Upon completion, the deal is expected to immediately add to Nvidia adjusted earnings, gross margin and free cash flow. The company will finance the deal from cash on hand and said that it will also keep its capital return programme for the rest of fiscal 2020.
Nvidia said the deal will not change anything for customers or for sales support and that it will continue to make investments in Israel after close. With Mellanox, Nvidia said it will optimize data centre-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilisation and lower operating cost for customers.
The transaction has been approved by the board of directors at both companies and is expected to close by the end of calendar year 2019, subject to regulatory approvals as well as other customary closing conditions, including the approval by Mellanox shareholders of the merger agreement.
Intel beat?
The Nvidia deal represents a premium of over 14 percent on Mellanox's last closing share price. It follows reports in recent months of multiple interested bidders for Israel-based Mellanox. Intel and Xilinx both reportedly looked at the company, and Israeli press reports suggested that Nvidia outbid Intel to win the acquisition. Shareholders such as Starboard also have pushed for Mellanox to consider a takeover or change in strategy.
Founded in 1999 and headquartered in northern Israel, Nasdaq-traded Mellanox manufactures interconnect chips for data centres. The company reported revenues of USD 1.09 billion for 2018, up 26 percent from a year earlier. Its net result improved to a profit of USD 134 million from a loss of USD 19 million in 2017.
