Chipmaker Marvell Technology to buy Cavium for about $6 bn

Marvell Technology Group Ltd yesterday struck a deal to buy smaller rival Cavium Inc for about $6 billion, in order to expand its wireless connectivity business.

Under the terms of the deal that has been approved by the board of both companies, Marvell will pay $40.00 per share in cash and 2.1757 Marvell shares for each Cavium share.

The total value of Marvell's offer is around $84.15, a premium of 11 per cent to Cavium's 3 November closing price when media first reported of a possible deal.

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

Post closing Cavium shareholders are expected to own approximately 25 per cent of the combined company.

The transaction is expected to generate at least $150 to $175 million of annual run-rate synergies within 18 months post close.

Marvell said that the deal will make it a leader in infrastructure solutions with annual revenues of around $3.4 billion.

California-based Cavium has a broad portfolio of infrastructure solutions for compute, security, storage, switching, connectivity and baseband processing.

Cavium's highly integrated multi-core SoC products deliver software compatible solutions across low to high performance points enabling secure and intelligent functionality in Enterprise, Data Center and Service Provider Equipment.

Its clients include networking giants like Cisco Systems and Juniper Networks.

Cavium has design centers in California, Massachusetts, India, Israel, China and Taiwan.

Founded in 1995 by Sehat Sutardja, Weili Dai, and Pantas Sutardja, Bermuda-based Marvell Technology is a producer of storage, communications and consumer semiconductor products.

The company ships more than one billion integrated circuits annually and its market segments include the enterprise, cloud, automotive, industrial and consumer markets.

The transaction combines Marvell's portfolio of HDD and SSD storage controllers, networking solutions and high-performance wireless connectivity products with Cavium's portfolio of leading multi-core processing, networking communications, storage connectivity and security solutions.

''The combined product portfolios provide the scale and breadth to deliver comprehensive end-to-end solutions for customers across the cloud data center, enterprise and service provider markets, and expands,'' Marvell said in a statement.

The deal will also allow Marvell to better compete with bigger rivals Intel Corp, Qualcomm and Broadcom.

The semiconductor industry has recently seen a consolidation in order to corner market share.

Qualcomm last month offered to buy NXP Semiconductors for $38 billion (See: Qualcomm to buy NXP Semiconductors for $39 bn).

while Broadcom has tabled an unsolicited bid of $103 billion for Qualcomm, which would be the biggest acquisition in the technology sector if the deal concludes (See: Qualcomm set to reject Broadcom's $103 bn takeover bid).

"This combination expands and diversifies our revenue base and end markets, and enables us to deliver a broader set of differentiated solutions to our customers,'' said Marvell president and CEO, Matt Murphy.

"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," said Cavium co-founder and CEO, Syed Ali.