Marvell to buy Lumentum in $115 billion all-stock deal

Marvell Technology agreed on Monday, November 2, to buy optical-components maker Lumentum ↘ 0.62% in an all-stock deal that gives Lumentum an implied enterprise value of $115 billion, according to the companies' joint announcement. The deal is Marvell's bet that spending on AI data centers will keep demand for high-speed optical links ahead of supply. It also strengthens Marvell's position against its larger rival Broadcom ↗ 3.07%, Reuters Thomson Reuters Corporation ↘ 9.87% reported.lasvegassun.com+1

Terms of the deal

Lumentum stockholders will receive a fixed 4.500 Marvell shares for each Lumentum share. That works out to about $1,132 per share, a premium of roughly 23.9% to each company's unaffected closing price on October 28, the last trading day before speculation about a deal began, the companies said. Reuters put the equity value at $102.54 billion. Current Marvell stockholders will own about 67% of the combined company and Lumentum holders about 33%.reuters.com+1

Matt Murphy will remain chairman and CEO. Three Lumentum directors, including CEO Michael Hurlston, will join Marvell's seven-member board. The deal is expected to close in the first half of 2028, pending shareholder and regulatory approvals. Marvell says it sees a path to more than $1 billion in annual run-rate cost synergies and expects the deal to add to non-GAAP earnings per share in the first year after closing, per the release. Marvell shares rose in premarket trading, while trading in Lumentum shares was halted, Reuters reported.lasvegassun.com+1

A bet on optical connectivity

The companies say the combined business will be able to target a $550 billion market. They plan to pair Marvell's interconnect, switching and custom-chip work with Lumentum's lasers, optical transceivers and indium phosphide manufacturing. "AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation," Murphy said.lasvegassun.com

Lumentum is roughly half Marvell's size. It competes with Coherent ↗ 3.77% and China's Zhongji Innolight, and it could gain from a proposed US ban on new Chinese optical transceivers, CNBC Comcast Corporation ↘ 0.84% reported. Earlier this year, Nvidia ↗ 2.29% invested $2 billion in each company.cnbc.com

Context and market backdrop

This is Marvell's largest acquisition since it bought Inphi for $10 billion in 2021. It follows Marvell's $3.5 billion purchase of Celestial AI, which closed in February. In August, Marvell signed a deal with Google Alphabet Inc. ↗ 0.08% worth up to $120 billion in sales through fiscal 2033, according to Reuters. Marvell's market value has climbed above $170 billion, helped by its work designing custom AI chips for customers such as Amazon Amazon.com, Inc. ↗ 2.06%.reuters.com

Since talks were first reported in late October, Lumentum shares have fallen about 8% and Marvell's about 22%. The declines came as a wider chip selloff picked up after Intel ↗ 0.97% issued a weak forecast, CNBC noted. Alongside the deal, Marvell kept the midpoint of its fiscal third-quarter revenue guidance and narrowed the range. Lumentum released its fiscal first-quarter results separately.cnbc.com