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The
end-user computing (EUC) unit will operate as a standalone
company and will continue to be run by its existing management
team led by Shankar Iyer, KKR said in a statement on Monday.
Shares of both Broadcom and KKR were up nearly 1% in early
trading.
Reuters first reported on Saturday that a deal between KKR and
Broadcom was imminent.
The VMware deal, which faced several regulatory hurdles, was
among the biggest globally when it was announced in May 2022.
Broadcom closed the acquisition more than a year later, in
November 2023, after receiving regulatory approval in China.
After the deal closed, Broadcom said it would seek to divest the
end-user computing unit. It is now also attempting to shed
VMware's security software business, Carbon Black.
"KKR has traditionally been a very active investor in the
enterprise software industry, and we have a differentiated point
of view and playbooks that we can apply to help businesses (like
Broadcom’s EUC unit) grow. So, we really coupled that kind of
playbook with a long history in carve-outs," Bradley Brown,
managing director on KKR's technology industry team said in an
interview.
KKR has struck more than 60 carve-out deals in its history. Last
year, it agreed to buy publishing house for $1.62 billion from
Paramount Global.
The EUC deal marks KKR's latest bet in the technology services
sector, which benefited from a bonanza in information technology
(IT) spending during the COVID-19 pandemic, fueled by remote
work.
In 2018, KKR purchased U.S. business software company BMC for
$8.5 billion, and two years later, it combined BMC with
Compuware, a company it acquired from technology-focused buyout
firm Thoma Bravo.
In 2021, KKR acquired information services technology provider
Ensono from private equity firms Charlesbank Capital Partners
and M/C Partners for about $1.7 billion. Later in 2021, KKR and
Clayton Dubilier & Rice agreed to buy Cloudera, taking the
data-cloud firm private for about $5.3 billion.
Evercore, Deutsche Bank and Jefferies are advising KKR on the
Broadcom EUC deal, while Citigroup is advising Broadcom. The
transaction is expected to close in 2024.
(Reporting by Samrhitha Arunasalam in Bengaluru and Anirban Sen
in New York; Editing by Shinjini Ganguli, Devika Syamnath and
Sharon Singleton)
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