Marvell Technology to acquire chipmaker rival Cavium for $6B

Marvell Technology is buying chip maker Cavium in cash-and-stock deal valued at nearly $6 billion that would help it better compete with industry giants like Intel and Broadcom. Shares of Marvell were up 1 percent while shares of Cavium were up 7.7 percent to $81.70 in premarket trading on Monday.

The deal will allow Marvell to diversify away from its traditional storage devices business following an agreement with Starboard Value LP last year to accept three new directors nominated by the activist hedge fund to its board. “This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” Marvell’s Chief Executive Matt Murphy said in a statement.

Based in San Jose, California, Cavium produces network, security, server, and switching processors and systems. Last year it acquired QLogic Corp, a manufacturer of interface devices for storage area networks, for about $1.3 billion. “Individually, our businesses are exceptionally strong,” said Cavium CEO Syed Ali, in a statement. “But together, we will be one of the few companies in the world capable of delivering such a comprehensive set of end-to-end solutions to our combined customer base.”

Marvell plans to fund the deal with a combination of cash on hand from the combined companies and $1.75 billion in debt financing, the company said.

Semiconductor market is witnessing a consolidation wave these days. Earlier this month, Qualcomm rejected rival Broadcom's $105 billion takeover bid, saying the offer undervalued the company and would face regulatory hurdles. Broadcom is also in the process of acquiring Brocade Communications for $5.5 billion, while Qualcomm is in the middle of a $38 billion bid to buy NXP Semiconductors in order to expand further in the automotive-chip market.