By Radarr Africa Business Desk
LAGOS, November 3 (Radarr Africa) – Marvell Technology has agreed to acquire Lumentum Holdings in an all-stock deal under which each Lumentum share will convert into 4.50 Marvell shares, according to a regulatory filing by Lumentum, and shares in both companies fell sharply on Monday.
The merger agreement was signed on November 1, according to Lumentum’s Form 8-K, signed on November 2. Lumentum’s board unanimously approved the deal and recommends that its stockholders adopt the agreement. The two companies were due to hold a joint investor call at 8:00 a.m. Eastern Time on Monday.
Under the terms in the filing, the transaction is structured as a two-step merger in which a Marvell subsidiary merges into Lumentum, which survives as a wholly owned Marvell subsidiary, and then merges into a second Marvell subsidiary. Cash will be paid in place of fractional shares.
Marvell will appoint three Lumentum directors to its board after closing and nominate them at its first annual meeting, the filing said. Closing depends on stockholder approvals at both companies, clearance under the US Hart-Scott-Rodino Act and other regulatory approvals, effectiveness of a registration statement on Form S-4, Nasdaq listing approval and the absence of a material adverse effect.
The filing sets out sizeable break fees. Marvell would pay $5.8 billion in certain cases and Lumentum would pay $2.9 billion in corresponding cases, while Marvell would owe a $3.2 billion regulatory termination fee in specified regulatory failure scenarios. The outside date is November 1, 2027, extendable to August 1, 2028 under certain regulatory circumstances. The filing does not give a specific closing date.
Markets reacted badly. Stock Titan reported that Marvell fell 12.72 per cent on Monday and Lumentum fell 18.59 per cent. Because the deal is paid in shares, the value of the offer moves with Marvell’s price. At Monday’s close, 4.5 Marvell shares were worth about $771, against about $1,132 on October 28, according to Stock Titan.
The deal had been flagged before it was announced. Bloomberg reported on October 28, citing people familiar with the matter, that Marvell was in advanced talks to buy Lumentum, according to The Next Web. It put Lumentum’s value at about $85 billion and Marvell’s at about $196 billion at that time, and said the deal could be one of the largest in technology. Marvell fell as much as 14 per cent on October 29 on the reports, The Next Web said.
Lumentum makes optical products used in artificial intelligence data centres. Its chief executive, Michael Hurlston, has said its optical products are sold out through early 2029 and that it cannot meet about 70 per cent of next year’s demand for some products, according to The Next Web. Marvell already buys lasers from Lumentum, and Nvidia took a $2 billion stake in Lumentum earlier this year, the site reported.
Analysts had weighed the structure before the announcement. RBC Capital Markets said the deal “makes strategic sense given the highly complementary product portfolios”, according to The Next Web, adding that the case would be strongest if Marvell sold Lumentum’s pluggable module business. Raymond James said an all-share deal avoids interest costs and dilutes earnings less, but that Marvell shareholders would give up more ownership, the report said.
Lumentum has also agreed to a tax reimbursement arrangement with Hurlston covering Section 280G and 4999 excise taxes, and its board approved similar arrangements for other named executive officers, the filing said.
The headline value of the transaction is not given in the filing text reviewed by Radarr Africa, and press reports differ on how it is calculated, so this report gives the exchange ratio and market values only as sourced.
