Shareholder Opposes VMWare’s $61B Acquisition by Broadcom

On Tuesday, a VMware Inc. shareholder sued the company and its directors over the impending acquisition by Broadcom Inc. proposed in late May. The Southern District of New York complaint said material terms were missing from the registration statement VMWare filed with the Securities and Exchange Commission (SEC), and that these are critical to stockholders in deciding whether to vote for the deal.

The complaint explains that VMWare is a “leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control,” while Broadcom is a “global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions,” according to a press release reprinted in the pleading.

Under the terms of the companies’ agreement, VMware’s stockholders are set to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock. While the parties tout the deal as providing enterprise customers with “an expanded platform of critical infrastructure solutions to accelerate innovation and address the most complex information technology infrastructure needs,” the complaint says that critical aspects of the proposal have been thus far omitted.

Pointing to the July-filed registration statement, the VMWare shareholder says that it omits information about the company’s financial projections, and specifically, the line items underlying those projections. Certain analyses conducted by advisors Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC also fail to provide shareholders with an adequate understanding of VMWare’s predicted future financial performance, the complaint says.

The filing faults several other analyses the advisors performed, like Goldman Sachs’ “Illustrative Discounted Cash Flow Analysis.” Numerous inputs and assumptions are not disclosed, making the computation opaque, the shareholder argues.

The filing states two claims for relief, one against VMWare and the other against its directors, who were “at least negligent in filling the Registration Statement with these materially false and misleading statements.” The plaintiff seeks to halt the transaction until the information is provided or recission in the case the deal goes through.

The shareholder is represented by Grabar Law Office.