Research Update: Broadcom Inc. Upgraded To ?BBB? On VMWare Acquisition, Improved Business Mix; Outlook Stable; Debt Ratings Also Raised

Broadcom Inc. has closed the acquisition of VMware Inc. after receiving necessary approvals from global regulators, furthering its push into the enterprise software business. We expect the transaction to increase Broadcom's 2023 adjusted debt to EBITDA to low-2x on a pro forma basis. Estimated free cash flow near $23 billion in fiscal 2024, and higher in fiscal 2025, will likely enable the company to decrease leverage over the next two years while providing sufficient capacity to continue shareholder returns and acquisitions. We raised the long-term issuer credit rating to 'BBB' from 'BBB-' and raised the short-term rating to 'A-2' from 'A-3'. We also raised all issue-level ratings on the company's outstanding debt to 'BBB' from 'BBB-'. The stable outlook reflects

...- Broadcom Inc. has closed the acquisition of VMware Inc. after receiving necessary approvals from global regulators, furthering its push into the enterprise software business. - We expect the transaction to increase Broadcom's 2023 adjusted debt to EBITDA to low-2x on a pro forma basis. Estimated free cash flow near $23 billion in fiscal 2024, and higher in fiscal 2025, will likely enable the company to decrease leverage over the next two years while providing sufficient capacity to continue shareholder returns and acquisitions. - We raised the long-term issuer credit rating to '###' from '###-' and raised the short-term rating to 'A-2' from 'A-3'. We also raised all issue-level ratings on the company's outstanding debt to '###' from '###-'. The stable outlook reflects our expectation that solid revenue growth and significant cash flow generation from Broadcom's semiconductor franchise and growing software assets will keep S&P Global Ratings-adjusted leverage under 3.5x through semiconductor...

Research Update