Marvell Technology to buy smaller rival Cavium

Nov 21, 2017, 00:35
Marvell Technology to buy smaller rival Cavium

20 that it has agreed to acquire rival chipmaker Cavium for $6 billion. Instead of focusing Marvell's business efforts exclusively on chips that control hard drive disks, Murphy has switched gears to add more offerings in data center and wireless communication technology.

The deal is part of Marvell's attempt to revamp its business after a scandal that led to the removal of its founders under pressure from Starboard Value, an activist investor.

Analysts say the new leadership is preparing a number of important new product launches for later this year after refreshing 25 products in 18 months. The deal is expected to close in mid-calendar 2018.

A buyout of Cavium would give a boost to the networking ambitions of Marvell, which has clients such as network giants Cisco Systems Inc (CSCO.O) and Juniper Networks (JNPR.N).

Cavium has been trying to break into the server microprocessor market using ARM technology.

Marvell plans to announce its cash-and-stock acquisition of Cavium on Monday, the sources said, asking not to be identified ahead of an official announcement.

The exchange ratio was based on a purchase price of $80 per share, using Marvell's undisturbed price prior to 3 November, when media reports of the transaction first surfaced.

Another chipmaker making headlines is Broadcom, which offered to buy rival Qualcomm for $105 billion.

"Individually, our businesses are exceptionally strong, but together, we will be one of the few companies in the world capable of delivering such a comprehensive set of end-to-end solutions to our combined customer base", Cavium Co-founder and Chief Executive Officer, Syed Ali, stated.

Marvell's offer of $84.15 - based on the stock's close on Friday - represents a premium of 11% to Cavium's close, according to a Reuters calculation.

Goldman Sachs was the financial adviser to Marvell while Qatalyst Partners and JP Morgan Securities were the financial advisers to Cavium.