Chipmaker Marvell Technology (NASDAQ: MRVL) said on Monday it would buy smaller rival Cavium (NASDAQ: CAVM) in a deal valued at about $6 billion, as it seeks to gain scale in a semiconductor industry that is rapidly consolidating.
Under the deal, Marvell will offer $40 per share in cash and 2.1757 of its shares for each Cavium share.
The exchange ratio was based on a purchase price of $80 per share, using Marvell's undisturbed price prior to November 3, when media reports of the transaction first surfaced. Marvell's offer represents a premium of 11% to Cavium's close on Friday. The Hamilton, Bermuda-based Marvell Technology makes storage and WiFi equipment while Cavium builds network equipment.
Marvell plans to fund the deal with a combination of cash on hand from the combined companies and $1.75 billion in debt financing, the company said. Goldman Sachs was the financial adviser to Marvell while Qatalyst Partners and J.P. Morgan Securities were the financial advisers to Cavium.
The deal will allow Marvell to diversify away from its traditional storage devices business following an agreement with Starboard Value last year to accept three new directors nominated by the activist hedge fund to its board.
Based in San Jose, California, Cavium produces network, security, server, and switching processors and systems. Last year, it acquired QLogic a manufacturer of interface devices for storage area networks, for about $1.3 billion.
Marvell opened trading Monday up nine cents to $20.38, while Cavium shot higher $5.42, or 7.1%, to $81.25
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