Chipmaker company, Marvell Technology, announced on Monday it would buy the semiconductor company, Cavium, for $6 billion. The move is part of Marvell Technology’s expansion beyond semiconductors that control hard disk drives.
Premarket trading showed Marvell Technology was up 1 percent in shares while Cavium shares were at 7.7 percent. The deal will see the chipmaker offer $40 per share in cash and 2.1757 of its shares for each Cavium share. The deal value comes to $6 billion, and Cavium shareholders will own about 25 percent of the merged company.
“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 Matt Murphy, Marvell Technology’s CEO.
Ever since taking charge of Marvell Technologies, Murphy started restructuring the company by cutting jobs and seeking ways of diversifying the company’s business.
Marvell Technology will fund the deal via a combination of available cash from the combined companies and a $1.75 billion in debt financing.
Multinational company, Goldman Sachs, was Marvell Technologies’ financial adviser while Cavium had Qatalist Partners and J.P. Morgan Securities as its financial advisers.
The deal will allow Marvell Technologies to steer away from its storage devices business. They made an agreement with the investment adviser, Starboard Value, to bring in three new directors nominated by the firm to its board.
Cavium is based in San Jose, California and produces network, security, server, and switching processors and systems. The company had acquired QLogic in 2016, a manufacturer of interface devices for storage area networks, for $1.3 billion.
Marvell Technologies has a market value of $10 billion while Cavium reported earlier this month to hold a $5.2 billion market capitalization.
Companies wanting to merge with their smaller rivals is nothing new. Earlier in November, chipmaker company, Qualcomm, rejected rival Broadcom’s $103 billion bid, one of the biggest deal propositions in the technology sector.
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