added the amount of VMware’s cash and cash equivalents and strategic investments as of April 29, 2022, as provided by VMware management and approved for Goldman Sachs’ use by VMware management, to derive a range of illustrative equity values for VMware. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of VMware as of the Undisturbed Date, as provided by VMware management and approved for Goldman Sachs’ use by VMware management, to derive a range of illustrative present values per share of VMware common stock, rounded to the nearest $0.10, of $100.80 to $148.90.
Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of VMware common stock, which is designed to provide an indication of the present value of a theoretical future value of VMware’s equity as a
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function of VMware’s estimated future unlevered free cash flow and enterprise value to one-year forward unlevered free cash flow (referred in this section titled “—Opinion of Goldman Sachs” as forward EV/UFCF) multiples. For this analysis, Goldman Sachs used the VMware management financial projections for each of the fiscal years 2023 to 2026. Goldman Sachs first calculated the implied future enterprise value of VMware as of January 31, 2023, 2024 and 2025, by applying a range of forward EV/UFCF multiples of 12.0x to 16.0x to the estimates of unlevered free cash flow for VMware, as reflected in the VMware management financial projections and referred to as Unlevered Free Cash Flow in the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors,” for each of the fiscal years 2024, 2025 and 2026. These illustrative multiples were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, current and historical average forward EV/UFCF multiples for VMware and certain selected diversified software companies described in the section titled “—Selected Public Company Comparables.”
Goldman Sachs then subtracted the amount of VMware’s total debt and added the amount of VMware’s cash and cash equivalents and strategic investments as of January 31, 2023, 2024 and 2025, each as provided by management of VMware and approved for Goldman Sachs’ use by VMware management, to the range of implied enterprise values to derive a range of illustrative equity values as of January 31, 2023, 2024 and 2025. Goldman Sachs then divided these implied equity values by the projected number of fully diluted outstanding shares of VMware, as provided by VMware management and approved for Goldman Sachs’ use by VMware management, as of January 31, 2023, 2024 and 2025, to derive a range of implied future equity values per share of VMware common stock. Goldman Sachs then discounted these implied equity values per share to the Undisturbed Date, using an illustrative discount rate of 8.5%, reflecting an estimate of VMware’s cost of equity. Goldman Sachs derived such discount rate by application of the CAPM, which requires certain company-specific inputs, including a beta for VMware, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values per share of VMware common stock, rounded to the nearest $0.10, of $92.30 to $139.90.
Selected Precedent Transactions Analysis. Goldman Sachs analyzed certain publicly available information relating to the following selected transactions in the technology, media and telecom industry. For each of the selected transactions, where information was publicly available, Goldman Sachs calculated and compared the implied enterprise value of the applicable target company based on the consideration paid in the transaction as a multiple of the target company’s earnings before interest, taxes, depreciation and amortization over the next twelve month period (referred to in this section titled “—Opinion of Goldman Sachs” as EV/NTM EBITDA) at or prior to the announcement of the applicable transaction based on FactSet and Institutional Brokers’ Estimate System estimates.
The following table identifies the transactions reviewed by Goldman Sachs as part of this analysis:
Announcement Date
Acquiror
Target
EV/NTM
EBITDA
January 2022
Elliott Investment Management L.P. and Vista Equity Partners Management, LLC
Citrix Systems, Inc.
14.1x
December 2021
Oracle Corporation
Cerner Corporation
14.3x
March 2021
Symphony Technology Group, LLC
McAfee Corp. (Enterprise Segment)
11.9x
August 2019
Broadcom Inc.
Symantec Corporation (Enterprise Security Segment)
8.2/27.5x(1)
July 2018
Broadcom Inc.
CA, Inc.
11.1x
October 2015
Silver Lake Group L.L.C. and Thoma Bravo, LLC
SolarWinds, Inc.
16.1x
April 2015
Canada Pension Plan Investment Board and Permira Advisers LLC
Informatica Corporation
17.9x
December 2014
Ontario Teachers’ Pension Plan and Thoma Bravo, LLC
Riverbed Technology, Inc.
11.2x
September 2014
Thoma Bravo, LLC
Compuware Corporation
10.3x
(1)
Higher multiple excludes approximately $1 billion of run-rate cost synergies as disclosed in the press release related to the acquisition.
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While none of the selected transactions or companies that participated in the selected transactions are directly comparable to the transactions or VMware, the transactions included as selected transactions were chosen because the target companies that participated in the selected transactions are companies with operations, results, market size and product profiles that, for the purpose of this analysis, may be considered similar to certain of those of VMware.
The foregoing analysis indicated a 25th percentile EV/NTM EBITDA multiple of 11.1x and 75th percentile EV/NTM EBITDA multiple of 14.3x. Using this analysis and its professional judgment and experience, Goldman Sachs applied a range of illustrative EV/EBITDA multiples of 11.1x to 14.3x to an estimate of VMware’s next twelve months’ EBITDA, as reflected in the VMware management financial projections and referred to as “Adjusted EBITDA” in the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors,” to derive a range of implied enterprise values for VMware. Goldman Sachs then subtracted from the range of implied enterprise values the amount of VMware’s total debt and added the amount of VMware’s cash and cash equivalents and strategic investments as of April 29, 2022, as provided by VMware management and approved for Goldman Sachs’ use by VMware management, to derive a range of illustrative equity values for VMware. Goldman Sachs divided the range of illustrative equity values by the number of fully diluted outstanding shares of VMware as of the Undisturbed Date, as provided by management of VMware and approved for Goldman Sachs’ use by management of VMware, to derive a range of implied values per share of VMware common stock, rounded to the nearest $0.10, of $99.10 to $132.90.
Premia Paid Analysis. Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for 45 transactions announced from January 1, 2013 through the Undisturbed Date, involving a public technology, media, or telecommunication company based in the United States as the target where the disclosed enterprise value for the transaction was greater than $10 billion. For the entire period, Goldman Sachs calculated the median, 25th percentile and 75th percentile premia of the price paid in the transactions relative to the target’s last undisturbed closing stock price prior to announcement of the transactions. This analysis indicated a median premium of 30%, a 25th percentile premium of 22% and a 75th percentile premium of 45% across the period. Using this analysis and its professional judgment and experience, Goldman Sachs applied a range of illustrative premia of 22% to 45% to the undisturbed closing price per share of VMware common stock of $95.71 as of the Undisturbed Date and calculated a range of implied values per share of VMware common stock, rounded to the nearest $0.10, of $116.80 to $138.80.
Selected Public Company Comparables. Using publicly available information, Goldman Sachs reviewed and compared forward EV/UFCF multiples for VMware and the following publicly traded companies in the diversified software industry, which are collectively referred to as the “selected companies”:
Check Point Software Technologies Ltd.
Cisco Systems, Inc.
F5, Inc.
International Business Machines Corporation
Microsoft Corporation
Oracle Corporation
SAP SE
Although none of the selected companies is directly comparable to VMware, the companies included were chosen because they are publicly traded companies in the diversified software industry with certain operations that for purposes of analysis may be considered similar to certain operations of VMware.
Goldman Sachs calculated and compared the average multiple of enterprise value to unlevered free cash flow over the next twelve month period (referred to in this section titled “—Opinion of Goldman Sachs” as EV/NTM UFCF) for each of VMware and the selected companies over the (i) 5-year period prior to the Undisturbed Date and (ii) period from November 2, 2021 (the first trading day following the special cash dividend payment to VMware stockholders as part of the VMware spin-off) through the Undisturbed Date, in each case based on financial and trading data as of the Undisturbed Date obtained from public filings and FactSet. The results of this analysis are summarized as follows:
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EV/NTM UFCF
Averages Over Periods Prior to May 20, 2022
 
5-Year
Since Nov 2, 2021
VMware
14.6x
13.3x
Selected Companies
14.1x
16.9x
Goldman Sachs also calculated and compared the current EV/NTM UFCF multiples for VMware, based on the VMware management financial projections and based on FactSet estimates, and each of the selected companies, based on financial and trading data as of the Undisturbed Date obtained from public filings, Capital IQ and FactSet. The results of this analysis are summarized as follows:
 
EV/NTM UFCF
VMware (based on the VMware management financial projections)
12.7x
VMware (based on FactSet estimates)
11.4x
Check Point Software Technologies Ltd.
9.7x
Cisco Systems, Inc.
11.0x
F5, Inc.
14.0x
International Business Machines Corporation
12.4x
Microsoft Corporation
24.2x
Oracle Corporation
19.4x
SAP SE
20.2x
General
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to VMware or Broadcom or the transactions.
Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the VMware board of directors as to the fairness from a financial point of view, as of the date of its opinion, of the aggregate merger consideration to be paid to the holders (other than Broadcom and its affiliates) of shares of VMware common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of VMware, Broadcom, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecasts.
The aggregate merger consideration was determined through arm’s-length negotiations between VMware and Broadcom and was approved by the VMware board of directors. Goldman Sachs provided advice to VMware during these negotiations. Goldman Sachs did not, however, recommend any specific amount or form of consideration to VMware or the VMware board of directors or that any specific amount or form of consideration constituted the only appropriate consideration for the transactions.
As described above, Goldman Sachs’ opinion to the VMware board of directors was one of many factors taken into consideration by the VMware board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex D to this proxy statement/prospectus.
Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services
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for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of VMware, Broadcom, any of their respective affiliates and third parties, including Dell, MSD Capital, L.P. (referred to in this section titled “—Opinion of Goldman Sachs” as MSD Capital), an affiliate of Dell, and Silver Lake Group, L.L.C. (referred to in this section titled “—Opinion of Goldman Sachs” as Silver Lake), each of which is a significant stockholder, or an affiliate of a significant stockholder, of VMware, and their respective affiliates and, as applicable, portfolio companies, or any currency or commodity that may be involved in the transactions.
Goldman Sachs acted as financial advisor to VMware in connection with, and participated in certain of the negotiations leading to, the transactions. Goldman Sachs has provided certain financial advisory and/or underwriting services to VMware and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted as joint bookrunner with respect to the public offering of VMware’s 0.600% Senior Notes due 2023 (aggregate principal amount $1,000,000,000), 1.000% Senior Notes due 2024 (aggregate principal amount $1,250,000,000), 1.400% Senior Notes due 2026 (aggregate principal amount $1,500,000,000), 1.800% Senior Notes due 2028 (aggregate principal amount $750,000,000) and 2.200% Senior Notes due 2031 (aggregate principal amount $1,500,000,000) in August 2021. During the two-year period ended May 24, 2022, based solely on Goldman Sachs’ books and records, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to VMware and/or its affiliates of approximately $1 million.
Goldman Sachs also has provided certain financial advisory and/or underwriting services to Broadcom and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation. During the two-year period ended May 24, 2022, based solely on Goldman Sachs’ books and records, the Investment Banking Division of Goldman Sachs has not been engaged by Broadcom or its affiliates to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation.
Goldman Sachs also has provided certain financial advisory and/or underwriting services to Dell and MSD Capital and/or their respective affiliates and/or, as applicable, portfolio companies from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted as lead arranger with respect to a term loan facility (aggregate principal amount $150,000,000) of Ultimate Fighting Championship Ltd. (referred to in this section titled “—Opinion of Goldman Sachs” as Ultimate Fighting Championship), a portfolio company of an entity associated with MSD Capital, in June 2020; bookrunner with respect to a $2,453,000,000 bond offering of Ultimate Fighting Championship in January 2021; as joint lead arranger and joint bookrunner with respect to the refinancing and amendment of the Term B-2 Loan facility (aggregate principal amount $3,143,000,000) of Dell in February 2021; as bookrunner with respect to the initial public offering of Hayward Holdings, Inc. (referred to in this section titled “—Opinion of Goldman Sachs” as Hayward Holdings), a portfolio company of an entity associated with MSD Capital, of 40,277,778 shares of its common stock in March 2021; as financial advisor to Kobalt Music Group Limited, a portfolio company of an entity associated with MSD Capital, with respect to its sale of AWAL and Kobalt Neighboring in May 2021; as financial advisor to Dell with respect to its sale of its 81% interest in VMware in November 2021; and as lead left bookrunner with respect to a follow-on public offering of 22,500,000 shares of common stock of Hayward Holdings in May 2022. During the two-year period ended May 24, 2022, based solely on Goldman Sachs’ books and records, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Dell and MSD Capital and/or their respective affiliates and/or, as applicable, portfolio companies of approximately $79 million.
Goldman Sachs also has provided certain financial advisory and/or underwriting services to Silver Lake and/or its affiliates and/or portfolio companies from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted as lead left bookrunner with respect to the initial public offering of Unity Software Inc. (referred to in this section titled “—Opinion of Goldman Sachs” as Unity Software), a portfolio company of a fund associated with Silver Lake, of 28,750,000 shares of its common stock in September 2020; as financial advisor to Credit Karma Inc., a portfolio company of a fund associated with Silver Lake, in connection with its sale in December 2020; as financial advisor to Social Finance, Inc., a portfolio company of a fund associated with Silver Lake, in connection with its sale in May
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2021; as lead left bookrunner with respect to the private offering of 0% convertible senior notes due 2026 of Unity Software (aggregate principal amount $1,500,000,000) in November 2021; as bookrunner with respect to the private offering of senior notes due 2030 (aggregate principal amount $1,000,000,000) of Twitter, Inc., a portfolio company of a fund associated with Silver Lake, in February 2022; and as placement agent for Fanatics, Inc., a portfolio company of a fund associated with Silver Lake, with respect to its equity private placement (aggregate principal amount approximately $1,530,000,000) in April 2022. During the two-year period ended May 24, 2022, based solely on Goldman Sachs’ books and records, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Silver Lake and/or its affiliates and/or portfolio companies of approximately $207 million.
Goldman Sachs may also in the future provide financial advisory and/or underwriting services to VMware, Broadcom, Dell, MSD Capital and Silver Lake and their respective affiliates and/or, as applicable, portfolio companies for which the Investment Banking Division of Goldman Sachs may receive compensation. Affiliates of Goldman Sachs also may have co-invested with MSD Capital and Silver Lake and their respective affiliates from time to time and may have invested in limited partnership units of affiliates of Silver Lake from time to time and may do so in the future.
The VMware board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions. Pursuant to a letter agreement dated May 25, 2022, VMware engaged Goldman Sachs to act as its financial advisor in connection with the transactions. The engagement letter between VMware and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement, at approximately $45 million, all of which is contingent upon consummation of the transactions. In addition, VMware has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
Opinion of J.P. Morgan
Pursuant to an engagement letter, VMware retained J.P. Morgan as its financial advisor in connection with the transactions.
At the meeting of the VMware board of directors on May 26, 2022, J.P. Morgan rendered its oral opinion to the VMware board of directors that, as of such date and based upon and subject to the various limitations, qualifications and assumptions set forth in its opinion, the merger consideration to be paid to the holders of VMware common stock in the transactions was fair, from a financial point of view, to such holders. J.P. Morgan subsequently confirmed its oral opinion by delivering its written opinion, dated May 26, 2022, to the VMware board of directors, that, as of such date, the merger consideration to be paid to the holders of VMware common stock in the transactions was fair, from a financial point of view, to such holders.
The full text of the written opinion of J.P. Morgan dated May 26, 2022, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex E to this proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. VMware’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the VMware board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the transactions, was directed only to the merger consideration to be paid in the transactions and did not address any other aspect of the transactions. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors, or other constituencies of VMware or as to the underlying decision by VMware to engage in the transactions. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of VMware as to how such stockholder should vote with respect to the transactions or any other matter.
In arriving at its opinions, J.P. Morgan, among other things:
reviewed a draft dated May 26, 2022 of the merger agreement;
reviewed certain publicly available business and financial information concerning VMware and Broadcom and the industries in which they operate;
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compared the proposed financial terms of the transactions with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
compared the financial and operating performance of VMware and Broadcom with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of VMware common stock and Broadcom common stock and certain publicly traded securities of such other companies;
reviewed certain internal financial analyses and forecasts prepared by the management of VMware relating to VMware and the business of Broadcom, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the transactions (referred to in this section titled “— Opinion of J.P. Morgan” as the synergies); and
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of VMware and Broadcom with respect to certain aspects of the transactions, and the past and current business operations of VMware and Broadcom, the financial condition and future prospects and operations of VMware and Broadcom, the effects of the transactions on the financial condition and future prospects of VMware and Broadcom and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by VMware and Broadcom or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to J.P. Morgan’s engagement letter with VMware, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of VMware or Broadcom under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of VMware and Broadcom to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the transactions will qualify as tax-free reorganizations for United States federal income tax purposes, and will be consummated as described in the merger agreement (and that any implementation of the alternative transaction structure contemplated by the merger agreement would not have any effect on J.P. Morgan’s analysis), and that the definitive merger agreement would not differ in any material respects from the draft thereof furnished to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by VMware, Broadcom, Holdco, Merger Sub 1 and Broadcom Merger Subs in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to VMware with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the transactions would be obtained without any adverse effect on VMware or Broadcom or on the contemplated benefits of the transactions.
The VMware management financial projections and the VMware approved Broadcom financial projections furnished to J.P. Morgan were prepared by VMware’s management. VMware does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the transactions, and such financial projections were not prepared with a view toward public disclosure. These financial projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of VMware’s management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such financial projections. For more information regarding the use of financial projections and other forward-looking statements, please refer to the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors.”
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J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid to the holders of VMware common stock in the transactions, and J.P. Morgan expressed no opinion as to the fairness of any consideration to be paid in connection with the transactions to the holders of any other class of securities, creditors or other constituencies of VMware or as to the underlying decision by VMware to engage in the transactions. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the transactions, or any class of such persons relative to the merger consideration to be paid to the holders of VMware common stock in the transactions or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which VMware common stock or Broadcom common stock would trade at any future time.
As of the date of J.P. Morgan’s opinion, J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of VMware or any other alternative transaction.
The terms of the merger agreement were determined through arm’s length negotiations between VMware and Broadcom, and the decision to enter into the merger agreement was solely that of the VMware board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the VMware board of directors in its evaluation of the transactions and should not be viewed as determinative of the views of the VMware board of directors or management with respect to the transactions or the merger consideration.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the VMware board of directors on May 26, 2022 and contained in the presentation delivered to the VMware board of directors on such date in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.
VMware Analysis
Public Trading Multiples Analysis
Using publicly available information, J.P. Morgan compared selected financial data of VMware with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to the business of VMware. These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered sufficiently similar to those of VMware. However, none of the selected companies reviewed is identical to VMware and certain of these companies have financial and operating characteristics that are materially different from those of VMware. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently from how they would affect VMware. With respect to the selected companies, J.P. Morgan calculated the ratio of firm value to unlevered free cash flow for the calendar year 2023 for each company based on publicly available financial information and Wall Street estimates per FactSet Research Systems as of May 24, 2022 (referred to as FV / uFCF CY23E). For VMware, the companies selected by J.P. Morgan were:
Selected Company
Cisco Systems, Inc.
International Business Machines Corporation
Microsoft Corporation
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Selected Company
Oracle Corporation
SAP SE
VMware, Inc.(1)
(1)
Based on unaffected closing share price as of the Undisturbed Date.
Based on the results of the above analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan selected a FV / uFCF CY23E multiple reference range for VMware of 10.5x – 16.5x. J.P. Morgan then applied that range to VMware’s estimated unlevered free cash flow for fiscal year 2024 (used as a proxy for calendar year 2023 per VMware management) included in the unaudited prospective financial information provided by VMware management and described in the section titled “—Certain Financial Projections Utilized by the VMware Board of Directors and VMware’s Financial Advisors”, adjusted for the net debt balance of VMware. This analysis indicated a range of implied equity values per share of VMware common stock, rounded to the nearest $0.25, of $78.75 to $134.00, which was compared to the unaffected closing price per share of VMware common stock of $95.71 on May 20, 2022 (the last trading day prior to public rumors of a potential sale of VMware to Broadcom) (referred to in this section titled “— Opinion of J.P. Morgan” as the Undisturbed Date) and the blended offer price per share of $139.69 (referred to in this section titled “— Opinion of J.P. Morgan” as the Blended Offer Price), calculated based on 50:50 proration of the per share cash consideration of $142.50 and the per share stock consideration of 0.25200 Broadcom shares for each share of VMware common stock (based on the unaffected closing price per share of Broadcom common stock of $543.19 on the Undisturbed Date).
Selected Transaction Multiples Analysis
Using publicly available information, J.P. Morgan examined selected transactions involving companies engaged in businesses that J.P. Morgan judged to be reasonably analogous to the business of VMware or aspects thereof. None of the selected transactions reviewed were identical to the transactions. Certain of these transactions may have characteristics that are materially different from those of the transactions. However, the selected transactions were chosen because certain aspects of the transactions, for purposes of J.P. Morgan’s analyses, may be considered similar to the transactions. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the transactions. For each of the selected transactions, J.P. Morgan calculated the ratio of the target company’s firm value to the Wall Street estimates of EBITDA for the twelve month period following the announcement of the applicable transaction (referred to as FV / NTM EBITDA). Specifically, J.P. Morgan reviewed the following transactions:
Announcement Date
Acquiror
Target
January 2022
Elliott Investment Management L.P. and Vista Equity Partners Management, LLC
Citrix Systems, Inc.
December 2021
Oracle Corporation
Cerner Corporation
March 2021
Symphony Technology Group, LLC
McAfee Corp. (Enterprise Segment)
August 2019
Broadcom Inc.
Symantec Corporation (Enterprise Security Segment)
July 2018
Broadcom Inc.
CA, Inc.
October 2015
Silver Lake Group, L.L.C. and Thoma Bravo, LLC
SolarWinds, Inc.
April 2015
Canada Pension Plan Investment Board and Permira Advisers LLC
Informatica Corporation
December 2014
Ontario Teachers’ Pension Plan and Thoma Bravo, LLC
Riverbed Technology, Inc.
September 2014
Thoma Bravo, LLC
Compuware Corporation
Based on the results of these analyses and other factors that J.P. Morgan considered appropriate, J.P. Morgan selected a FV / NTM EBITDA multiple reference range of 11.0x to 14.5x. J.P. Morgan then applied that reference range to VMware management’s estimated NTM EBITDA, adjusted for the net debt balance of
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VMware. This analysis indicated a range of implied equity values per share of VMware common stock, rounded to the nearest $0.25, of $98.00 to $135.00, which was compared to the unaffected closing price per share of VMware common stock of $95.71 as of the Undisturbed Date and the Blended Offer Price.
Discounted Cash Flow Analysis
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for VMware common stock on a standalone basis. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by an asset and taking into consideration the time value of money with respect to such future cash flows by calculating their present value. Unlevered free cash flow refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. The current value of the future cash flows generated by an asset obtained by discounting those future cash flows back to the present using an appropriate discount rate is referred to as the present value in this section titled “—Opinion of J.P. Morgan.” The present value of all future cash flows generated by an asset for periods beyond the projections period is referred to as the terminal value in this section titled “—Opinion of J.P. Morgan.”
J.P. Morgan calculated the unlevered free cash flows that VMware is expected to generate during the remainder of fiscal year 2023 through fiscal year 2027 based upon the VMware management financial projections. Based on VMware management’s estimates of a 2.5% terminal value growth rate in the industry in which VMware operates, J.P. Morgan also calculated a range of terminal values for VMware by applying terminal growth rates ranging from 2.0% to 3.0% to the unlevered free cash flows of VMware at the end of fiscal year 2027. The unlevered free cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 7.5% to 8.5%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of VMware. The present value of the unlevered free cash flows and the range of terminal values were then adjusted for the net debt balance of VMware and divided by VMware’s fully diluted shares outstanding (calculated using the treasury stock method). Based on the results of this analysis, J.P. Morgan arrived at a range of implied equity values per share of VMware common stock, rounded to the nearest $0.25, of $109.00 to $159.25, which was compared to the unaffected closing price per share of VMware common stock of $95.71 on the Undisturbed Date and the Blended Offer Price.
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Broadcom Analysis
Public Trading Multiples Analysis
Using publicly available information, J.P. Morgan compared selected financial data of Broadcom with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to the business of Broadcom. These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered sufficiently similar to those of Broadcom. However, none of the selected companies reviewed is identical to Broadcom and certain of these companies have financial and operating characteristics that are materially different from those of Broadcom. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently from how they would affect Broadcom. With respect to the selected companies, J.P. Morgan calculated the ratio of closing share price to earnings per share for the calendar year 2023 for each company based on publicly available financial information and Wall Street estimates per FactSet Research Systems as of May 24, 2022, which is referred to as P/E CY23E. For Broadcom, the companies selected by J.P. Morgan were:
Selected Company
Broadcom Inc.(1)
Semiconductor
Analog Devices, Inc.
Marvell Technology, Inc.
NXP Semiconductors NV
Texas Instruments Incorporated
Qualcomm, Inc.
Software
Check Point Software Technologies Ltd.
Cisco Systems, Inc.
F5, Inc.
International Business Machines Corporation
Oracle Corporation
(1)
Based on unaffected closing share price as of the Undisturbed Date.
Based on the results of the above analysis and other factors that J.P. Morgan considered appropriate, J.P. Morgan selected a P/E CY23E multiple reference range for Broadcom of 13.0x – 16.0x. J.P. Morgan then applied that range to Broadcom’s estimated earnings per share for calendar year 2023, as provided by VMware management. This analysis indicated a range of implied equity values per share of Broadcom common stock, rounded to the nearest $0.25, of $519.50 to $639.25, which was compared to the unaffected closing price per share of Broadcom common stock of $543.19 on the Undisturbed Date.
Discounted Cash Flow Analysis
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for Broadcom common stock on a standalone basis.
J.P. Morgan calculated the unlevered free cash flows that Broadcom is expected to generate during the remainder of fiscal year 2022 through fiscal year 2026 based upon the VMware approved Broadcom financial projections. Based on VMware management’s estimates of a 2.5% terminal value growth rate in the industry in which Broadcom operates, J.P. Morgan also calculated a range of terminal values for Broadcom by applying terminal growth rates ranging from 2.0% to 3.0% to the unlevered free cash flows of Broadcom at the end of fiscal year 2026. The unlevered free cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 8.0% to 9.0%, which were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of Broadcom. The present value of the unlevered free cash flows and the range of terminal values were then adjusted for the net debt balance of Broadcom and divided by Broadcom’s fully diluted shares outstanding (calculated using the treasury stock method). Based on the results of
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this analysis, J.P. Morgan arrived at a range of implied equity values per share of Broadcom common stock, rounded to the nearest $0.25, of $532.00 to $747.00, which was compared to the unaffected closing price per share of Broadcom common stock of $543.19 on the Undisturbed Date (the last trading day prior to public rumors of a potential sale of VMware to Broadcom).
Relative Implied Stock Exchange Ratio Analysis
J.P. Morgan compared the implied equity values per share for VMware with those of Broadcom with respect to the analyses referenced in the table below. For each comparison, J.P. Morgan compared the highest equity value per share for VMware to the lowest equity value per share for Broadcom to derive the highest exchange ratio implied by each pair of estimates. J.P. Morgan also compared the lowest equity value per share for VMware to the highest equity value per share for Broadcom to derive the lowest exchange ratio implied by each pair of estimates. The results of this analysis are indicated in the following table:
 
Implied Exchange Ratios
 
Low
High
Public Trading Multiples Analysis
0.1232x
0.2579x
Discounted Cash Flow Analysis
0.1459x
0.2993x
The implied exchange ratio reference ranges for VMware and Broadcom were compared to the equivalent 100% stock election exchange ratio in the transactions of 0.25200 shares of Broadcom common stock per share of VMware common stock and the unaffected exchange ratio of 0.1762 shares of Broadcom common stock for each share of VMware common stock (based on the trading prices of VMware common stock and Broadcom common stock on the Undisturbed Date, the last trading day prior to public rumors of a potential sale of VMware to Broadcom).
Intrinsic Value of Merger Consideration – DCF Based
J.P. Morgan conducted a value creation analysis that compared the implied equity value of VMware common stock derived from J.P. Morgan’s discounted cash flow valuation of VMware on a standalone basis to the value of the cash consideration plus VMware common stockholders’ pro forma ownership of the implied equity value of Broadcom. The pro forma implied equity value of Broadcom was calculated as the sum of: (i) the standalone implied equity value of VMware using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described in the section titled “—VMware Analysis—Discounted Cash Flow Analysis,” plus (ii) the standalone implied equity value of Broadcom using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described in the section titled “—Broadcom Analysis—Discounted Cash Flow Analysis,” plus (iii) the present value of VMware management’s estimate of the net synergies, calculated on an after-tax basis and less transaction expenses and using a discount rate of 8.0% and a terminal value growth rate of 2.5%. J.P. Morgan then determined the implied pro forma equity value of Broadcom attributable to VMware common stockholders based on the equity ownership percentage of Broadcom of approximately 12% (on a fully diluted basis) plus the cash consideration to be paid to VMware common stockholders. This analysis indicated an implied equity value per share to holders of VMware common stock, rounded to the nearest $0.25, of $155.00, and yielded value accretion to holders of VMware common stock of $11.3 billion. There can be no assurance, however, that the estimated synergies or estimated costs to achieve such synergies will not be substantially greater or less than VMware management’s estimates.
Miscellaneous
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of VMware or Broadcom. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular
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weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to VMware or Broadcom, and none of the selected transactions reviewed was identical to the transactions. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of VMware and Broadcom, as applicable. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the transactions. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to VMware and Broadcom and the transactions selected compared to the transactions.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. J.P. Morgan was selected to advise VMware with respect to the transactions on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with VMware and the industries in which it operates.
For services rendered in connection with the transactions, VMware has agreed to pay J.P. Morgan a fee estimated to be approximately $45 million based on the information available as of the date of announcement of the transactions, which is payable to J.P. Morgan upon the closing of the transactions, $5.0 million of which was earned by J.P. Morgan upon delivery of its opinion. In addition, VMware has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.
During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with VMware, Broadcom, Silver Lake, a significant stockholder of VMware, and portfolio companies of Silver Lake for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period for Broadcom have included acting as joint lead arranger and bookrunner on its revolving credit facility in January 2021 and joint lead bookrunner on an offering of debt securities in January 2021. Such services during such period for VMware have included acting as joint lead arranger and bookrunner on a revolving credit facility in November 2021, joint lead bookrunner on an offering of debt securities in July 2021, and financial advisor to VMware on the VMware spin-off in November 2021. Such services during such two-year period for Silver Lake and Silver Lake portfolio companies have included extending loans and providing debt syndication, equity underwriting, debt underwriting, private bank lending and capital raising and/or financial advisory services, for which J.P. Morgan and its affiliates have received customary compensation, and, in the case of such services provided to Silver Lake, in amounts not material to J.P. Morgan. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of VMware and Silver Lake portfolio companies, for which it receives customary compensation or other financial benefits. During the two year period preceding delivery of its opinion, the aggregate fees recognized by J.P. Morgan from VMware were approximately $45 million, from Broadcom were approximately $13 million, and from Silver Lake and its portfolio companies were approximately $128 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of VMware or Broadcom for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.
Interests of VMware’s Directors and Executive Officers in the Transactions
When considering the recommendation of the VMware board of directors with respect to the transactions, you should be aware that VMware’s directors and executive officers may have interests in the transactions that
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are different from, or in addition to, those of VMware stockholders more generally. The VMware board of directors was aware of these interests during its deliberations on the merits of the transactions and considered them in deciding to recommend that VMware stockholders vote to adopt the merger agreement.
As described below, the interests of VMware non-employee directors and executive officers include the following:
accelerated vesting of restricted stock units held by non-employee directors and conversion of time-based restricted stock units and performance-based restricted stock units held by executive officers into Broadcom restricted stock units and the “double trigger” accelerated vesting of such converted awards;
a seat on Broadcom’s board of directors for one VMware director, to be mutually agreed by VMware and Broadcom, following the closing of the transactions;
potential severance benefits in the event of certain qualifying terminations of employment upon or following the closing of the transactions; and
the right to indemnification and liability insurance coverage that will survive the closing of the transactions.
VMware’s executive officers (all of whom are named executive officers for purposes of the discussion below) are the following: Raghu Raghuram, Zane Rowe, Sumit Dhawan, Jean-Pierre Brulard and Amy Fliegelman Olli. Patrick Gelsinger and Sanjay Poonen are also deemed to be named executive officers, but because they separated from employment with VMware on February 12, 2021 and August 6, 2021, respectively, they will not receive any benefit that is payable or that may become payable that is based on, or otherwise relates to, the transactions other than the merger consideration in respect of any shares of VMware common stock that they own, and they are not included in the disclosure below.
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:
A per share price of VMware common stock of $130.09, which is the average closing price of VMware common stock on the New York Stock Exchange over the first five business days following the first public announcement of the transactions on May 26, 2022;
The effective time of the second merger is July 13, 2022; and
The employment of each VMware executive officer was terminated by VMware without cause or by the executive officer for good reason, in either case, immediately following the effective time of the second merger.
Treatment of VMware Equity Awards
VMware’s non-employee directors and executive officers hold certain time-based VMware restricted stock unit awards and performance-based VMware restricted stock unit awards. No executive officers or non-employee directors hold any outstanding stock options.
Upon the terms and subject to the conditions of the merger agreement, at the effective time of the second merger, outstanding VMware restricted stock unit awards and performance-based VMware restricted stock unit awards will be treated as follows, subject to all required withholding taxes:
each outstanding VMware restricted stock unit award held by a non-employee director will become vested and will be cancelled in exchange for the right of the holder to receive, in respect of each share of VMware common stock subject to such award, a payment equal to 50% of the cash consideration and 50% of the stock consideration;
each outstanding time-based VMware restricted stock unit award that is not held by a non-employee director will be converted into a Broadcom restricted stock unit award based on an equity award exchange ratio calculated as (i) the sum of (1) 50% of the stock consideration and (2) 50% of the cash consideration divided by (ii) the Broadcom trading price; and
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each outstanding performance-based VMware restricted stock unit award will be converted into a Broadcom restricted stock unit award using the same formula described in the above bullet, provided that (i) for each such award granted under the VMware operating performance stock unit plan, performance goals will be deemed achieved (1) at the actual level with respect to performance periods completed prior to the closing of the transactions, or (2) at target level with respect to performance periods not completed prior to the closing of the transactions; and (ii) for each such award that was granted under the VMware TSR performance stock unit plan, performance will be measured at the closing of the transactions based on the actual level of achievement of the applicable performance goals based on the value of merger consideration (with the value of the stock consideration calculated for such purpose based on the Broadcom trading price).
Pursuant to the VMware, Inc. Change in Control Retention Plan (referred to as the CIC Plan) as described below, if a VMware executive officer’s employment is terminated by VMware without “cause” or due to the executive officer’s resignation for “good reason”, in each case, within 12 months following a change in control of VMware, all such equity awards then held by such executive officer would fully vest upon such termination of employment.
These “double trigger” vesting provisions applicable to VMware equity awards held by executive officers will continue to apply to such awards after such awards are converted to Broadcom restricted stock unit awards at the effective time of the second merger.
See the section titled “Quantification of Potential Payments and Benefits to VMware’s Named Executive Officers in Connection with the Transactions” below for the estimated value of each VMware named executive officer’s unvested VMware equity awards. Based on the assumptions described above under “—Certain Assumptions,” the estimated aggregate value of the unvested VMware equity awards held by non-employee directors is $2,071,683.
Change in Control Retention Plan
Each VMware executive officer is eligible to receive change in control benefits pursuant to the CIC Plan upon an involuntary termination without cause or a resignation for good reason, in each case, within 12 months following a change in control of VMware (each such term as defined in the CIC Plan). The transactions constitute a change in control for purposes of the CIC Plan.
Upon a qualifying termination under the CIC Plan, subject to execution of a release of claims in favor of VMware, each executive officer is eligible to receive:
a lump sum payment equal to 1.5 times (or 2.0 times for Mr. Raghuram) the sum of the executive officer’s highest annual base salary and highest target annual bonus, in each case measured during the protected period (as defined in the CIC Plan);
a lump sum payment equal to the value of 18 months (or 24 months for Mr. Raghuram) of health insurance premiums, which are equal to 150% of the monthly cost required to obtain continuation coverage for the executive officer and their covered dependents; and
full accelerated vesting of outstanding equity awards.
The CIC Plan does not provide for any tax gross-ups. In the event the executive officer would be subject to an excise tax under Section 4999 of the Code, the benefits to the executive officer will be reduced to the extent that such benefits do not trigger the excise tax unless the executive officer would retain greater value (on an after-tax basis) by receiving all benefits and paying applicable excise, income and payroll taxes.
See the section titled “—Quantification of Potential Payments and Benefits to VMware’s Named Executive Officers in Connection with the Transactions” below for an estimate of the value of the payments and benefits that each of VMware’s named executive officers would receive under the CIC Plan upon a qualifying termination of employment immediately following the effective time of the second merger.
Board Seat on the Broadcom Board of Directors
Pursuant to the merger agreement, one member of the VMware board of directors, to be mutually agreed by VMware and Broadcom, will be added to Broadcom’s board of directors.
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Potential Employment Arrangements with Broadcom
Any of VMware’s executive officers who become officers or employees or who otherwise are retained to provide services to Broadcom or Broadcom Merger Subs may, prior to, on, or following the closing of the transactions, enter into new individualized compensation arrangements with Broadcom or Broadcom Merger Subs and may participate in cash or equity incentive or other benefit plans maintained by Broadcom or Broadcom Merger Subs. As of the date of this proxy statement/prospectus, no new individualized compensation arrangements between VMware’s executive officers and Broadcom or Broadcom Merger Subs have been established.
Indemnification and Insurance
Under the merger agreement, for a period of six years after the effective time of the second merger, the entity into which VMware converted in connection with its conversion into a limited liability company (referred to as the VMware Converted LLC) must, and Broadcom must cause VMware Converted LLC to, indemnify and hold harmless, to the fullest extent permitted by applicable law and the organizational documents of VMware or its subsidiaries, or any indemnification agreements in existence as of the date of the merger agreement that were provided to Broadcom prior to the date of the merger agreement, each current and former director and officer of VMware and its subsidiaries against any costs and expenses in connection with any actual or threatened claims in respect of acts or omissions occurring or alleged to have occurred at or prior to the effective time of the second merger, whether asserted or claimed prior to, at or after the effective time of the second merger, in connection with such person serving as an officer, director, employee or agent of another corporation or of a limited liability company, partnership, joint venture, trust, enterprise or nonprofit entity if such service was at the request of VMware.
In addition, for a period of six years following the effective time of the second merger, Broadcom is required to maintain in effect the provisions in the organizational documents of VMware and any indemnification agreements in existence as of the date of the merger agreement that were provided to Broadcom (except to the extent such agreement provides for an earlier termination) regarding elimination of liability, indemnification of officers, directors and employees and advancement of expenses that are in existence as of the date of the merger agreement.
At or prior to the effective time of the second merger, VMware is required to purchase a directors’ and officers’ liability insurance and fiduciary liability insurance “tail” insurance policy for a period of six years after the effective time of the second merger with respect to matters arising at or prior to the effective time of the second merger, and officers’ liability insurance and fiduciary liability insurance prior to the date of the merger agreement.
For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification and liability insurance, please see the section titled “The Merger Agreement—Directors’ and Officers’ Indemnification and Insurance.”
Quantification of Potential Payments and Benefits to VMware’s Named Executive Officers in Connection with the Transactions
The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about the compensation that is payable or that may become payable to each named executive officer of VMware that is based on, or otherwise relates to, the transactions. For additional details regarding the terms of the payments and benefits described below, see the discussion under the caption “—Interests of VMware’s Directors and Executive Officers in the Transactions” above.
The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table. As a result, the amount, if any, that a named executive officer actually receives in the transactions may materially differ from the amounts set forth in the table. For purposes of calculating the amounts set forth in the table, the following assumptions were used:
A per share price of VMware common stock of $130.09, which is the average closing price of VMware common stock on the New York Stock Exchange over the first five business days following the first public announcement of the transactions on May 26, 2022;
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The effective time of the second merger is July 13, 2022; and
The employment of each named executive officer was terminated by VMware without cause or by the named executive officer for good reason, in either case, on or immediately following the effective time of the second merger.
Golden Parachute Compensation
Name
Cash ($)(1)
Equity ($)(2)
Total ($)
Raghu Raghuram
$6,070,797
$46,510,167
$52,580,964
Zane Rowe
$2,921,847
$44,817,956
$47,739,803
Sumit Dhawan
$2,868,904
$21,581,931
$24,450,835
Jean-Pierre Brulard
$2,436,015
$21,471,615
$23,907,630
Amy Fliegelman Olli
$1,997,328
$18,911,964
$20,909,292
(1)
Consists of (i) a lump sum payment equal to 1.5 times (or 2.0 times for Mr. Raghuram) the sum of the named executive officer’s highest annual base salary and highest target annual bonus, in each case measured during the protected period (as defined in the CIC Plan); and (ii) a lump sum payment equal to the value of 18 months (or 24 months for Mr. Raghuram) of health insurance premiums, which are equal to 150% of the monthly cost required to obtain continuation coverage for the executive officer and the executive officer’s covered dependents. The cash severance described in clause (i) (severance) and clause (ii) (health insurance premium payments) are “double trigger” and become payable only upon a qualifying termination of employment following a change in control of VMware under the terms of the CIC Plan (see the section titled “Interests of VMware’s Directors and Executive Officers in the Transactions—Change in Control Retention Plan”). The estimated amount of each such payment is shown in the following table:
Name
Severance ($)
Health Insurance
Premium
Payments ($)
Total ($)
Raghu Raghuram
$6,000,000
$70,797
$6,070,797
Zane Rowe
$2,868,750
$53,097
$2,921,847
Sumit Dhawan
$2,868,750
$154
$2,868,904
Jean-Pierre Brulard
$2,400,000
$36,015
$2,436,015
Amy Fliegelman Olli
$1,950,000
$47,328
$1,997,328
(2)
Includes accelerated vesting of the VMware restricted stock unit awards (which will be converted to Broadcom restricted stock units upon the effective time of the second merger) upon a qualifying termination of employment following the closing of the transactions pursuant to the CIC Plan; this accelerated vesting is a “double trigger” benefit and is triggered only upon a qualifying termination of employment following a change in control of VMware (see the section titled “Interests of VMware’s Directors and Executive Officers in the Transactions—Treatment of VMware Equity Awards”). The estimated value of such awards are shown in the following table (in the case of any such award that was granted under the VMware operating performance stock unit plan, this estimated value assumes that the applicable performance goals are achieved at actual performance with respect to performance periods completed prior to July 13, 2022 and at target with respect to performance periods that are not completed prior to July 13, 2022 and in the case of any such award that was granted under the VMware TSR performance stock unit plan, this estimated value represents the estimated actual payout level for such award based on the value of the merger consideration, which is equal to $0).
Name
VMware Time-
Based Restricted
Stock Units ($)
VMware
Performance-
Based Restricted
Stock Units ($)
Total ($)
Raghu Raghuram
$15,973,621
$30,536,546
$46,510,167
Zane Rowe
$15,857,971
$28,959,985
$44,817,956
Sumit Dhawan
$11,584,254
$9,997,677
$21,581,931
Jean-Pierre Brulard
$10,768,460
$10,703,155
$21,471,615
Amy Fliegelman Olli
$9,408,889
$9,503,075
$18,911,964
Treatment of Indebtedness
For a description of Broadcom’s and VMware’s existing indebtedness, see Broadcom’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2022, filed on June 9, 2022 and VMware’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2022, filed on June 3, 2022, respectively, each of which is incorporated by reference herein.
For more details on the treatment of VMware’s existing indebtedness under the merger agreement, see the section titled “The Merger Agreement—Actions with Respect to VMware Debt.”
This proxy statement/prospectus does not constitute an offer to sell or the solicitation of an offer to buy any debt securities of Broadcom or VMware. It does not constitute a prospectus or prospectus equivalent document for any such securities. No offering of any debt securities of Broadcom shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act or an exemption therefrom.
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Financing of the Transactions
The transactions are not conditioned upon any financing arrangements or contingencies. Broadcom anticipates that the funds needed to complete the transactions contemplated by the merger agreement will be derived from a combination of cash on hand and third party debt financing.
In connection with its entry into the merger agreement, Broadcom entered into a debt commitment letter on May 26, 2022 with certain financial institutions, which was amended, restated and superseded in its entirety by an amended and restated commitment letter entered into by Broadcom on June 22, 2022 (such amended and restated commitment letter, referred to as the debt commitment letter) with certain financial institutions pursuant to which such financial institutions committed to provide, subject to the terms and conditions of the debt commitment letter, a senior unsecured bridge facility in aggregate principal amount of approximately $32 billion. The availability of the bridge facility is conditioned on the consummation of the transactions in accordance with the terms of the merger agreement (subject to certain customary exceptions and qualifications) and certain other customary conditions. Broadcom expects to replace the commitments in respect of the bridge facility prior to the consummation of the transactions with the proceeds of the issuance of one or more series of senior unsecured debt securities and/or other incurrences of indebtedness (or commitments in respect thereof).
Accounting Treatment of the Transactions
The transactions will be accounted for as a business combination, with Broadcom using the acquisition method of accounting in accordance with Accounting Standard Codification 805, Business Combinations, and, accordingly, will generally result in the recognition of VMware assets acquired and liabilities assumed at fair value. However, as of the date of this proxy statement/prospectus, the valuation studies necessary to estimate the fair values of the assets acquired (including intangible assets, such as completed technology, customer relationships and customer lists, and trademarks and trade names) and liabilities assumed have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations to the type of information that can be exchanged between Broadcom and VMware at this time. Until the transactions are complete, Broadcom will not have complete access to all the relevant information. Differences between these preliminary estimates and the final acquisition accounting will occur and there can be no assurances that the final valuations will not result in material changes to this preliminary purchase price allocation. The excess of the consideration transferred over the identifiable net assets acquired reflected in the unaudited pro forma condensed combined financial information will be allocated to goodwill. A final determination of these fair values will reflect appraisals prepared by independent third-parties and will be based on the actual tangible and intangible assets and liabilities that exist as of the acquisition date. The actual allocation of the consideration transferred may differ from the allocation assumed in the unaudited pro forma condensed combined financial information and may result in adjustments to the unaudited pro forma condensed combined financial information.
Material U.S. Federal Income Tax Consequences
The following general discussion addresses the material U.S. federal income tax considerations to U.S. holders (as defined below) of VMware common stock that exchange their VMware common stock for the merger consideration in the transactions. The discussion is based on the Code, Treasury regulations promulgated thereunder, administrative rulings, published positions of the IRS and judicial decisions, all as currently in effect and all of which are subject to change and to differing interpretations (possibly with retroactive effect), and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion applies only to U.S. holders that hold their VMware common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal taxation that may be relevant to a particular holder in light of his, her or its individual circumstances or to holders subject to special treatment under U.S. federal income tax laws, including:
banks or other financial institutions,
mutual funds,
tax exempt organizations,
governmental agencies or instrumentalities,
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insurance companies,
dealers in securities or non-U.S. currency,
traders in securities who elect to apply a mark-to-market method of accounting,
entities or arrangements treated as partnerships or other pass-through entities (including S corporations) for U.S. federal income tax purposes and investors in such partnerships or other pass-through entities (including S corporations),
holders that are not U.S. holders,
certain expatriates,
holders that exercise appraisal rights,
regulated investment companies and real estate investment trusts,
broker-dealers,
holders liable for the alternative minimum tax,
holders that have a functional currency other than the U.S. dollar,
holders who received their VMware common stock through the exercise of employee stock options, through a tax-qualified retirement plan or otherwise as compensation,
holders that hold (or that held, directly or constructively, at any time during the five-year period ending on the date of the disposition of such holder’s VMware common stock pursuant to the transactions) 5% or more of VMware common stock (by vote or value),
holders required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement,” and
holders who hold VMware common stock as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment.
In addition, this discussion does not address any state, local or foreign tax considerations of the transactions, nor does it address the impact of the Medicare contribution tax on net investment income or the Foreign Account Tax Compliance Act (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith) or any U.S. federal laws other than those pertaining to the U.S. federal income tax.
For purposes of this discussion, a “U.S. holder” is a beneficial owner of VMware common stock who is, for U.S. federal income tax purposes:
(i)
an individual who is a citizen or resident of the United States;
(ii)
a corporation or other entity taxable as a corporation, created or organized under the laws of the United States, any state thereof or the District of Columbia;
(iii)
an estate that is subject to U.S. federal income tax on its income regardless of its source; or
(iv)
a trust that (A) is subject to the primary supervision of a court within the United States and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) or (B) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds shares of VMware common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Accordingly, such partners and partnerships should consult their tax advisors regarding the particular tax considerations of the transactions to them.
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Each holder of VMware common stock should consult his, her or its tax advisor with respect to the particular tax considerations of the transactions to such holder. Holders of VMware common stock that are not U.S. holders should consult their own tax advisors regarding the possibility that, in the event the applicable withholding agent is unable to determine whether any cash consideration paid to them in the transactions should be treated as a dividend for applicable U.S. federal income tax purposes, such withholding agent may withhold U.S. federal withholding tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the entire amount of any cash consideration payable to such non-U.S. holder in the transactions, and such non-U.S. holders should consult their own tax advisors as to the possible desirability and timing of selling any shares of VMware common stock or Broadcom common stock that they own.
In General
The obligation of VMware to complete the transactions is conditioned upon the delivery by Gibson Dunn, counsel to VMware (or other nationally recognized tax counsel or Big 4 accounting firm as may be reasonably acceptable to VMware) of the Tax Opinion. In addition, in connection with the filing of the registration statement of which this document is a part, Gibson Dunn has delivered an opinion to VMware that the transactions will qualify for the Intended Tax Treatment. Each of these tax opinions is or will be based on factual representations contained in officer’s certificates provided by Broadcom and VMware, representations and covenants contained in the merger agreement, and on certain customary factual assumptions, all of which must continue to be true and accurate as of the consummation of the transactions. If any of the representations, covenants or assumptions upon which the tax opinions are or will be based is inconsistent with the actual facts, the U.S. federal income tax considerations of the transactions could be materially different from those discussed below. None of these opinions is binding on the IRS or the courts, and neither Broadcom nor VMware intends to request a ruling from the IRS regarding the U.S. federal income tax considerations of the transactions. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to any of those set forth below. Accordingly, and on the basis of the opinion delivered in connection herewith, the U.S. federal income tax considerations of the transactions to U.S. holders generally are as follows.
U.S. Federal Income Tax Consequences of the Transactions to U.S. Holders
The U.S. federal income tax considerations of the transactions to a U.S. holder generally will depend on whether the U.S. holder exchanges its VMware common stock for cash consideration, stock consideration or a combination of cash consideration and stock consideration.
Exchange Solely for Cash
The exchange of shares of VMware common stock solely for cash generally will result in the recognition of gain or loss equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares of VMware common stock surrendered. Such gain or loss will generally be long-term capital gain or loss if the U.S. holder’s holding period with respect to the VMware common stock surrendered is more than one year at the effective time of the second merger. Long-term capital gains of certain non-corporate holders, including individuals, generally are subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of shares of VMware common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of VMware common stock. In certain circumstances, if a U.S. holder actually or constructively owns Broadcom common stock after the transactions, the cash consideration received could be treated as having the effect of a distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such U.S. holder may have dividend income up to the amount of the cash consideration received. Because the possibility of dividend treatment depends primarily upon the particular circumstances of a U.S. holder, including the application of certain constructive ownership rules, U.S. holders that actually or constructively own Broadcom common stock should consult their tax advisors regarding the application of the foregoing rules to their particular circumstances.
U.S. holders electing to receive solely cash consideration in the transactions may be subject to proration (as described in the section titled “The Merger Agreement—Effects of the Transactions—Proration and Allocation of Merger Consideration.”), which may result in the receipt of a portion of the merger consideration in stock
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consideration, in addition to cash consideration. See “—Exchange for Broadcom Common Stock and Cash” for a general description of the U.S. federal income tax considerations to U.S. holders of the receipt of stock consideration and cash consideration.
Exchange Solely for Broadcom Common Stock
If, pursuant to the transactions, a U.S. holder exchanges all of its shares of VMware common stock solely for shares of Broadcom common stock, that U.S. holder generally will not recognize any gain or loss, except with respect to cash received in lieu of a fractional share of Broadcom common stock (as discussed in “—Cash in Lieu of a Fractional Share”). The aggregate adjusted tax basis in the shares of Broadcom common stock received in the transactions (including fractional shares deemed received and redeemed as described in “—Cash in Lieu of a Fractional Share”) will be equal to the aggregate adjusted tax basis of the shares of VMware common stock surrendered, and the holding period of the shares of Broadcom common stock received in the transactions (including fractional shares deemed received and redeemed as described in “—Cash in Lieu of a Fractional Share”) will include the holding period of the shares of VMware common stock surrendered. If a U.S. holder acquired different blocks of shares of VMware common stock at different times or different prices, such U.S. holder should consult his, her or its tax advisor as to the determination of the tax bases and holding periods of the Broadcom common stock received in the transactions.
U.S. holders electing to receive solely stock consideration in the transactions may be subject to proration (as described in the section titled “The Merger Agreement—Effects of the Transactions—Proration and Allocation of Merger Consideration.”), which may result in the receipt of a portion of the merger consideration in cash consideration, in addition to the stock consideration. See “—Exchange for Broadcom Common Stock and Cash” for a general description of the U.S. federal income tax considerations to U.S. holders of the receipt of stock consideration and cash consideration.
Exchange for Broadcom Common Stock and Cash
A U.S. holder who receives a combination of Broadcom common stock and cash (other than cash in lieu of a fractional share of Broadcom common stock) pursuant to the transactions generally will recognize gain (but not loss) in an amount equal to the lesser of (1) the sum of the amount of the cash (other than cash in lieu of a fractional share of Broadcom common stock) and the fair market value of the Broadcom common stock received, minus that U.S. holder’s adjusted tax basis in its shares of VMware common stock surrendered in exchange therefor and (2) the amount of cash received.
If a U.S. holder acquired different blocks of shares of VMware common stock at different times or different prices, any gain or loss may be determined separately for each block of shares and such U.S. holder’s basis and holding period in its shares of Broadcom common stock may be determined with reference to each block of shares of VMware common stock. Any such U.S. holder should consult his, her or its tax advisor regarding the manner in which the cash consideration and stock consideration should be allocated among different blocks of shares of VMware common stock surrendered, including the ability to specifically identify shares of VMware common stock exchanged for the cash consideration, and the determination of the tax bases and holding periods of the Broadcom common stock received.
Any recognized gain will generally be long-term capital gain if the U.S. holder’s holding period with respect to the shares of VMware common stock surrendered is more than one year at the effective time of the second merger. Long-term capital gains of certain non-corporate holders, including individuals, generally are subject to U.S. federal income tax at preferential rates. In certain circumstances, if a U.S. holder actually or constructively owns Broadcom common stock other than Broadcom common stock received pursuant to the transactions, the recognized gain could be treated as having the effect of the distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. Because the possibility of dividend treatment depends upon the particular circumstances of a U.S. holder, including the application of certain constructive ownership rules, U.S. holders should consult their tax advisors regarding the potential application of the foregoing rules to their particular circumstances.
The aggregate tax basis of the Broadcom common stock received (including fractional shares deemed received and redeemed as described in “—Cash in Lieu of a Fractional Share”) will be equal to the aggregate adjusted tax basis of the shares of VMware common stock surrendered, reduced by the amount of cash consideration received by the U.S. holder (excluding any cash in lieu of a fractional share) and increased by the
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amount of gain (regardless of whether such gain is classified as capital gain or dividend income, as discussed above, but excluding any gain recognized with respect to cash in lieu of a fractional share), if any, recognized by the U.S. holder on the exchange. The holding period of the Broadcom common stock received in the transactions (including fractional shares deemed received and redeemed as described below) will include the holding period of the shares of VMware common stock surrendered.
Cash in Lieu of a Fractional Share
U.S. holders who receive cash in lieu of a fractional share of Broadcom common stock will generally be treated as having received such fractional share and then as having received such cash in redemption of the fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash in lieu of the fractional share and the tax basis allocated to such fractional share. Such gain or loss generally will be long-term capital gain or loss if the holding period for such shares is more than one year at the effective time of the second merger. Long-term capital gains of certain non-corporate holders, including individuals, generally are subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Information reporting and backup withholding (currently, at a rate of 24%) may apply to payments made in connection with the transactions. Backup withholding will not apply, however, if the recipient provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable certification requirements. Backup withholding is not an additional tax. Any amounts withheld may be allowed as a refund or credit against such U.S. holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.
THIS SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. HOLDERS OF VMWARE COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSIDERATIONS TO THEM OF THE TRANSACTIONS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.
Regulatory Clearances and Approvals Required for the Transactions
HSR Act and U.S. Antitrust Matters. The transactions are subject to the requirements of the HSR Act, which prevents VMware and Broadcom from completing the transactions until required information and materials are furnished to the Antitrust Division of the DOJ and the FTC and the HSR Act waiting period is terminated or expires. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar-day waiting period following the parties’ filings of their respective HSR Act notification forms or the early termination of that waiting period. The parties may also choose to voluntarily re-start the initial 30-calendar-day waiting period by following certain prescribed procedures. After the expiration of the initial waiting period (or the re-started initial waiting period), the Antitrust Division of the DOJ or the FTC may issue a Request for Additional Information and Documentary Material (referred to as a second request). If a second request is issued, the parties may not complete the transactions until they substantially comply with the second request and observe a second 30-calendar-day waiting period, unless the waiting period is terminated earlier, or the parties commit not to close for some additional period of time. VMware and Broadcom submitted the requisite notification and report forms under the HSR Act on June 10, 2022. On July 11, 2022 VMware and Broadcom each received a request for additional information, often referred to as a “second request,” from the FTC under the HSR Act.
Foreign Regulatory Clearances. The completion of the transactions is subject to clearance under the antitrust laws of the European Union and certain other jurisdictions, and the parties will file merger notifications pursuant to antitrust and competition laws with the appropriate regulators in the European Union and certain other jurisdictions. The parties must observe mandatory waiting periods and/or obtain the necessary approvals, clearances or consents pursuant to certain of these foreign laws before completing the transactions.
Other state or foreign antitrust, competition and foreign investment authorities may take action under the laws of their jurisdictions, which could include seeking to enjoin the completion of the transactions. For more information about regulatory approvals relating to the transactions, see the section titled “The Merger Agreement—Conditions to the Transactions.”
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Although the parties expect that all required regulatory clearances and approvals will be obtained, the parties cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the transactions, including the requirement to divest assets, create or modify contractual rights or obligations or enter into supply or services agreements. These conditions could result in the conditions to the transactions not being satisfied.
Exchange of Shares; Elections as to Form of Consideration
At the effective time of the second merger, each issued and outstanding share of VMware common stock (other than (i) cancelled shares, (ii) dissenting shares and (iii) excluded shares) will be converted into the right to receive, at the election of the stockholder and subject to proration, $142.50 in cash, without interest, or 0.25200 of a share of Broadcom common stock. A VMware stockholder may elect a different form of consideration for each share such VMware stockholder owns. A VMware stockholder may elect to receive (i) solely the cash consideration, (ii) solely the stock consideration or (iii) if a VMware stockholder owns more than one share, a combination of the cash consideration for a selected number of shares and the stock consideration for the remaining number of shares. No fractional shares of Broadcom common stock will be issued in the second merger, and holders of VMware common stock will instead receive cash in lieu of fractional shares of Broadcom common stock.
Prior to the effective time of the second merger, Broadcom will enter into an exchange agent agreement with a bank or trust company reasonably acceptable to VMware. At or prior to the effective time of the second merger, Broadcom will deposit (i) cash in immediately available funds in an amount sufficient to pay the aggregate cash consideration and, to the extent determinable, cash in lieu of fractional shares and (ii) evidence of Broadcom common stock in book-entry form representing the number of shares of Broadcom common stock sufficient to deliver the aggregate stock consideration.
As described above, VMware stockholders will not receive any fractional shares of Broadcom common stock in the second merger. Instead, a VMware stockholder who otherwise would have received a fractional share of Broadcom common stock will be entitled to receive a cash payment in lieu of such fractional share in an amount determined by multiplying (i) the last reported sale price of Broadcom common stock on The Nasdaq Global Select Market (as reported in the Wall Street Journal, or if not reported therein, in another authoritative source mutually selected by Broadcom and VMware) on the last complete trading day prior to the date of the effective time of the second merger by (ii) the fraction of a share (after taking into account all shares of Broadcom common stock held by such holder at the effective time of the second merger and rounded to the nearest one thousandth when expressed in decimal form) of Broadcom common stock to which such holder would otherwise be entitled.
If a dividend or other distribution is declared with respect to shares of Broadcom common stock with a record date after the effective time of the second merger, such declaration will include a dividend or other distribution in respect of all shares of Broadcom common stock issuable pursuant to the merger agreement.
The merger agreement provides that VMware stockholders will be provided with an election form and other customary transmittal materials. The election form will allow each holder of VMware common stock to specify (i) the number of shares of VMware common stock owned by such holder with respect to which such holder desires to receive the cash consideration and (ii) the number of shares of VMware common stock owned by such holder with respect to which such holder desires to receive the stock consideration.
Broadcom and VMware will initially make available and mail the election form at least 20 business days prior to the anticipated election deadline to holders of record as of the fifth business day prior to such mailing date. Following the mailing date, Broadcom and VMware will use all reasonable efforts to make available as promptly as possible an election form to any stockholder who requests an election form prior to the election deadline. The election deadline will be 5:00 p.m. local time (in the city in which the principal office of the exchange agent is located) on the date that is five business days prior to Broadcom’s good faith estimate of the closing date or such other date as may be mutually agreed to by the parties. Broadcom and VMware will cooperate to issue a press release reasonably satisfactory to each of them announcing the election deadline at least three business days prior to the election deadline.
To make a valid election, a VMware stockholder must submit to the exchange agent a properly completed and signed election form (including duly executed transmittal materials included in the election form). The
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election form must also be accompanied by any certificates representing all certificated shares of VMware common stock to which such election form relates (or by an appropriate customary guarantee of delivery of such certificates, as set forth in such election, from a member of any registered national securities exchange or a commercial bank or trust company in the United States).
A VMware stockholder may change or revoke an election by providing written notice to the exchange agent, which must be received by the exchange agent prior to the election deadline, accompanied by a properly completed and signed revised election form, or by withdrawing his or her shares of VMware common stock previously deposited with the exchange agent. If any election is not properly made with respect to any shares of VMware common stock, such election will be deemed to be not in effect, and the shares of VMware common stock covered by such election will be deemed to be non-election shares, unless a proper election is subsequently timely made.
After the effective time of the second merger, shares of VMware common stock will no longer be outstanding, will be cancelled and will cease to exist and each certificate or book entry share that previously represented shares of VMware common stock (other than (i) cancelled shares, (ii) dissenting shares and (iii) excluded shares) will represent only the right to receive the merger consideration pursuant to the merger agreement, cash in lieu of fractional shares and unpaid dividends and distributions, if any, as described above. With respect to such shares of Broadcom common stock deliverable upon the surrender of VMware stock certificates or book-entry shares, until holders of such VMware stock certificates or book-entry shares have properly surrendered such stock certificates or book-entry shares to the exchange agent (or another agent appointed by Broadcom) for exchange, along with a duly completed letter of transmittal in the case of holders of certificates and any other documents as may customarily be required by the exchange agent, those holders will not receive the merger consideration, any cash in lieu of fractional shares and any dividends or distributions that become due to the holders of converted VMware common stock.
Promptly (and within five business days) after the effective time of the second merger, Broadcom will cause the exchange agent to mail to each record holder of certificates who has not previously submitted an election notice with duly executed transmittal materials and whose shares of VMware common stock were converted in the second merger into the right to receive the merger consideration a letter of transmittal and instructions for surrendering VMware share certificates in exchange for payment of the merger consideration. Holders of book-entry shares whose shares of VMware common stock were converted in the second merger into the right to receive the merger consideration will not be required to deliver a certificate or an executed letter of transmittal to the exchange agent to receive the merger consideration. Upon surrender of VMware share certificates or book-entry shares and a duly executed letter of transmittal in the case of holders of certificates to the exchange agent (or another agent appointed by Broadcom) in compliance with the instructions for surrender, such holders will be entitled to receive the merger consideration and any fractional share cash amounts.
Broadcom will instruct the exchange agent to accept the certificates upon compliance with such reasonable terms and conditions as the exchange agent may impose, to effect an orderly exchange in accordance with normal exchange practices. The time that any individual VMware stockholder receives its, his or her merger consideration will vary depending on the underlying arrangements through which such VMware stockholder holds its, his or her shares of VMware common stock.
Dividend Policy
Broadcom currently pays regular quarterly cash dividends on its common stock. Broadcom most recently paid a cash dividend on June 30, 2022, of $4.10 per share. Broadcom currently expects to continue to pay quarterly cash dividends, although they remain subject to determination and declaration by Broadcom’s board of directors. The payment of future dividends, if any, will be based on several factors, including Broadcom’s financial performance, outlook and liquidity.
Subsequent to VMware’s initial public offering in August 2007, VMware has not declared or paid regular cash dividends on its common stock.
Under the terms of the merger agreement, during the period before the closing of the transactions, Broadcom is not permitted to pay any special cash dividends on its capital stock other than regular, quarterly cash dividends (including any increases to current dividend rates approved by the Broadcom board in good faith) and VMware is not permitted to pay any dividends or make any distributions on its capital stock, in each case without the consent of Broadcom.
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Listing of Broadcom Common Stock; Delisting of VMware Common Stock
It is a condition to the consummation of the transactions that the shares of Broadcom common stock to be issued to VMware stockholders in the second merger be approved for listing on The Nasdaq Global Select Market, subject to official notice of issuance. As a result of the second merger, shares of VMware common stock will cease to be listed on the New York Stock Exchange.
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 THE MERGER AGREEMENT
The following describes the material provisions of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein. The summary of the material provisions of the merger agreement below and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. Broadcom and VMware encourage you to read carefully the merger agreement in its entirety before making any decisions regarding the merger as it is the legal document governing the transactions.
Explanatory Note Regarding the Merger Agreement
The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Broadcom and VMware are responsible for considering whether additional disclosure of material information is required to make the statements in this proxy statement/prospectus not misleading. Factual disclosures about Broadcom and VMware contained in this proxy statement/prospectus or Broadcom’s or VMware’s public reports filed with the SEC may supplement, update or modify the factual disclosures about Broadcom or VMware contained in the merger agreement and described in the summary. The representations, warranties and covenants made in the merger agreement by Broadcom, Broadcom Merger Subs and VMware, Holdco and Merger Sub 1 are qualified and subject to important limitations agreed to by the parties to the merger agreement in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the merger agreement, and were negotiated with the principal purpose of allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality that may be different from that generally relevant to stockholders or applicable to reports and documents filed with the SEC, and in some cases are qualified by confidential disclosures that were made by each party to the other, which disclosures are not publicly disclosed. The representations and warranties in the merger agreement will not survive the completion of the transactions. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference into this proxy statement/prospectus. See the section titled “Where You Can Find More Information.”
Transactions
Upon the terms and subject to the conditions of the merger agreement and in accordance with Delaware law:
the first merger will occur in which Merger Sub 1 will merge with and into VMware, and VMware will survive the first merger and become a wholly owned subsidiary of Holdco and the separate corporate existence of Merger Sub 1 will cease;
following the effective time of the first merger, the LLC conversion will occur in which VMware will be converted into a Delaware limited liability company in accordance with Section 266 of the DGCL and Section 18-214 of the Delaware Limited Liability Company Act;
following the effective time of the LLC conversion, the second merger will occur in which Merger Sub 2 will merge with and into Holdco, and Holdco will survive the second merger and become a wholly owned subsidiary of Broadcom and the separate corporate existence of Merger Sub 2 will cease; and
following the effective time of the second merger, the third merger will occur in which Holdco will merge with and into Merger Sub 3, and Merger Sub 3 will survive the third merger as a wholly owned subsidiary of Broadcom and the separate corporate existence of Holdco will cease.
Within 60 business days of the date of the merger agreement, Broadcom may elect, with VMware’s prior written consent (not to be unreasonably withheld, conditioned or delayed) to implement an alternative transaction
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structure. Under this alternative transaction structure, the first merger and the LLC conversion will be eliminated, and the structure of the second merger will be modified such that it consists of Merger Sub 2 merging with and into VMware, with VMware surviving as a wholly owned subsidiary of Broadcom and the separate existence of Merger Sub 2 ceasing and the third merger will be modified such that it consists of the surviving corporation in the second merger merging with and into Merger Sub 3, with Merger Sub 3 surviving as a wholly owned subsidiary of Broadcom. If the alternative transaction structure is adopted, the parties will enter into an amendment to the merger agreement implementing the alternative transaction structure.
Closing; Effective Time
Unless the parties otherwise agree in writing, the closing of the transactions will occur on the third business day following the date on which all conditions to the transactions set forth in the merger agreement have been satisfied, or, to the extent permitted by applicable law, waived (other than those conditions that by their nature are to be satisfied at the closing of the transactions, but subject to the satisfaction or, to the extent permitted by applicable law, waiver of such conditions at the closing of the transactions). The first merger will be effective as of 11:59 p.m., New York City time, on the business day prior to the closing date. The second merger will be effective at 8:30 a.m., New York City time, on the closing date or at such other date and time as is agreed to by the parties and specified in the certificate of merger for the second merger.
In the event that, pursuant to the terms described in the immediately preceding paragraph, the closing of the transactions would occur on a date that is within 35 days of the last day of Broadcom’s fiscal year or any other Broadcom fiscal quarter, Broadcom may irrevocably elect to defer the closing of the transactions until the first business day of the immediately succeeding fiscal year or fiscal quarter, respectively, unless another date or time is agreed to in writing by VMware and Broadcom. Upon making such written election, (x) each of the conditions to the obligations of Broadcom and Broadcom Merger Subs to consummate the transactions (related to accuracy of VMware’s, Holdco’s and Merger Sub 1’s representations and warranties, compliance with covenants and absence of a material adverse effect) will be deemed to have been irrevocably fulfilled, other than with respect to a willful breach by VMware, Holdco or Merger Sub 1 occurring after the date of delivery of such written election, (y) Broadcom will be deemed to have irrevocably waived its right to terminate the merger agreement as a result of VMware’s, Holdco’s or Merger Sub 1’s breach, failure to perform or violation of covenants or agreements under the merger agreement or the inaccuracy of any of the representations and warranties of VMware, Holdco or Merger Sub 1 in the merger agreement, other than with respect to a willful breach by VMware, Holdco or Merger Sub 1 occurring after the date of delivery of such written election, and (z) until the fifth business day of the immediately succeeding fiscal quarter, neither Broadcom nor VMware will have the right to terminate the merger agreement as a result of the effective time of the merger not having occurred prior to the outside date.
Effects of the Transactions
At the effective time of the first merger, each share of VMware common stock issued and outstanding immediately prior to the effective time of the first merger will be converted into one share of common stock of Holdco, and each outstanding VMware equity award will be converted into a Holdco award that relates to a number of shares of Holdco common stock that is equal to the number of shares of VMware common stock that were subject to such award prior to such conversion. All terms and conditions applicable to each such VMware security (including any VMware equity awards) immediately prior to the effective time of the first merger will, except as described in the immediately preceding sentence, remain in effect immediately after the effective time of the first merger. After the consummation of the first merger, all references in this proxy statement/prospectus to VMware, including VMware common stock, VMware stock options, VMware restricted stock unit awards, VMware equity awards and other securities of VMware will be deemed, where applicable, to be references to Holdco and the same securities of Holdco, and all references to VMware stockholders will be deemed to be references to common stockholders of VMware.
At the effective time of the LLC conversion, each issued and outstanding share of capital stock of VMware (then a wholly owned subsidiary of Holdco) will be converted into one limited liability company interest of VMware Converted LLC, the entity into which VMware will have converted in connection with its conversion into a limited liability company.
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At the effective time of the second merger, subject to the payment of cash in lieu of fractional shares of Broadcom common stock as described below under “—No Fractional Shares” and proration as described below under “—Proration and Allocation of Merger Consideration,” each share of VMware common stock issued and outstanding immediately prior to the effective time of the second merger, other than cancelled shares, dissenting shares and excluded shares as described below under “—Cancellation of Certain VMware Common Stock,” “—Shares of Dissenting Stockholders,” and “—Conversion of Excluded Shares,” respectively, will be converted into the right to receive, without interest:
for each share of VMware common stock with respect to which an election to receive cash (referred to as a cash election) has been properly made and not revoked (referred to as a cash election share), $142.50 in cash (referred to as the cash consideration);
for each share of VMware common stock with respect to which an election to receive Broadcom common stock (referred to as a stock election) has been properly made and not revoked (referred to as a stock election share), 0.25200 of a share of Broadcom common stock (referred to as the stock consideration); and
for each share of VMware common stock that is not a cash election share or a stock election share (referred to as a non-election share), the right to receive cash consideration or stock consideration as determined in accordance with the proration methodology described below under “—Proration and Allocation of Merger Consideration.”
The stock consideration will be appropriately adjusted to reflect the effect of any stock split, subdivision, consolidation, combination or reclassification with respect to the outstanding shares of Broadcom common stock, VMware common stock or Holdco common stock, payment of a stock dividend or other distribution in respect of such shares or the changing of such shares into other securities, in each case that occurs prior to the effective time of the second merger.
At the effective time of the third merger, each share of capital stock of Holdco (then a wholly owned subsidiary of Broadcom) issued and outstanding immediately prior to the effective time of the third merger will be converted into one limited liability company interest of Merger Sub 3.
No Fractional Shares
Cash will be paid in lieu of fractional shares of Broadcom common stock as described in the next sentence. Each holder of VMware common stock that would otherwise have been entitled to receive a fractional share of Broadcom common stock in the second merger will instead receive a cash payment equal to the product obtained by multiplying (i) the fraction of a share of Broadcom common stock to which such holder would otherwise be entitled (accounting for all shares of VMware common stock held by such holder at the effective time of the second merger), rounded to the nearest one-thousandth of one share, by (ii) the last reported sale price of Broadcom common stock on The Nasdaq Global Select Market (as reported in the Wall Street Journal, or if not reported therein, in another authoritative source mutually selected by Broadcom and VMware) on the last complete trading day prior to the date of the effective time of the second merger.
Proration and Allocation of Merger Consideration
The total number of shares of VMware common stock to be entitled to receive the cash consideration, referred to as the maximum cash share number, will be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the second merger (other than any cancelled shares and excluded shares), and the total number of shares of VMware common stock to be entitled to receive the stock consideration will be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the second merger (other than any cancelled shares and excluded shares). Accordingly, depending on the elections made by other holders of VMware common stock, a holder of VMware common stock may receive a portion of the merger consideration in the form such holder did not elect.
Within five business days after the effective time of the second merger, VMware will cause the exchange agent for the payment of the merger consideration, referred to as the exchange agent, to effect the allocation among holders of VMware common stock of rights to receive the cash consideration and the stock consideration as follows (with the exchange agent to determine, consistent with the immediately preceding paragraph, whether
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fractions of cash election shares, stock election shares and non-election shares, as applicable, will be rounded up or down):
Oversubscription of Cash Election Option. If the aggregate number of cash election shares (including, for this purpose, dissenting shares as of the effective time), referred to as the cash election number, equals or exceeds the maximum cash share number, then
the cash election shares of each holder of such cash election shares will be converted into the right to receive the cash consideration in respect of that number of cash election shares equal to the product obtained by multiplying (i) the number of cash election shares held by such holder by (ii) a fraction, the numerator of which is the maximum cash share number and the denominator of which is the cash election number, with the remaining number of such holder’s cash election shares being converted into the right to receive the stock consideration;
all stock election shares will be converted into the right to receive the stock consideration; and
all non-election shares will be converted into the right to receive the stock consideration.
Undersubscription of Cash Election Option. If the cash election number is less than the maximum cash share number (the amount by which the maximum cash share number exceeds the cash election number referred to as the shortfall number), then
all cash election shares will be converted into the right to receive the cash consideration;
if the shortfall number is less than or equal to the number of non-election shares, then all stock election shares will be converted into the right to receive the stock consideration, and the non-election shares of each holder of such non-election shares will be converted into the right to receive the cash consideration in respect of that number of non-election shares equal to the product obtained by multiplying (i) the number of non-election shares held by such holder by (ii) a fraction, the numerator of which is the shortfall number and the denominator of which is the total number of non-election shares, with the remaining number of such holder’s non-election shares being converted into the right to receive the stock consideration; and
if the shortfall number exceeds the number of non-election shares, then all non-election shares will be converted into the right to receive the cash consideration, and stock election shares of each holder of such stock election shares will be converted into the right to receive the cash consideration in respect of that number of stock election shares equal to the product obtained by multiplying (i) the number of stock election shares held by such holder by (ii) a fraction, the numerator of which is the amount by which the shortfall number exceeds the total number of non-election shares, and the denominator of which is the total number of stock election shares, with the remaining number of such holder’s stock election shares being converted into the right to receive the stock consideration.
Cancellation of Certain VMware Common Stock
At the effective time of the second merger, each share of VMware common stock issued and outstanding immediately prior to the effective time of the second merger that is owned or held in treasury by VMware or owned by Merger Sub 2 or in the treasury of VMware as the surviving company in the first merger, referred to as cancelled shares, will automatically be cancelled and will cease to exist. No consideration will be delivered in exchange for any cancelled shares.
Conversion of Excluded Shares
Each share of VMware common stock issued and outstanding immediately prior to the effective time of the second merger that is owned by any wholly owned subsidiary of VMware, referred to as excluded shares, will automatically be converted into the right to receive, without interest, the stock consideration.
Shares of Dissenting Stockholders
Shares of VMware common stock issued and outstanding immediately prior to the effective time of the second merger and held by a person, referred to as a dissenting stockholder, (i) who did not vote in favor of approval of the merger agreement proposal, (ii) who is entitled to demand and properly demands appraisal of
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such shares of VMware common stock pursuant to Section 262 of the DGCL and (iii) who complies in all respects with the provisions of the DGCL concerning the rights of VMware stockholders to require payment by the surviving corporation of the “fair value” of such shares of VMware common stock, referred as dissenting shares, will not be converted into the right to receive the merger consideration.
Instead, if the second merger is consummated, then dissenting shares will represent the right to receive whatever consideration may be determined to be due to such dissenting stockholder under Section 262 of the DGCL. If any dissenting stockholder fails to perfect or otherwise waives, withdraws or loses the right to appraisal under Section 262 or a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262, dissenting shares held by such dissenting stockholder will be treated as though such dissenting shares had been converted into the right to receive the merger consideration as of the effective time of the second merger. However, in such case, the proposed dissenting shares will be deemed to be cash election shares, unless such holder thereafter otherwise make a timely election. If any holder of proposed dissenting shares fails to perfect or has effectively withdrawn, waived or lost such holder’s right to dissent from the adoption of the merger agreement after the election deadline, each of such holder’s shares of VMware common stock will be deemed to have been converted into the right to receive the merger consideration and will be treated as cash election shares. For more information regarding appraisal rights, see the section titled “Appraisal Rights of VMware Stockholders.” In addition, a copy of Section 262 of the DGCL is attached as Annex F to this proxy statement/prospectus.
Governing Documents; Officers and Directors
Prior to the effective time of the first merger, VMware and Holdco will take all necessary actions to ensure that the certificate of incorporation and bylaws of Holdco will be the same as the certificate of incorporation and bylaws of VMware as of the date of the merger agreement, except for the name of Holdco.
At the effective time of the first merger, the certificate of incorporation of VMware as in effect immediately prior to the effective time of the first merger will be the certificate of incorporation of the surviving company in the first merger, and the bylaws of VMware as in effect immediately prior to effective time of the first merger will be the bylaws of the surviving company in the first merger. Each of VMware and Merger Sub 1 will take all necessary action to cause the directors of Merger Sub 1 immediately prior to the effective time of the first merger to be the initial directors of the surviving company in the first merger. Each of VMware and Merger Sub 1 will take all necessary action to cause the officers of VMware immediately prior to the effective time of the first merger to be the initial officers of the surviving company in the first merger. After the effective time of the first merger until the effective time of the second merger, Holdco will, and VMware will cause Holdco to, ensure that the officers and directors of VMware immediately prior to the effective time of the first merger will be the officers and directors of Holdco.
At the effective time of the LLC conversion, VMware Converted LLC will adopt a limited liability company agreement in a form customary for a single member, member-managed limited liability company that is treated as disregarded as an entity separate from Holdco for U.S. federal income tax purposes, which limited liability company agreement must be acceptable in form and substance to Broadcom.
At the effective time of the second merger, the certificate of incorporation of Holdco as in effect immediately prior to the effective time of the second merger will be the certificate of incorporation of the surviving company in the second merger, and the bylaws of Holdco as in effect immediately prior to the effective time of the second merger will be the bylaws of the surviving company in the second merger. Each of the parties will take all necessary action to cause the directors and officers of Merger Sub 2 immediately prior to the effective time of the second merger to be the initial directors and officers of the surviving company in the second merger.
At the effective time of the third merger, the certificate of formation of Merger Sub 3 as in effect immediately prior to the effective time of the third merger will be the certificate of formation of the surviving company in the third merger, and the limited liability company agreement of Merger Sub 3 as in effect immediately prior to the effective time of the third merger will be the limited liability company agreement of the surviving company in the third merger. Each of the parties will take all necessary action to cause the officers of the surviving company in the second merger immediately prior to the effective time of the third merger to be the initial officers of the surviving company in the third merger.
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Election Procedures
Each holder of shares of VMware common stock to be converted into the right to receive the merger consideration, referred to in this proxy statement/prospectus as a holder, may specify in a request made in accordance with the procedures described in this “—Election Procedures” section (i) the number of shares of VMware common stock owned by such holder with respect to which such holder desires to make a stock election and (ii) the number of shares of VMware common stock owned by such holder with respect to which such holder desires to make a cash election. Any such request is referred to in this proxy statement/prospectus as an election.
The merger agreement provides that Broadcom will prepare a form reasonably acceptable to VMware, including appropriate and customary transmittal materials, referred to in this proxy statement/prospectus as the election form, so as to permit holders to exercise their right to make an election.
Broadcom and VMware (i) will initially make available and mail the election form at least 20 business days prior to the anticipated election deadline (as defined below) to holders of record of VMware common stock as of the fifth business day prior to such mailing date, and (ii) following such mailing date, will use all reasonable efforts to make available as promptly as possible an election form to any VMware stockholder who requests such election form prior to the election deadline. The time period between such mailing date and the election deadline is referred to in this proxy statement/prospectus as the election period.
Any election will have been made properly only if the exchange agent will have received, during the election period, an election form properly completed and executed (including duly executed transmittal materials included in the election form) and accompanied by any certificates representing all certificated shares to which such election form relates or by an appropriate customary guarantee of delivery of such certificates, as set forth in such election form, from a member of any registered national securities exchange or a commercial bank or trust company in the United States.
Unless otherwise agreed in advance by the parties to the merger agreement, election deadline means 5:00 p.m. local time (in the city in which the principal office of the exchange agent is located) on the date that is five business days prior to Broadcom’s good faith estimate of the closing date or such other date as may be mutually agreed to by the parties. Broadcom and VMware will cooperate to issue a press release reasonably satisfactory to each of them announcing the date of the election deadline at least three business days prior to the election deadline.
Any holder may, at any time during the election period, change or revoke his, her or its election by written notice to the exchange agent prior to the election deadline accompanied by a properly completed and executed revised election form. If any election is not properly made with respect to any shares of VMware common stock (none of Broadcom, VMware or the exchange agent being under any duty to notify any holder of any such defect), such election will be deemed to be not in effect, and the shares of VMware common stock covered by such election will be deemed to be non-election shares, unless a proper election is thereafter timely made.
Any holder may, at any time during the election period, revoke his, her or its election by written notice received by the exchange agent prior to the election deadline or by withdrawal prior to the election deadline of his, her or its certificates, or of the guarantee of delivery of such certificates, previously deposited with the exchange agent. All elections will be automatically deemed revoked upon receipt by the exchange agent of written notification from the parties that the merger agreement has been terminated.
Subject to the election form, Broadcom, in the exercise of its reasonable, good faith discretion, will have the right to make all determinations, not inconsistent with the terms of the merger agreement, governing (i) the validity of the forms of election and compliance by any holder with the election procedures described in this “—Election Procedures” section, (ii) the method of issuance of shares of Broadcom common stock into which shares of VMware common stock are converted in the second merger and (iii) the method of payment of cash for shares of VMware common stock converted into the right to receive the cash consideration and cash in lieu of fractional shares of Broadcom common stock.
Exchange and Payment Procedures
Prior to the effective time of the second merger, Broadcom will enter into an exchange agent agreement with a bank or trust company reasonably acceptable to VMware. Prior to or at the effective time of the second merger, Broadcom will deposit, or cause to be deposited, with the exchange agent (i) cash in immediately
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available funds in an amount sufficient to pay the aggregate cash consideration and all fractional share cash amounts as is necessary for the payment to holders of VMware common stock and (ii) evidence of Broadcom common stock in book-entry form representing the number of shares of Broadcom common stock sufficient to deliver the aggregate stock consideration. Such cash and book-entry shares, together with any dividends or other distributions with respect to such book-entry shares, are referred to in this proxy statement/prospectus as the exchange fund. No such deposits will be required to be made with respect to any dissenting shares.
Exchange of VMware Share Certificates and Book-Entry VMware Shares
Promptly (and within five business days) after the effective time of the second merger, Broadcom will cause the exchange agent to mail to each record holder of certificates who has not previously submitted an election notice with duly executed transmittal materials and whose shares of VMware common stock were converted in the second merger into the right to receive the merger consideration a letter of transmittal and instructions for surrendering VMware share certificates in exchange for payment of the merger consideration. Holders of book-entry shares whose shares of VMware common stock were converted in the second merger into the right to receive the merger consideration will not be required to deliver a certificate or an executed letter of transmittal to the exchange agent to receive the merger consideration. Upon surrender of VMware share certificates or book-entry shares and a duly executed letter of transmittal in the case of holders of certificates to the exchange agent (or to another agent appointed by Broadcom) in compliance with the instructions for surrender, such holders will be entitled to receive the merger consideration and any fractional share cash amounts.
Broadcom will instruct the exchange agent to accept the certificates upon compliance with such reasonable terms and conditions as the exchange agent may impose, to effect an orderly exchange in accordance with normal exchange practices. The time that any individual stockholder receives its, his or her merger consideration will vary depending on the underlying arrangements through which such stockholder holds its, his or her shares of VMware common stock.
In the event of a transfer of ownership of shares of VMware common stock that is not registered in VMware’s transfer or stock records, cash may be paid and/or shares may be issued to a person other than the person in whose name the surrendered VMware share certificate or book-entry share is registered if such certificate or book-entry share is presented to the exchange agent accompanied by all documents reasonably required to evidence and effect such transfer and to evidence to the reasonable satisfaction of the exchange agent and Broadcom that any applicable stock transfer or other similar taxes have been paid.
Lost, Stolen or Destroyed Certificates
In the event that an VMware share certificate is lost, stolen or destroyed, the previous holder of the VMware share certificate may obtain the merger consideration and the amount of any owed dividends or distributions in respect of such certificate by (i) making an affidavit regarding the loss, theft or destruction of the VMware share certificate and (ii) if required by Broadcom or the exchange agent, providing an indemnity (in a reasonable amount as determined by Broadcom or the exchange agent) as indemnity against any claim that may be made against Broadcom, the surviving company in the third merger, VMWare Converted LLC or the exchange agent with respect to the lost, stolen or destroyed VMware share certificate.
No interest will be paid or accrue on any cash payable upon surrender of any VMware share certificates or in respect of any book-entry shares.