Chipmaker Marvell Technology Group Ltd has announced that it would buy smaller rival Cavium Inc for about $6 billion, as it seeks to expand its wireless connectivity business in a rapidly consolidating semiconductor industry.
All this has come out after the shares of Marvell were down 0.8 percent to $20.14, while Cavium was up 7 percent at $81.14 in early trading.
It’s clear that Chief Executive Matthew Murphy of Marvell has been focusing on Marvell’s networking business to counteract declining demand for its chips used in hard disk drives of personal computers.
As per the analysts, the new leadership is preparing a number of important new product launches for later this year after refreshing 25 products in 18 months.
A buyout of Cavium would give a boost to the networking ambitions of Marvell, which has clients including network giants Cisco Systems Inc and Juniper Networks.
For the past couple of years, the chip industry has witnessed a series of deals as companies try to gain market share in emerging areas such as automotive technologies and connectivity.
The most recent is a bid by Wi-Fi chipmaker Broadcom to rival Qualcomm for a whopping $103 billion in what could be one of the biggest technology deals ever.
As per the calculations made by experts, 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.
Marvell plans to offer $40 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, Marvell’s share price prior to the first media report of the transaction on Nov. 3.
In a statement, Marvell expressed that it is planning to fund the deal with a combination of cash on hand from the combined companies and $1.75 billion in debt financing.