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Marvell to Buy Rival Chipmaker Cavium for About $6 Billion

Marvell to Buy Rival Chipmaker Cavium for About $6 Billion

Marvell Technology Group Ltd. announced on November 20 that it has reached an agreement to acquire Cavium Inc. Instead of focusing Marvell's business efforts exclusively on chips that control hard drive disks, Murphy has switched gears to add more offerings in data center and wireless communication technology.

Marvell's acquisition of Cavium is subjected to shareholder and regulatory approval, but it's expected to be complete by mid-2018.

"This is an exciting combination of two very complementary companies that together equal more than the sum of their parts", Marvell Chief Executive Matt Murphy said in a news release.

Cavium's stock soared 7.4% in pre-market trading on the news, while Marvell shares climbed 1%. The potential deal came to light November 3 when a Wall Street Journal report said the companies were in "advanced" talks.

Murphy a year ago replaced former CEO Sehat Sutardja and President Weili Dai - a husband-wife team who co-founded the company - after an audit committee questioned their management style and hedge fund investor Starboard Value LP made a host of demands.

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Marvell's acquisition of Cavium also comes more than a year after Marvell's founders, the husband-and-wife team of CEO Sehat Sutardja and President Weili Dai, were forced out of the company in an accounting irregularity scandal.

The exchange ratio was based on a purchase price of $80 per share, using Marvell's undisturbed price prior to 3 November, when media reports of the transaction first surfaced.

Earlier this month, chipmaker Qualcomm rejected rival Broadcom $103bn takeover bid, one of the biggest ever in technology dealmaking.

Marvell's offer of $84.15 - based on the stock's close on Friday - represents a premium of 11 percent to San Jose, California-based Cavium's close, according to a Reuters calculation.

Marvell has obtained a $850 million bridge loan commitment and a $900 million committed term loan from Goldman Sachs Group Inc. and Bank of America Corp.

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