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News Worms


Marvell Set to Acquire Cavium in $6B Network Silicon Deal

Marvell Set to Acquire Cavium in $6B Network Silicon Deal

Marvell Technology Group Ltd., a chipmaker looking to build itself a future outside of a declining area of the market, has agreed to buy Cavium Inc. for about $6 billion.

The transaction has been approved by the boards of both companies, with Cavium shareholders to receive $40 per share and about 2.2 Marvell common shares for each share of Cavium common stock. The exchange ratio was based on a purchase price of $80 per share, which is a 21% premium to Cavium's closing price on November 2, before media reports about the transaction first surfaced.

The acquisition will expands Marvell's portfolio and combine it with Cavium's portfolio.

Marvell has a market capitalization of $10 billion while Cavium, whose shares have risen more than 10 percent since the Wall Street Journal reported earlier this month that the companies were in advanced talks, has a market capitalization of $5.2 billion.

The deal is Murphy's first acquisition at the company.

Upon completion of the transaction, Marvell will have annual revenue of about $3.4 billion.

"This is an exciting combination of two very complementary companies that together equal more than the sum of their parts", said Marvell President and CEO Matt Murphy. The two will be able to deliver "comprehensive end-to-end solutions" for customers across cloud data center, enterprise and service provider markets, and Marvell's serviceable market.

IBD'S TAKE: Cavium is now ranked No. 40 on the IBD 50 list of top-performing growth stocks.

Chief Executive Matthew Murphy, who took the top job a year ago, has been focusing on Marvell's networking business to counteract declining demand for its chips used in hard disk drives of personal computers.

Marvell on Monday also updated its fiscal third-quarter sales and earnings estimates.

The transaction is expected to generate at least United States dollars 150 to USD 175 million of annual run-rate synergies within 18 months post close and to be significantly accretive to revenue growth. Marvell will release fiscal third-quarter results on November 28 after the market close.

"Our potential is huge".

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