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What happened:Marvell Technology (MRVL) fell more than 3% on Monday after the chipmaker announced it will acquire optical component maker Lumentum (LITE) for $115 billion, in what would be the largest merger between two publicly traded companies on record. Lumentum shares also declined following the announcement.
What’s behind the move: The record breaking agreement is expected to expand the combined company’s total addressable market to $550 billion, according to the announcment.
“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” Matt Murphy, chairman and CEO of Marvell, said on Monday.
Lumentum shares fell in premarket trading as investors weighed the implications of the all-stock acquisition, under which shareholders will receive Marvell shares rather than cash.
Lumentum shareholders will get 4.5 shares of Marvell stock for every Lumentum share they own. The agreement mplies an enterprise value of approximately $115 billion, or $1,132 per share, representing a 23.9% premium over Lumentum’s Oct. 28 closing share price.
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What else you need to know:The acquisition gives Marvell greater access to optical technologies and manufacturing capacity, which have become critical bottlenecks of the AI infrastructure build-out.
Lumentum makes lasers and other optical components as increasingly powerful AI systems require faster connections. Marvell, which competes with Broadcom (AVGO), designs high-speed infrastructure and custom chips that enable AI computers to communicate with one another.
Earlier this year, Marvell stock rallied sharply after AI chip heavyweight Nvidia (NVDA) CEO Jensen Huang described the chip designer as “the next trillion-dollar company.”
The company joined the S&P 500 (^GSPC) index in June. Marvell shares are up more than 130% year to date. Lumentum shares have rallied 128%.
Marvell’s market cap stood at $176 billion on Monday morning in pre-market, while Lumentum’s hovered near $76 billion.
