Update: Marvell Technology to buy smaller rival Cavium for $6 billion

Marvell Technology to buy smaller rival Cavium for $6 billion

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Marvell Semiconductor President and CEO Matt Murphy. REUTERS/Courtes y Marvell

(Reuters) – Chipmaker Marvell Technology Group Ltd (MRVL.O) said it would buy smaller rival Cavium Inc (CAVM.O)
in a $6 billion deal, as it seeks to expand its wireless connectivity
business in a fast consolidating semiconductor industry.
Marvell Semiconductor President and CEO Matt Murphy. REUTERS/Courtes y Marvell
Shares of Marvell were up 1 percent while shares of Cavium were up 7.7 percent to $81.70 in premarket trading on Monday.
Under the deal, Marvell will offer $40.00 per share in cash and 2.1757 of its shares for each Cavium share.

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

Marvell’s
offer of $84.15- based on the stock’s close on Friday – represents a
premium of 11 percent to Cavium’s close, according to a Reuters
calculation.
Hamilton, Bermuda-based Marvell
makes chips for storage devices while San Jose, California-based Cavium
builds network equipment.
“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,” said GBH Insights analyst Daniel Ives.
Marvell,
which has been trying to diversify from its storage devices business,
had come under pressure from Starboard Value LP last year, when the
activist investor called the company undervalued.
“This
is an exciting combination of two very complementary companies that
together equal more than the sum of their parts,” Marvell’s Chief
Executive Matt Murphy said in a statement.
Marvell
plans to fund the deal with a combination of cash on hand from the
combined companies and $1.75 billion in debt financing, the company
said.

Earlier this month, chipmaker Qualcomm Inc (QCOM.O) rejected rival Broadcom Ltd’s (AVGO.O) $103-billion takeover bid, one of the biggest ever in technology dealmaking.
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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