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Marvell Gets Final Clearance to Close Cavium Acquisition

Zacks Equity Research
Updated

Marvell Technology Group Ltd. MRVL has cleared the final hurdle to acquire Cavium CAVM as it received the necessary approval from China’s State Administration for Market Regulation. The company expects to complete the merger by July 2018.

Previously, the company received clearance from Committee on Foreign Investment in the United States (“CFIUS”) and completed the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).

In November, Marvell agreed to acquire its smaller competitor for $6 billion in a cash-stock deal. Per the agreement, the company will pay $40 per share and 2.1757 of its common shares for each Cavium share. In this connection, the company raised funds, last week, by issuing senior notes worth $1 billion.

Marvell Technology Group Ltd. Free Cash Flow (TTM)

Marvell Technology Group Ltd. Free Cash Flow (TTM) | Marvell Technology Group Ltd. Quote

Marvell is one of the leading providers of chips for hard disk drives. Cavium offers software compatible processors that enable functionality in data center applications and network connectivity for server and switches. Therefore, the buyout will provide Marvell an opportunity to expand its offerings and access newer markets.

Upon successful completion of the deal, Marvell expects total addressable revenues for the combined entity to cross $16 billion and believes the deal to be accretive to both its top and bottom lines.

Furthermore, Cavium’s strategy of breaking into Intel Corporation’s INTC potential hold on the server microprocessor market makes it the most feasible buyout for Marvell, per a Bloomberg report. According to the report, Intel holds more than 99% market share in this space.

In the maturing chip industry, it only makes sense for both the companies to combine and gain a competitive advantage. The combined entity will have the ability to offer an enhanced product portfolio.

Zacks Rank & Another Stock to Consider

Currently, Marvell has a Zacks Rank #2 (Buy).

Another top-ranked stock in the broader computer & technology sector is Micron Technology MU, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Micron is currently pegged at 8.2%.

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Marvell Technology Group Ltd. (MRVL) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
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