Marvell to buy chip company Cavium for $6 billion

Marvell to buy chip company Cavium for $6 billion

Marvel Technology Group Ltd (NASDAQ:MRVL) announced on Monday that it will buy its smaller rival Cavium Inc (NASDAQ:CAVM) in a deal valued at about US$6bn as it seeks to expand its networking equipment business.

Shares of Marvell were down 0.8 percent to $20.14, while Cavium was up 7 percent at $81.14 in early trading. The exchange ratio was based on a purchase price of $80 per share, which is a 21% premium to Cavium's closing price on November 2, before media reports about the transaction first surfaced.

XAutoplay: On | OffSanta Clara, Calif. -based Marvell agreed to acquire all outstanding shares of Cavium common stock in exchange for $40 per share in cash and 2.1757 Marvell common shares for each Cavium share. The potential deal came to light November 3 when a Wall Street Journal report said the companies were in "advanced" talks.

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.

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The big acquisition deal in progress in the semiconductor space might be Broadcom's rejected bid to take over Qualcomm, but a pair of less-prominent names in the space have come to terms.

Marvell hopes the acquisition will position the company to better compete with Intel, Qualcomm, and Broadcom.

Marvell intends to fund the purchase with a combination of cash on hand from the combined companies and $1.75 billion in debt financing.

"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.

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