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Marvell to Buy Inphi for $8.2 Billion to Grow in Cloud Data Centers, 5G

Inphi makes semiconductor components and optical subsystems for data center and telco networking equipment.

Ian King (Bloomberg) -- Marvell Technology Group Ltd. agreed to buy Inphi Corp. in a cash-and-stock deal valued at about $8.2 billion, marking the second big chip merger this week and adding to an already record year for semiconductor deals.

The transaction will help Marvell expand in the market for cloud data centers and 5G wireless infrastructure, the companies said in a statement Thursday.

According to terms of the deal, Marvell will pay $66 in cash and 2.323 shares of the combined company for each Inphi share. The offer, which translates into about $157.83 per share, represents a premium of about 42% to Inphi’s last closing price. The companies, both based in Santa Clara, California, said the combined enterprise value of the new entity, which includes debt, would be about $40 billion. Marvell shareholders will hold 83% and Inphi investors 17%.

Inphi makes chips that act as the interface in gear to speed the flow of big chunks of information between computers and networks. Data center silicon is becoming increasingly important as cloud providers, swamped with data, look for ways to become more efficient.

“Marvell’s proposed Inphi acquisition aligns well with its long-term infrastructure strategy,” said Bloomberg Intelligence analyst Woo Jin Ho. He noted that Inphi makes high-speed optics, which are playing a growing role in cloud and 5G network infrastructures. Still, he said the valuation “is rich.”

Marvell shares fell 7.7% in early trading in New York. Inphi shares soared 24%.

Inphi stock has rallied almost 50% this year, even as it’s tried to overcome the loss of another large user of its chips, China’s Huawei Technologies Co. which has been cut off from U.S. suppliers by regulatory action. The company is on course to register an increase in revenue of almost 90% this year according to analysts’ estimates.

The Inphi deal adds to an already bumper year of announced transactions including: Advanced Micro Devices Inc.’s $35 billion takeover of Xilinx Inc., Nvidia Corp.’s $40-billion offer for Arm Ltd. and Analog Devices Inc. agreement to acquire Maxim Integrated Products Inc. for $20.9 billion.

Competition in the semiconductor industry is heating up as companies that were once customers, such as Apple Inc., design their own chips and established players like Nvidia branch out into new areas.

Marvell also released preliminary financial results. It said third-quarter revenue is expected to be about $750 million. Full results will be released Dec. 3.

The transaction is expected to generate annual run-rate synergies of $125 million within 18 months after the deal closes -- by the second half of 2021 -- and is expected to become accretive to Marvell’s adjusted earnings per share by the end of the first year after the deal closes, according to the statement.

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