Marvell Technology to acquire Cavium for $6 billion

Isaac Cain
November 21, 2017

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

Marvell and Cavium did not immediately respond to requests for comment.

Shares of Cavium surged 8.6 per cent to US$82.35 in pre-market trading, while Marvell advanced 2.9 per cent to US$20.87.

The deal will allow Marvell to diversify away from its traditional storage devices business following an agreement with Starboard Value LP a year ago to accept three new directors nominated by the activist hedge fund to its board.

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).

That move was followed by the appointment of Matt Murphy as the company's new chief executive officer.

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The cash and stock deal will combine the two companies' offerings "to deliver comprehensive end-to-end solutions for customers across the cloud data center, enterprise and service provider markets", the companies said. The deal better positions Marvell to compete with bigger rivals, including Intel and Broadcom, in a semiconductor industry that has changed a lot over the past couple years as companies buy out rivals.

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

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.

Last week, Qualcomm turned down a proposed $103 billion takeover bid by communications chipmaker Broadcom.

Goldman Sachs & Co LLC was the financial adviser to Marvell, while Qatalyst Partners LP and J.P. Morgan Securities LLC were the financial advisers to Cavium.

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