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Marvell's (MRVL) Inphi Takover On Track, HSR Waiting Period Ends

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Marvell Technology’s (MRVL - Free Report) deal to acquire Inphi Corporation (IPHI - Free Report) took a step ahead yesterday with an important regulatory approval from the U.S. Federal Trade Commission. The provider of data infrastructure semiconductor solutions, Marvell, announced that the waiting period for a review of the transaction under the Hart-Scott-Rodino (HSR) Act has expired on Dec 14.

The HSR Act seeks to ensure due filing of all documents necessary for mergers, acquisitions and transfer of assets or securities by companies with the U.S. Federal Trade Commission and Department of Justice.

Marvell-Inphi Acquisition Deal

The two companies inked a definitive agreement in the last week of October, under which Marvell would acquire Inphiin a cash-and-stock deal worth $10 billion.  Per the terms of the deal, Marvell will pay $66 per share in cash and 2.323 shares of stock for each Inphi share.

The transaction is anticipated to close in the second half of calendar-year 2021. Following the deal’s closure, Marvell shareholders will own 83% of the combined company, while Inphi stockholders will own the remaining 17%.

Rationale Behind the Acquisition

Marvell plans to reorganize the combined company and domiciled in the United States, creating a $40-billion semiconductor powerhouse. The transaction will broaden Marvell's leadership in data centers and extend its 5G network infrastructure. Inphi's growing presence with cloud customers will also open up additional opportunities for Marvell's DPU and ASIC products.

Marvell is a leader in infrastructure semiconductor products, while Inphi makes high-speed data movement systems. “Combining Marvell's storage, networking, processor, and security portfolio with Inphi's leading electro-optics interconnect platform, will position the combined company for end-to-end technology leadership in data infrastructure," the companies said.

The deal will likely generate annual run-rate synergies of $125 million to be realized within 18 months after the transaction‘s conclusion. It will also be accretive to Marvell's non-GAAP earnings per share by the end of the first year after the deal’s closure.

Semiconductor Industry Continues to Consolidate

The Semiconductor industry is undergoing a massive consolidation wave. A huge number of mergers and acquisitions worth hundreds of billion dollars have taken place over the last few years.

Most recently, in October, Advanced Micro Devices (AMD - Free Report) agreed to buy Xilinx for $35 billion. During the second quarter of 2020, the industry witnessed two major mergers and acquisitions which have a combined worth of more than $60 billion.

In July, Analog Devices (ADI - Free Report) agreed to acquire Maxim Integrated Products in an all-stock deal worth $20.9 billion. In September, NVIDIA (NVDA - Free Report) entered into a definitive agreement to buy the U.K.-based Arm Holdings in a deal valued at $40 billion.

Consolidation is natural in a mature industry like semiconductor which is now more than 60 years old. This industry is currently plagued with two huge challenges, which include escalating costs of producing chips for devices and a sluggish growth rate.

In such a scenario, semiconductor companies need to be huge in order to compete effectively. Therefore, these companies have resorted to mergers and acquisitions in an effort to grab more market share, cut costs, boost productivity and improve investment returns through scale economies.

Currently, Inphi carries a Zacks Rank #2 (Buy), while Marvell has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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