Marvell Technology Group Ltd. (NASDAQ: MRVL) and Inphi Corp. (NASDAQ: IPHI) say they have reached an agreement for Marvell to acquire optical networking chip and transceiver vendor. The cash and stock transaction, expected to close in the second half of next year after receipt of the usual approvals and meeting of closing conditions, is estimated to be worth approximately $10 billion.
Marvell says the new company, which will be reorganized in a manner that will see the two companies become subsidiaries of a new Delaware-based holding company, will have a total enterprise value of approximately $40 billion. Current Marvell President and CEO Matt Murphy will continue in those roles in the combined company, while Inphi President and CEO Ford Tamer will join the company’s board. Inphi founder Loi Nguyen also will have a leadership role.
The acquisition is part of an expansion strategy that will see Marvell gain a foothold in cloud and data center networking and extend its current 5G opportunities. It will grow Marvell's addressable market to $23 billion and accelerate market growth to 12% CAGR as well, the company believes.
"Our acquisition of Inphi will fuel Marvell's leadership in the cloud and extend our 5G position over the next decade," explained Marvell head Murphy. "Inphi's technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products, including 400G data center interconnect optical modules, which leverage their unique silicon photonics and DSP technologies. We believe that Inphi's growing presence with cloud customers will also lead to additional opportunities for Marvell's DPU and ASIC products."
"Marvell and Inphi share a vision to enable the world's data infrastructure and we have both transformed our respective businesses to benefit from the strong secular growth expected in the cloud data center and 5G wireless markets," added Tamer. "Combining with Marvell significantly increases our scale, accelerates our access to the next generations of process technology, and opens up new opportunities in 5G connectivity."
Marvell will offer $66 in cash and 2.323 shares of stock for each Inphi share. Upon close, Marvell shareholders will own approximately 83% of the combined company and Inphi stockholders the remainder. Marvell will finance the deal with cash on hand and $4 billion of new debt. Marvell has obtained debt financing commitments from JPMorgan Chase Bank, N.A.
Benefits and review
The pending acquisition dovetails with Marvell's transition toward becoming a data networking company, according to Raghib Hussain, chief strategy officer and executive vice president of the Networking and Processor Group at Marvell. Hussain, who came to Marvell through its acquisition of Cavium, sees the upcoming combination as benefiting Inphi in several ways, not the least of which is accelerated access to 5-nm process technology and overall scale. One application where the two companies should work together well is co-packaged optics, given Marvell's switch chip expertise and Inphi's work in optical transmission technology, he said.
While mergers in the optical communications technology space have been held up by delays in receiving approval from Chinese authorities (see "II-VI to refile Finisar purchase approval request with Chinese authority" and "Cisco, Acacia Communications optimistic about merger approval from China" as examples; the II-VI/Finisar deal eventually received approval, while Cisco and Acacia are still waiting), Hussain believes this deal should have smoother sailing. The complementary nature of the the companies' products and the benefits the combination will bring Chinese companies should make the deal appealing, he said.
[Editor's Note: This article was amended from the original with the addition of the comments from Raghib Hussain.]
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