If SMAR doesn’t approve, will Broadcom risk the fines and potential damage to China relations or risk the potential $1.5Bn penalty for the deal not closing. The end of October seemed to be a convenient date so the deal of ot closing then may not be an indicator of what Broadcom would do. The 26th November is the crunch point. If nothing happens this week, how late will we go next week before an announcement of some sort
12 replies (most recent on top)
Actually, the last line of Question #8 in that Skadden attorney doc that discusses the complexities of China SAMR approval is even more interesting: "it is best to keep a low profile politically to minimize the odds of attracting adverse attention."
See question 9 here
https://www.skadden.com/insights/publications/2022/12/2023-insights/more-intense-merger-reviews/demystifying-chinas-merger-review-process
Or you exit china due to sanctions which go live tomorrow. Or find a way to make a profit on 10 year old technology.
Some M&A guys were discussing this (not in the BC context) and mentioned that not only could China shut down local companies but they can fine 10% of global revenue. Not local. Not profit. Global revenue. BC isn’t going to risk that.
As far as waiting past Nov 26th, what’s the upside? If China just silently fails to approve, what are the chances they’ll change their mind randomly later. And with interest rates twice what they were when banks originally agreed, that would all have to be renegotiated too.
Either the Chicoms relent before Nov 26 or it’s dead, IMO—which is worth exactly what you paid for it.
“It is interesting that Hock was in NDA meetings with customers and partners in Barcelona last week with an expectation that this will close”
Not interesting at all. The guy is full of lies hot air and his own ego. Can’t close this to save his life
https://www.apple.com/newsroom/2023/05/apple-announces-multibillion-dollar-deal-with-broadcom/
"Apple announces multibillion-dollar deal with Broadcom for components made in the USA"
OPINION ALERT:
Broadcom will not close without China's approval. Too much revenue hinging on that, not to speak about what Apple would say if chip deliveries to their iPhone manufacturing would stop coming in.
Apple is already requiring chips to be made on US soil. The latest contract with broadcom for chips requires US Soil.
Get your facts strait pal.
It is interesting that Hock was in NDA meetings with customers and partners in Barcelona last week with an expectation that this will close. That message has been passed through to VP level and they seem to express the same confidence - without being able to actually comment. We will see if that is the case.
You need to consider 1.5B is not a so big amount of money... BCM makes around 15B net earning yearly and VMW roghly 1.5B. BCM can give the 1.5B wothout issues and for VMW 1.5B will not be surely enough to cover the damage
I'd be expecting modified cloud software sanctions announced in july to launch very soon with an executive order to shut down net-new sales effective immediately. Why? Because. Like on Nov 16.
If SMAR doesn’t approve, will Broadcom risk the fines and potential damage to China relations or risk the potential $1.5Bn penalty for the deal not closing.
Will Broadcom has to pay 1.5Bn penalty if they can't close due to not receiving approval post Nov 26th?
I think I read somewhere there is no penalty for not closing post 3rd outside date outlined in the original agreement.
OPINION ALERT:
Broadcom will not close without China's approval. Too much revenue hinging on that, not to speak about what Apple would say if chip deliveries to their iPhone manufacturing would stop coming in.
The id--t press is floating a theoretical possibility that BC would close this without approvals (and stating what the theoretical maximum of fines would be), but all that is just, well, theoretical.
If they wanted to close without approval, they would have done so on or before October 30th and saved themselves the embarrassment of the delays and the embarrassment of HT's pathetic Barcelona appearance.