Shares of Marvell Technology Group (NASDAQ:MRVL) have sunk by 4% today, while Inphi (NASDAQ:IPHI) stock has skyrocketed 26% as of 12:05 p.m. EDT. The moves came after Marvell said it would acquire Inphi in a $10 billion cash-and-stock deal. Marvell is looking to boost its exposure to the data center and 5G cellular technology.
The offer includes $66 per share in cash and 2.323 shares of the combined company for each Inphi share. Inphi shareholders will own approximately 17% of the combined company. Marvell argues that the deal is highly complementary to its existing businesses, adding Inphi's electro-optics interconnect products to the mix in order to better address the data center market.
"Our acquisition of Inphi will fuel Marvell's leadership in the cloud and extend our 5G position over the next decade," Marvell CEO Matt Murphy said in a statement. "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."
Marvell estimates that its total addressable market will expand to $23 billion after the purchase while accelerating the growth of the combined company. The transaction will be funded in part with $4 billion of new debt, with the remainder coming from cash on hand. The companies estimate that they can generate $125 million in annual cost synergies within 18 months of closing, and that the deal will become accretive to adjusted earnings per share within the first year.
The acquisition is expected to close in the first half of 2021.