Earlier this month, Marvell Technology Group Ltd. — the company known for revolutionizing the digital storage industry — announced that it is acquiring Aquantia Corp — which is a leader in Multi-Gig Ethernet connectivity. The deal was approved by the boards of directors of both companies. And the deal involves Marvell acquiring all outstanding shares of Aquantia common stock in exchange for consideration of $13.25 per share in cash. This represents about $452 million in transaction value after adjusting for net cash on Aquantia’s balance sheet.
“Our acquisition of Aquantia will fuel Marvell’s leadership in the transformation of the in-car network to high-speed Ethernet over the next decade,” said Marvell president and CEO Matt Murphy. “At the same time, Aquantia extends our reach in the rapidly emerging Multi-Gig segment of network infrastructure and creates a leading end-to-end Ethernet connectivity portfolio.”
With the acquisition of Aquantia, it complements Marvell’s portfolio of copper and optical physical layer product offerings. Plus it extends its position in the Multi-Gig 2.5G/5G/10G Ethernet segments. Specifically, Aquantia’s innovative Multi-gig automotive PHYs combined with Marvell’s industry-leading gigabit PHY and secure switch products will create the broadest and most advanced range of high-speed in-car networking solutions in the world.
“Marvell and Aquantia share a vision where the network – whether in an autonomous vehicle, an enterprise application or in cloud infrastructure – can seamlessly power the data economy,” added Aquantia chairman and CEO Faraj Aalaei. “This is a fantastic opportunity as our customers will benefit from Marvell’s global scale and expanding footprint in Multi-Gig network applications.”
Essentially this combination accelerates Marvell’s vision for the future of automotive networking with speeds necessary to enable level 4 and 5 autonomous driving. The automotive industry is increasingly adopting Ethernet in-vehicle networks for mainstream models and the number of related ports is expected to grow dramatically at a 62% annualized growth trajectory in 2018 to 367 million by 2022, according to Strategy Analytics.
This transaction is expected to be immediately accretive to Marvell’s non-GAAP earnings per share and generate significant annual run-rate synergies of $40 million to be realized within a year of the transaction closing. Marvell will be financing the transaction with cash on hand and revolver borrowings. This transaction is not subject to any financing condition and is expected to close by the end of CY2019 subject to regulatory approval and other customary closing conditions.
In connection with this definitive agreement, certain stockholders of Aquantia — who together hold approximately 17% of the outstanding shares of common stock — have agreed to vote their shares in favor of the transaction under a voting and support agreement.
In Aquantia’s latest earnings report, the company reported $121 million in sales last year — which is a 17% increase on an annual basis. However, Aquantia reported an operating loss of $10.5 million compared to a $3 million loss in 2017. And first-quarter sales dropped 40% on an annual basis to $17 million at a $13.2 million loss.