Marvell Technology to buy smaller rival Cavium for $6bn

Ivan Schwartz
November 21, 2017

Semiconductor manufacturer Marvell Technology has announced that it will be acquiring USA chip maker Cavium in a deal worth $6bn.

Marvell is offering $40 per share in cash as well as 2.1757 of its own shares, based on its undisturbed share price prior to November 3.

The chipmaker plans to fund the deal with a combination of cash on hand from the combined companies and $1.75 billion in debt financing, the company said.

"With Marvell facing secular challenges on its core chip business, this acquisition is a smart strategic move which puts the company in a stronger competitive position for the coming years", said GBH Insights analyst Daniel Ives. Murphy promptly began a large-scale restructuring of Marvell's businesses, cutting jobs and moving to add new offerings in data centers and wireless communications.

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"This combination expands and diversifies our revenue base and end markets, and enables us to deliver a broader set of differentiated solutions to our customers", said Marvell Chief Executive Matt Murphy in a statement about the deal.

Cavium shareholders will own about 25% of the combined company. Syed Ali has built an outstanding company, and I'm excited that he is joining the Board. On Monday, Nov. 20, 2017, Marvell said it would acquire San Jose-based Cavium for $6 billion. In the biggest proposed deal so far, Broadcom Ltd. has offered to buy Qualcomm Inc. for more than $100 billion. In 2015 the company launched an internal investigation into its accounting practices and concluded that some revenue had been recognized prematurely.

The Nasdaq gained 7.92 (+0.12 percent) to close at 6,790.71, while the S&P 500 finished at 2,582.14, up 3.29 (+0.13 percent) from its open. Marvell's customers include Western Digital Corp., Toshiba Corp. and Samsung Electronics Co., according to Bloomberg supply chain analysis. The companies expect the deal to close in mid-2018.

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