Marvell makes offer for telecom chip maker Cavium

The semiconductor market continues to consolidate, with Marvell Technology Group making a $6 billion bid for chipmaker Cavium. 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.

The move expands Marvell’s addressable market, shifting a company which has focused on chips for the digital storage space into communications and networking. Cavium shareholders will own about 25% of the combined company, which Marvell plans to purchase with a combination of cash on hand and $1.75 billion in financing.

“This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” said Marvell President and CEO Matt Murphy. “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.”

Murphy will lead the combined company, and Syed Ali, Cavium co-founder and CEO, will be a strategic advisor as well as a member of Marvell’s board of directors.

“Individually, our businesses are exceptionally strong, but together, we will be one of the few companies in the Ali. “Our potential is huge. We look forward to working closely with the Marvell team to ensure a smooth transition and to start unlocking the significant opportunities that our combination creates.”

Other members of the combined company’s leadership team include Marvell’s current CFO Jean Hu; Cavium co-founder and COO Raghib Hussain; and Anil Jain, cavium’s vice president of integrated circuit engineering.

Marvell’s stock was up 2% in early trading, while Cavium’s rose nearly 8%. 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.

The deal follows on the heels of a bid by Broadcom to acquire rival Qualcomm, in an unsolicited $130 billion offer that Qualcomm’s board unanimously rejected, saying that the offer undervalued Qualcomm and its prospects for growth.

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