Chipmaker Marvell to buy rival firm Cavium for around $6 billion

Report: Chipmaker Marvell to buy rival firm Cavium for around $6 billion

Marvell Technology to buy smaller rival Cavium

Chipmaker Marvell Technology Group (MRVL) on Monday officially announced plans to buy industry peer Cavium (CAVM) in a deal worth $6 billion, creating what it called an "infrastructure solutions powerhouse".

Shares of Marvell were up 1% while shares of Cavium were up 7.7% to $81.70 in premarket trading on Monday.

Marvell's main business is in chips that control hard disk drives, a market that's no longer growing as new technology begins to take over data storage.

With the buyout of its rival, the chipmaker will be able to diversify away from its traditional storage devices business following an agreement with Starboard Value previous year to accept three new directors nominated by the activist hedge fund to its board.

Analysts say the new leadership is preparing a number of important new product launches for later this year after refreshing 25 products in 18 months.

Bermuda-based Marvell makes semiconductors for data-storage devices while California-based Cavium produces communications and networking chips. The deal has been approved by the boards of directors at both companies and is expected to close in mid-2018. Cavium has strong server computing products that can help telecommunication carriers optimize their networks, which Broadcom doesn't have, Moorhead said in an email.

Another chipmaker making headlines is Broadcom, which offered to buy rival Qualcomm for $105 billion.

Starboard still holds a 6.8% stake, and shares of Marvell have jumped 46% this year, giving the company a market value of about $10 billion.

Marvell will offer $40 per share in cash and 2.1757 of its shares for each Cavium share.

Marvell is offering $40 per share in cash as well as 2.1757 of its own shares, based on its undisturbed share price prior to November 3.

Goldman Sachs was the financial adviser to Marvell while Qatalyst Partners and JP Morgan Securities were the financial advisers to Cavium.

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