Chipmaker Marvell to Buy Rival Cavium for $6 Billion

Marvell to buy chip company Cavium for $6 billion 0

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

The transaction will combine Marvell's portfolio of storage drive controllers, networking systems and wireless connectivity products with Cavium's portfolio of multicore processing, networking communications, storage connectivity and security products.

Marvell had revenues past year of US$2.3 billion, while Cavium had sales of US$603.3 million.

Marvell's stock was up 2% in early trading, while Cavium's rose almost 8%.

The deal will allow Marvell to diversify away from its traditional storage devices business following an agreement with Starboard Value LP past year to accept three new directors nominated by the activist hedge fund to its board. Cavium makes networking processors and is one of several companies trying to use ARM Holdings Plc technology to break into the server microprocessor market.

"This is an exciting combination of two very complementary companies that together equal more than the sum of their parts", Marvell Chief Executive Matt Murphy said in a news release. The companies expect the deal to close in mid-2018.

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Starboard still holds a 6.8% stake, and shares of Marvell have jumped 46% this year, giving the company a market value of about $10 billion.

The deal will see Marvell paying $40 for each Cavium common share and giving each shareholder 2.1757 Marvell common shares.

The deal will lift Marvell's total potential market to more than US$12 billion and establish a more substantial research and development team to meet shifting needs in the massive industry of data storage, they said in a statement.

The chipmaker 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.

Marvell has obtained a $850 million bridge loan commitment and a $900 million committed term loan from Goldman Sachs Group Inc. and Bank of America Corp.

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