Marvell Technology to buy chipmaker Cavium for about £4.5 billion

  • Marvell Technology to buy chipmaker Cavium for about £4.5 billion

Marvell Technology to buy chipmaker Cavium for about £4.5 billion

Marvell Technology Group Ltd. announced on November 20 that it has reached an agreement to acquire Cavium Inc.

Further, the merger will expand Marvell's existing portfolio of storage hardware, networking solutions and high-performance connectivity products with Cavium's portfolio of multi-core processing products, networking communications, storage connectivity and security solutions, to create a significant industry leader in technology infrastructure solutions.

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

A buyout of Cavium would give a boost to the networking ambitions of Marvell, which has clients such as network giants Cisco Systems Inc (CSCO.O) and Juniper Networks (JNPR.N).

"This is an exciting combination of two very complementary companies that together equal more than the sum of their parts", Murphy said.

Marvell had revenues previous year of US$2.3 billion, while Cavium had sales of US$603.3 million.

Marvell and Cavium combined would be able to better compete with bigger rivals Intel Corp (INTC.O), Qualcomm (QCOM.O) and Broadcom (AVGO.O), Stifel analyst Kevin Cassidy said. Syed Ali, co-founder and chief executive officer 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. In 2015 the company launched an internal investigation into its accounting practices and concluded that some revenue had been recognized prematurely. The acquisition is expected to close in the middle of 2018, pending regulatory approvals. In February 2016, Starboard announced it had taken a 7 percent stake in the chipmaker, saying that it believed the firm was "undervalued" and would look to cut costs by restructuring its operations. The total value of the deal is approximately $6 billion.