Broadcom has agreed to pay $ 61 billion for VMware, a cloud computing company, in a massive tech merger that will expand the chipmaker's software capabilities.

The cash-and-stock acquisition, which is one of the largest in industry history, will combine Broadcom's software assets with VMware's cloud computing and virtualization expertise.

Broadcom's offerings to clients are likely to improve as a result of the merger, giving customers more choice and flexibility to design, run, manage, connect, and protect applications at scale across varied, distributed settings.

Broadcom's reliance on semiconductor sales is expected to be diluted as a result of the VMware transaction, which comes amid concerns about ‘chip cycle peaking’.

VMware shareholders can choose between receiving $142.50 in cash or little more than one-fourth of a Broadcom share for each VMware share under the terms of the deal. When compared to VMware's stock price last week before word of the acquisition broke, this implies a 49 percent premium.

Broadcom will also take over $ 8 billion in debt from VMware.

In 2021, VMware was spun off from Dell Technologies.

Michael Dell and Silver Lake, which own 40.2 percent and 10 percent of VMware shares, respectively, have signed on to support the acquisition as long as the VMware board of directors approves it.

In early trading, VMware increased 0.9 percent to $121.65, while Broadcom rose 1.9 percent to $ 541.89.

Broadcom, led by CEO Hock Tan, has developed through acquisitions, with revenues of around $27.5 billion in fiscal 2021.

Broadcom made an unsolicited $117 billion offer to buy rival chipmaker Qualcomm in 2017, but the deal was vetoed by then-President Donald Trump's government due to national security concerns.

Qualcomm's operations are mostly focused in the US, but the company is headquartered in Singapore.

Words on the street imply that Broadcom would become a force in software and cloud computing, where VMware is a key global competitor.