Marvell to Acquire Rival Cavium in $6 Billion Deal

Chipmaker Marvell Technology Group is looking to build a future for it outside an area that is declining in the market and announced it would acquire Cavium Inc. for $6 billion, said a person who is familiar with the situation.

The deal involves both stock and cash, said the source. The two companies could announce the deal as early as Monday.

Marvell is attempting to remake itself following a huge corporate scandal that led to the founder of the business being forced out under pressure from Starboard Value LP an activist investor. The company has been specializing in chips that control the drives in hard disks, a market that is not growing any longer as new technology has started to take over the storage of data industry.

Cavium, based in San Jose, California, would be Marvell’s biggest deal by CEO Matthew Murphy, who last year took over the top executive role of the company.

Cavium, which makes network processors, is one of many companies attempting to use technology from ARM Holdings to break the lucrative hold that Intel Corp has on the market for server microprocessors.

The effort remains in the early stages and the largest chipmaker in the world still controls over 99% of the market share.

Marvell did not respond to the requests left asking for a comment, but those requests were made during non-business hours. At the same time, Cavium declined to make a comment when asked.

This deal is one more move toward consolidating the semiconductor industry that is estimated to be worth over $300 billion. Chipmakers have been merging during the past two years at a record rate trying to increase scales to cope better with the rise in costs and the shrinking number of customers.

In the largest proposed deal to date, Broadcom Ltd, offered to acquire Qualcomm for over $100 billion.

Marvell shares have increased by 46% during this year, which gives the business a $10 billion market value. Its clients include companies such as Toshiba Corp., Samsung Electronics Co. and Western Digital Corp. amongst several others.

With the rapid change in technology available to companies, the chip making business has come under heavy pressure to expand and the larger players are using cash reserves to acquire the smaller companies which is beginning to shrink the industry at a very rapid pace.