What happened: Shares of Marvell Technology (MRVL) fell more than 4% on Monday after the chip designer announced the acquisition of optical component maker Lumentum (LITE) in a deal valued at $115 billion. It would be the largest merger ever between two publicly traded companies. Lumentum shares also fell 10% following the announcement.
What’s behind this move: The record deal is expected to bring the combined company’s total addressable market to $550 billion, according to the announcement.
“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating a once-in-a-generation opportunity,” Matt Murphy, president and CEO of Marvell, said Monday.
Lumentum shares fell as investors weighed the implications of the all-stock acquisition, in which shareholders will receive Marvell stock rather than cash.
Lumentum shareholders will receive 4.5 shares of Marvell stock for each Lumentum share they own. The deal implies an enterprise value of approximately $115 billion, or $1,132 per share, representing a 23.9% premium to Lumentum’s closing stock price on October 28.
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750.00 -90.70 (-10.79%)
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What else do you need to know: The acquisition gives Marvell greater access to optical technologies and manufacturing capacity, which have become critical bottlenecks in the development of AI infrastructure.
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 allow AI computers to communicate with each other.
Earlier this year, Marvell stock rebounded sharply after AI chip heavyweight Nvidia’s (NVDA) CEO Jensen Huang described the chip designer as “the next trillion-dollar company.”
The company joined the S&P 500 Index (^GSPC) in June. Marvell shares are up more than 120% year to date. Lumentum shares are up more than 100%.
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