The deal will have Marvell Technology Group Ltd. acquiring Cavium Inc. This will have it paying holders of CAVM stock $40 and 2.1757 shares of MRVL stock per share. This price will have it paying $80 per share for the company based on MRVL’s closing price as of Nov. 3. This was the last day before news of the deal began to spread.
Marvell Technology Group Ltd.’s offer for Cavium Inc represents a total value of $6 billion. The company says that it plans to fund this purchase with cash on hand and $1.75 billion in debt financing. Following the completion of the deal, shareholders of CAVM stock will own 25% of the merged company.
The Boards of Directors for Cavium Inc and Marvell Technology Group Ltd. have already both unanimously approved the deal. If the deal goes through, it will transform MRVL into a leading infrastructure solution company with $3.4 billion in yearly revenue.
Cavium Inc and Marvell Technology Group Ltd. are expecting to see several benefits from the deal. This includes between $150 million and $175 million in annual synergies within 18 months of completing the deal. They also expect it to bring growth to revenue, margins and earnings per share.
Cavium Inc and Marvell Technology Group Ltd. are expecting the deal to close in mid 2018. However, it will first have to clear customary closing conditions and get approval from regulators. Holders of CAVM stock and MRVL stock will also have to approve the deal before its completion.
CAVM stock was up 9% and MRVL stock was up 5% as of noon Monday. CAVM stock is up 31% year-to-date and MRVL stock is up 50% year-to-date.
As of this writing, William White did not hold a position in any of the aforementioned securities.