The transaction will create a so-called industry leader in artificial intelligence connectivity, as Marvell Technology seeks to strengthen its data center business.
Summary
Marvell Technology has reached an all-stock deal valued at approximately $80 billion to acquire Lumentum, expanding its optical interconnect technology product line.
AI chip maker Marvell Technology (NASDAQ: MRVL) has agreed to acquire data center optical component maker Lumentum (NASDAQ: LITE) in an all-stock transaction valued at approximately $80 billion. The deal will merge two of the fastest-growing upstream technology suppliers in the AI sector.
Marvell Technology designs custom AI chips and various technologies used for interconnecting processors and transferring data within data centers. Acquiring Lumentum will expand Marvell's product portfolio in optical transmission technology, which relies on optical signals to transmit data between chips and servers. Nvidia is a strategic investor in both companies.
The two companies announced the terms of the transaction on Monday: each Lumentum shareholder will receive 4.5 shares of Marvell Technology common stock for each share of Lumentum common stock held. Including assumed debt, the transaction is valued at approximately $115 billion.
Lumentum produces lasers, chips, and optical interconnect hardware used in data center servers. In the once relatively obscure field of photonics, Lumentum is a key player. Companies in this space develop technology that enables data transfer between computer chips at speeds far exceeding traditional copper wire connections.
Lumentum currently has a market capitalization of approximately $76 billion, while Marvell Technology has a market capitalization of approximately $172 billion.
In 2016, Marvell Technology's data center business accounted for less than 10% of total revenue; today, the segment is the company's largest revenue contributor and a core growth driver. CEO Matt Murphy has said that Marvell Technology has "bet the entire company" on developing its data center business.
In early March of this year, Nvidia announced a multi-year procurement agreement with Lumentum for its high-end laser components. As part of the partnership, Nvidia will invest $2 billion in Lumentum to support research and development as well as domestic U.S. manufacturing capacity building. Later that same month, Nvidia also completed an investment in Marvell Technology, with the two sides reaching a strategic cooperation aimed at making it easier for various custom AI chip makers' products to connect with Nvidia systems.
If the acquisition is completed successfully, Marvell Technology's technology could also serve Nvidia's competitor hardware. Marvell Technology is best known for developing custom AI chips for Amazon Web Services (AWS). In August of this year, Marvell Technology disclosed an expanded commercial partnership with Google, under which Google obtained rights to purchase Marvell Technology shares.
Murphy said: "AI infrastructure is undergoing a fundamental architectural shift toward optical interconnect, representing a once-in-a-generation opportunity." He added that the acquisition will help shape the next generation of AI interconnect technology.
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