Cavium, which makes communications processors, has agreed to buy QLogic, as the company seeks to expand in the data centre and storage markets.
The transaction values QLogic at approximately $1.36 billion in equity value, including $355 million of cash on QLogic’s balance sheet, and has been unanimously approved by the boards of directors of both companies.
The two companies have complementary product portfolios. QLogic specialises in data centre connectivity and storage products, notably Fibre Channel and Ethernet, while Cavium’s processors are used in networking, compute, and security solutions. The combination will enable Cavium to offer a complete end-to-end offering to customers in enterprise, cloud, data centre, storage, telco and networking markets.
Overall the combination will add an incremental $2-billion-plus market opportunity for Cavium, the company claims.
‘Today’s acquisition of QLogic creates a diversified pure-play infrastructure semiconductor leader,’ stated Syed Ali, president and chief executive officer of Cavium. ‘QLogic’s industry leading products further diversify our revenue and customer base.’
Under the terms of the deal Cavium will acquire all of the outstanding QLogic common stock for approximately $15.50 per share, comprised of $11.00 per share in cash and 0.098 of a share of Cavium common stock for each share of QLogic common stock (valued at approximately $4.50 based on the volume weighted average Cavium trading price for the three trading days beginning June 10, 2016), through an exchange offer.
The transaction will be funded with a combination of $220 million in cash, $750 million of committed financing, which includes $650 million of term loan and $100 million of short-term bridge debt, and $400 million in new Cavium equity.
Christine King, executive chairman of QLogic, said the deal is ‘a winning combination for customers and employees.’ She added: ‘The scale of operations of a nearly $1 billion revenue business will allow the combined company to deliver better solutions for customers and create more career opportunities for employees.’
The transaction is expected to close in the third quarter of calendar year 2016 pending customary closing conditions.