Marvell Technology has confirmed an agreement to acquire Cavium for USD 6 billion, in a bid to relaunch the company in the networking market. If approved, Cavium shareholders will own around 25 percent of the combined group, which will have around USD 3.4 billion in annual sales.
Marvell is offering USD 40.00 per share in cash and 2.1757 Marvell common shares for each Cavium share. This values Cavium shares at USD 80 each, compared to a price of just under USD 70 in early November before reports first emerged of a possible deal.
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 multi-core processing, networking communications, storage connectivity and security products. The new group will target the cloud data centre, enterprise and service provider markets, and expand Marvell's addressable market to more than USD 16 billion. This transaction also creates an R&D innovation engine to accelerate product development, Marvell said.
The companies expect annual synergies from the merger of USD 150-175 million within 18 months of completing the deal. The merger should be "significantly accretive" to revenue growth, margins and adjusted EPS, Marvell said.
Marvell CEO Matt Murphy will lead the combined company, while Cavium's co-founder and COO Raghib Hussain and VP of IC Engineering Anil Jain will join the new group. In addition, Cavium's co-founder and CEO Syed Ali will continue with the company as a strategic advisor and will join Marvell's board of directors, along with two additional directorrs from Cavium's board.
The transaction is expected to close in mid-2018, subject to regulatory approval and approval from shareholders at both companies.
Marvell intends to fund the takeover with cash on hand from the combined companies and USD 1.75 billion in debt financing. The company has agreed a USD 850 million bridge loan and a USD 900 million committed term loan from Goldman Sachs and Bank of America Merrill Lynch.
Marvell also announced that it expects revenue of USD 610-620 million and adjusted EPS of USD 0.32-0.34 for its fiscal third quarter, above the mid-point of its guidance provided in August. Full results will be released on 28 November.
