Marvell Technology Group Ltd, a chipmaker based in Hamilton, Bermuda, has announced that it will buy smaller rival Cavium Inc., a network equipment builder in San Jose, Calif. The deal is valued at $6 billion, and is intended as a way for Marvell to expand its wireless connectivity business in the semiconductor industry and diversify from its storage device business.
Marvell’s shares climbed 1 percent following the news on Nov. 20, and Cavium shares went up 7.7 percent to $81.70 in premarket trading.
The deal consists of Marvell offering $40 cash per share, and 2.1757 of its shares for each Cavium share.
“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,” GBH Insights analyst Daniel Ives told Reuters.
Cavium reports that the deal will give Marvell approximately $3.4 billion in annual revenue. The new business union will combine Marvell’s portfolio of HDD and SSD storage controllers, networking solutions, and high-performance wireless connectivity products with Cavium’s portfolio of multi-core processing, networking communications, storage connectivity, and security solutions. The deal will also enhance the business’s R&D innovation in order to speed product development to meet customer demand for data storage, heterogeneous computing, and high-speed connectivity.
“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,” commented Cavium Co-founder and Chief Executive Officer, Syed Ali, in a released statement. “Our potential is huge. 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.”
The transaction is not subject to any financing condition, and is expected to close in mid-2018.
Cavium has design centers in California, Massachusetts, India, Israel, China, and Taiwan.
