Marvell Technology Group Ltd.’s (MRVL - Free Report) previously announced acquisition of Cavium moved a step closer after the Committee on Foreign Investment in the United States (“CFIUS”) cleared the deal of any type of unresolved national security concerns.
Notably, CFIUS is a government committee in charge of reviewing economic transactions by foreign entities.
However, Marvell still awaits approval from China’s State Administration for Market Regulation to complete the transaction. The company is optimistic regarding obtaining the necessary regulatory approvals in time and closing the deal by mid-calendar 2018.
In November 2017, the two companies entered into an agreement wherein Marvell agreed to acquire Cavium in a cash-stock deal worth $6 billion. Per the agreement, Marvell will pay $40 per share and 2.1757 of its common shares for each Cavium’s share.
This means, post buyout, shareholders of Cavium will own 25% of the combined company’s share. Marvell intends to fund the buyout with available cash in hand and $1.75 billion in debt.
Accretive to Top & Bottom Lines
This deal is expected to accelerate Marvell’s revenues and margins. Upon successful completion of the deal, Marvell expects the total addressable revenues for the combined entity to cross $16 billion mark.
Apart from this, the company expects to realize at least $150-$175 million in cost synergies, within 18 months post the deal conclusion.
Further, the combined entity is anticipated to witness a compounded annual revenue growth rate of 6-8%. It is also expected to be accretive to its margins. Marvell anticipates combined company’s gross, operating and EBITDA margins to be nearly 65%, 35% and 40%, respectively.