Morningstar | Marvell’s Connectivity Business Finds Prospective Suitor in NXP; Maintaining FVEs
On May 29, NXP Semiconductors announced an agreement to acquire Marvell Technologies’ connectivity portfolio for $1.76 billion in an all-cash deal that is expected to be completed by the first quarter of calendar 2020, pending regulatory approval. In principle, the transaction makes sense for both parties. The combination of products, which includes Wi-Fi and Bluetooth connectivity solutions, should support NXP’s efforts in industrial, “Internet of Things,†and automotive markets. NXP noted that the Marvell unit generated roughly $300 million in revenue during fiscal 2019, or roughly 3% of NXP’s total revenue for 2018, and NXP expects this to double by 2022. For Marvell, the divestiture further refines the business to focus on higher-margin opportunities in 5G, data center, and enterprise infrastructure markets. However, we wonder about the extent to which the pending acquisition of automotive Ethernet player Aquantia now fits within Marvell’s overall strategy, since some of the connective tissue between it and Marvell’s general connectivity portfolio would be severed in the deal with NXP.NXP expects the transaction will be accretive to adjusted operating margins in the quarter after it closes, and we expect further details from Marvell on the impact of the divestiture in the earnings call on May 30. For now, we will maintain our fair value estimates for both NXP and Marvell as well as our moat ratings of narrow and none, respectively.
NXP Semiconductors is a holding company. Through its subsidiaries, Co. is engaged as a global semiconductor company and a long-standing supplier in the industry. Co. provides High-Performance Mixed-Signal and Standard Product solutions. Co.'s product solutions are used in automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing applications. Co. engages with original equipment manufacturers (OEM) and sell products in all major geographic regions.
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