Marvell Technology to acquire Cavium for $6 billion

Andrew Cummings
November 20, 2017

Broadcom is also in the process of acquiring Brocade Communications for $5.5 billion, while Qualcomm is in the middle of a $38 billion bid to buy NXP Semiconductors in order to expand further in the automotive-chip market.

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). It's an ambitious move because Intel Corp., the world's largest chipmaker, dominates the sector with a 99% share.

Marvell CEO Matt Murphy, who took over past year, launched a restructuring of the company, which involved cutting jobs and adding additional services in areas such as data centers and wireless communications. "We look forward to working closely with the Marvell team to ensure a smooth transition and to start unlocking the significant opportunities that our combination creates", said Cavium Co-founder and Chief Executive Officer, Syed Ali.

Cavium shareholders will own about 25% of the combined company, which Marvell plans to purchase with a combination of cash on hand and $1.75 billion in financing. Chipmakers have combined at a record pace over the last two years trying to gain scale to better cope with rising costs and a shrinking customer list.

Qualcomm a year ago said it would buy NXP Semiconductors for $38 billion.

During the investigation, Starboard Value LP took a stake in Marvell and pushed for management changes and divestments, and in April 2016 Sutardja and his wife, President Weili Dai, who founded the company in 1995, stepped down.

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. Cavium shares have gained 21%.

The transaction is expected to close around the middle of 2018.

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