Marvell Technology announced its acquisition of Inphi on Oct. 28. The $10 billion cash-and-stock Marvell-Inphi deal is expected to generate synergies through the companies' complementary portfolios. The semiconductor space is in a phase of consolidation and has seen some major deals in the last few months. Why is the semiconductor industry consolidating? What are the terms of the Marvell-Inphi deal? And how did their stocks react to the deal?
What is Marvell Technology?
Marvell Technology Group, a Bermuda-based semiconductor company, was founded in 1995. The company "design[s], develop[s], and market[s] integrated circuits for communications-related markets.” At its IPO on June 27, 2000, under the ticker symbol "MRVL," it raised $90 million.
Its CEO, Matt Murphy, was brought on board in 2016 after activist investor Starboard Value Fund ousted the company’s founders. Marvell has a history of making small acquisitions to enter new markets. Excluding the Inphi deal, it has made 12 acquisitions.
The details on the Marvel-Inphi deal
On Oct. 29, Marvell announced its acquisition of Inphi for $10 billion. Inphi, a leader in high-speed data movement, has a product portfolio that complements Marvell's, with high-speed electro-optics that facilitate connectivity for cloud data centers and global networks. The acquisition is expected to accelerate Marvell’s growth in cloud and 5G technology.
The deal is slated to close by the second half of 2021. Under the deal's terms, Marvell will pay $66 in cash and 2.323 shares for each Inphi share. After the transaction is closed, Marvell shareholders will own around 83 percent of the company, and Inphi shareholders will own the rest.
Marvell expects run-rate synergies of $125 million within 18 months of the transaction's closure. It also expects the deal to become accretive to its non-GAAP EPS by the end of the first year after.
Mergers and acquisitions in the semiconductor sector are heating up
The Marvell-Inphi deal comes on the heels of the AMD-Xilinx deal earlier this week. Other notable deals in this space have been the Nvidia-ARM Holdings and Analog Devices-Maxim Integrated Products agreements. The semiconductor industry is consolidating as the world shifts to working and doing business online.
How did Marvell's and Inphi’s stock prices react to the deal?
Marvell stockholders seem to be unimpressed with the deal, as MRVL stock was down 3.3 percent after the announcement. However, the stock has had a good run this year, rising almost 60 percent.
Inphi stock, on the other hand, rose by almost 27 percent. Inphi is focused on providing semiconductor solutions for networking, a high-growth segment. This strategy has grown Inphi stock by 90 percent this year, and by 50 percent excluding yesterday's gain. While much of the deal's success will depend on its execution post-acquisition, the company's complementary portfolios and synergies and the demand for semiconductor solutions should make the combined company a winner in the semiconductor space.