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US chipmaker and cloud software companies insist transaction will complete ‘soon’ despite missing Monday’s scheduled close

US chipmaker Broadcom and cloud software company VMware have delayed the completion of their $69bn merger, which had been scheduled to close on Monday, as they await approval from China.

The companies said in a joint statement that they maintained their “expectation that Broadcom’s acquisition of VMware will close soon, but in any event prior to the expiration of their merger agreement”, which set a final deadline of November 26.

The Financial Times reported this month that Chinese regulators were considering holding up the deal, which was first announced in May 2022, after Washington toughened rules to block Chinese access to high-performance semiconductors.

Broadcom and VMware’s statement did not mention China directly but said they expected to “close [the] transaction promptly following satisfaction of [a] remaining condition”. China was not listed among the territories that have approved the deal, which include the EU, Japan, South Korea and the UK.

People close to the situation in China have said geopolitical friction between Washington and Beijing hung over the deal’s approval.

The companies said that there was “no legal impediment to closing under US merger regulations”.

The statement indicates that US antitrust authorities had not lodged objections before the deadline expired for intervention under the Hart-Scott-Rodino Act, which requires large deals to be notified to the US Federal Trade Commission and Department of Justice.

Ahead of Monday’s deadline, both companies had proceeded as if closing was imminent.

Mark Kelly, chief executive of MKP Advisors, an advisory firm, said Monday’s statement was the “first public admission by the companies that they cannot close as planned”, despite the FT’s initial report that a lack of approval from China could delay it.

“Never before has there been such uncertainty over the fate of such a large acquisition so close to a supposed deadline for it to be closing,” Kelly said.

“I’ve never seen anything like this,” said one hedge fund investor who owns VMware shares.    

The delay will leave investors hoping that a thaw in US-China relations could open a path to approval. President Xi Jinping is expected to meet his counterpart Joe Biden in San Francisco next month for the Asia-Pacific Economic Cooperation summit. Prior meetings, such as one held in Bali last year, have helped stabilise relations. 

China’s State Administration for Market Regulation did not immediately respond to requests for comment, outside normal business hours.

Moving forward without China’s approval could be highly damaging for Broadcom. The San Jose-headquartered group brings in about a third of its revenue from shipments to China and lawyers say the group could face a large fine for closing without China’s sign-off. 

If Broadcom’s merger with VMware is eventually scuppered by Beijing, it would mark the second time in five years that the technology group has seen its ambitions curtailed by US-China tensions.

In 2018, then-US president Donald Trump blocked Broadcom’s $142bn bid for chipmaker Qualcomm, citing national security concerns about a US semiconductor champion being bought by what was then a Singapore-headquartered company. Broadcom subsequently relocated its headquarters to the US.

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Tyres release many more polluting particles than an exhaust pipe but rarely come under scrutiny

Eat lettuce and you are eating tyres. Your diet may still be vegetarian, but not as green as you think.

We know this from a recent study that traced how a particular chemical was drawn up through the roots and into the leaves of a lettuce plant as it grew. This chemical is overwhelmingly found in vehicle tyres. 

As we drive, our tyres wear down and release invisible particles that we inhale and ultimately ingest. Strikingly, the rate of release of these particles is almost 2,000 times greater than the mass of particles from a modern exhaust pipe. It looks likely, then, that these apparently mundane yet economically vital and technically sophisticated products are a source of pollution that will make Dieselgate — the exhaust emissions cheating scandal of 2015 — look minor. The difference? No rules are being broken, yet current US and EU polices promoting battery electric vehicles through subsidies are set to make the problem worse.

Tyres work hard. They are the only points of contact between a vehicle — which often weighs more than two tonnes — and the road. Those on battery vehicles, which often weigh an extra half tonne compared with conventional vehicles, are usually even bigger and wider to compensate. Add to that the sharper acceleration potential of battery vehicles, and you have a recipe for up to 20 per cent higher tyre emissions. 

Very soon, if not already, the total tyre emissions from all vehicles in the US will exceed exhaust mass emissions. By the time sales of new internal combustion engine vehicles are banned in 2035, tyre emissions will be many times higher. We shouldn’t stop electrification, but we should recognise that battery vehicles are far from emission free. Car weight matters when it comes to the climate.

When we think of products of strategic national significance, we rarely consider tyres. Without them, though, economies would hardly function. Cement kilns are powered by burning tyres as cheap fuel. Asphalt roads contain pieces of them to reduce noise. Clever tyre formulations can deliver lower rolling resistance to vehicles, giving a carbon dioxide emissions benefit to the manufacturer. Even football pitches often rely on ground up old tyres. With their use, however, come adverse environmental impacts, such as deforestation in Asia, the deaths of salmon as a result of ingesting road run-off and lives lost to cancer from football pitch fumes.

Leading players in the tyre industry are already working to mitigate these effects, in advance of looming regulation. Modifying the ingredients and formulas for tyre-making can reduce the potential toxicity of particles released, although this puts the price up. When those tyres are worn out, drivers often replace them with the cheapest option. Therefore, the electrification of cars must come hand in hand with the regulation of replacement tyres.

European authorities are racing to develop the “Euro 7” regulation, part of which seeks to reduce tyre emissions on all vehicles by limiting the rate of rubber loss through abrasion, based on a standardised test. The flaw in the European approach, however, is that it only focuses on reducing the rubber mass shed by tyres, with little consideration for how to control the quality of replacement tyres, and of the chemical composition. The price of lower wear may be greater toxicity.

Tyres are all around and inside us — yet none carry an ingredients list. If there is any doubt about their potential damage, consider the Chinese subjects of a recent peer-reviewed scientific study, who had their urine tested. An average of 709 nanograms of the very same tyre preservative found in the lettuce were passed per person daily. That may seem a tiny amount, but zero nanograms would be preferable, given what we know about the toxic effects in fish. To avoid our decarbonisation mission backfiring, we must take the tyres problem seriously.