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NVIDIA’s Acquisition of Mellanox Gets Nod of Approval From China

By Nicholas Rossolillo – Apr 16, 2020 at 3:49PM

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More than a year since the proposed takeover, the final hurdle has been cleared.

Chinese regulators have given their approval for NVIDIA (NVDA -0.60%) to acquire Israeli-based Mellanox Technologies (MLNX). NVIDIA announced it received the go-ahead on April 16, 2020, more than a year after the proposed deal was formally announced on March 11, 2019.  

With waiting periods under U.S. antitrust laws expiring and the European Commission already clearing the way for the takeover, a nod from Chinese officials was the final hurdle NVIDIA needed to clear. NVIDIA is the leader in graphics processing unit (GPUs) chip design, a type of semiconductor that originally rose to prominence powering high-end video game graphics and professional visualization software (think engineering and architectural design, and computer-generated images for the entertainment industry). GPUs have grown increasingly important in data center construction in recent years, getting put to use as computing accelerators to process large amounts of data generated by cloud computing software services and artificial intelligence.  

A robotic arm holding an NVIDIA chip.

Image source: NVIDIA.

Purchasing Mellanox, which builds other data center hardware as well as the software to manage it, yields NVIDIA increased exposure to one of its fastest-growing end markets. The GPU designer is paying $6.9 billion, or $125 per share in a one-time cash payout, to shareholders of Mellanox. Mellanox generated $1.33 billion in revenue and $394 million in adjusted net income in 2019, year-over-year increases of 22% and 48%, respectively. NVIDIA says the addition of the networking hardware company will immediately add to its own bottom-line profitability.

NVIDIA expects the deal to be finalized on or before April 27, 2020.

Nicholas Rossolillo and his clients own shares of NVIDIA. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.

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