Marvell Technology will buy rival chipmaker Cavium for $6 billion

Marvell Technology will buy rival chipmaker Cavium for $6 billion

Marvell Technology will buy rival chipmaker Cavium for $6 billion

The semiconductor manufacturing industry looks to be consolidating further with the news that chipmaker Marvell Technology Group Ltd. has agreed to acquire its rival Cavium Inc. for $6 billion.

Marvell Technology has agreed to buy Cavium for about $6 billion as it tries to expand beyond semiconductors that control hard disk drives.

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

The move expands Marvell's addressable market, shifting a company which has focused on chips for the digital storage space into communications and networking.

Daniel Ives, chief strategy officer at GBH Insights, said the deal is a sign that Marvell is getting its house back in order after "years of taking a step backwards".

A buyout of Cavium would give a boost to the networking ambitions of Marvell, which has clients such as network giants Cisco and Juniper Networks.

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The most recent is a bid by Wi-Fi chipmaker Broadcom for rival Qualcomm for a whopping $103 billion in what could be one of the biggest technology deals ever.

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. The exchange ratio was based on a purchase price of $80 per share, which is a 21% premium to Cavium's closing price on November 2, before media reports about the transaction first surfaced.

Marvell offered over $84 per share for Cavium, an 11% premium compared to the company's stock market value this past Friday afternoon.

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. Marvell will fund the deal with cash on hand and $1.75 billion in debt financing.

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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