Marvell suits up well for growing chipmaker wars

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Marvell suits up well for growing chipmaker wars

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

Shares of Marvell were down 0.8 percent to $20.14, while Cavium was up 7 percent at $81.14 in early trading. Broadcom is also in the process of acquiring Brocade Communications for $5.5 billion, while Qualcomm is in the middle of a $38 billion bid to buy NXP Semiconductors in order to expand further in the automotive-chip market.

The deal is part of Marvell's attempt to revamp its business after a scandal that led to the removal of its founders under pressure from Starboard Value, an activist investor.

Marvell CEO Matt Murphy, who took over a year ago, launched a restructuring of the company, which involved cutting jobs and adding additional services in areas such as data centers and wireless communications. The acquisition is expected to close in the middle of 2018, pending regulatory approvals.

"With Marvell facing secular challenges on its core chip business, this acquisition is a smart strategic move which puts the company in a stronger competitive position for the coming years", said GBH Insights analyst Daniel Ives. Marvell is based in Bermuda and operates out of Santa Clara, Calif. Cavium's headquarters is in San Jose, Calif., and the company has design centers in California, Massachusetts, India, Israel, China and Taiwan.

Cavium has been trying to break into the server microprocessor market using ARM technology.

Marvell's offer of $84.15 - based on the stock's close on Friday - represents a premium of 11% to Cavium's close, according to a Reuters calculation. The transaction has been approved by the boards of both companies, with Cavium shareholders to receive $40 per share and about 2.2 Marvell common shares for each share of Cavium common stock.

Goldman Sachs & Co LLC was the financial adviser to Marvell, while Qatalyst Partners LP and J.P. Morgan Securities LLC were the financial advisers to Cavium.

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