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Marvell (MRVL) Issues Senior Notes to Fund Inphi Acquisition

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Marvell Technologies (MRVL - Free Report) recently announced that its wholly-owned subsidiary, Marvell Technology, Inc. (MTI) has priced a senior notes offering worth $2 billion. The company stated that the notes would be issued in three tranches of different maturities, carrying different interest rates.

The company prices notes worth $500 million, having an annualized interest rate of 1.65% and maturity in 2026. Another senior note worth $750 million carries an annualized interest rate of 2.45% and will mature in 2028. Additional $750 million worth senior notes carrying an annualized interest rate of 2.95% will mature in 2031. The company stated that the offering will be closed on or around Apr 12.

Marvell intends to use the net proceeds to fund the proposed cquisition of Inphi Corporation , which is expected to close this month after a shareholders meeting on Apr 15. Markedly, last October, Marvell and Inphi inked a definitive agreement, under which the former would acquire the latter in a cash-and-stock deal worth $10 billion.

Why is Marvell Acquiring Inphi?

Marvell has rallied 105.5% in the past one year, outperforming the Zacks Semiconductor - Communications industry’s gain of 103.2%.

The acquisition will integrate Inphi's powerful electro-optics interconnect platform into Marvell’s storage, networking, processor and security portfolio, broadening its leadership in data centers and extending its 5G network infrastructure. The total addressable market of the combined company will also expand with this deal.

Marvell plans to reorganize the combined company and create a $40-billion semiconductor powerhouse.  Inphi's growing clout among cloud customers will also open up additional opportunities for the Zacks Rank #3 (Hold) company's DPU and ASIC products.

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

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.

Marvell Takes Advantage of Low Interest Rates

Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand.

In the past few months, several companies have issued senior notes to improve liquidity. Last month, NCR Corporation (NCR - Free Report) raised $1.1 billion through issuing 5.125% senior unsecured notes. Additionally, Twilio (TWLO - Free Report) raised $1 billion through issuing senior notes to enhance its financial flexibility in March.

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