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Bloomberg
Marvell Technology Group, a chipmaker looking to build itself a future outside of a declining area of the market, has agreed to buy Cavium Inc. for about $6 billion.
The buyer will pay $40 in cash plus 2.1757 Marvell common shares for each Cavium share, according to a statement Monday. Marvell plans to use $1.75 billion in debt financing to fund the transaction.
Marvell’s main business is in chips that control hard disk drives, a market that’s no longer growing as new technology begins to take over data storage. Cavium makes networking processors and is one of several companies trying to use ARM Holdings Plc technology to break into the server microprocessor market. It’s an ambitious move because Intel Corp., the world’s largest chipmaker, dominates the sector with a 99 percent share.
The acquisition of San Jose, California-based Cavium is the biggest deal for Marvell CEO Matthew J. Murphy, who took the role last year after an accounting scandal forced the resignation of his predecessor. “This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,†Murphy said. Marvell is based in Bermuda and run from Santa Clara, California.
Cavium shareholders are expected to own about 25 percent of the combined company on a pro forma basis. Syed Ali, co-founder and CEO of Cavium, will join the board of Marvell, with fellow co-founder Raghib Hussain and engineering executive Anil Jain rounding out the Marvell leadership team. Marvell’s Murphy will head up the new company.
The deal is yet another move towards consolidating the $300-billion semiconductor industry. Chipmakers have combined at a record pace over the last two years trying to gain scale to better cope with rising costs and a shrinking customer list. In the biggest proposed deal so far, Broadcom Ltd. has offered to buy Qualcomm Inc. for more than $100 billion. Marvell is trying to remake itself after a corporate scandal.
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. The deal is expected to close in mid-2018.