Cavium (CAVM) Concludes $1.36 Billion Takeover Of QLogic

Yesterday, semiconductor chip manufacturer Cavium Inc. (NASDAQ:CAVM) announced the completion of the takeover of QLogic Corp. Following the buyout, QLogic will now function as a wholly owned subsidiary of Cavium and will be delisted from Nasdaq.

Cavium is a relatively small player in the semiconductor space. With the acquisition of QLogic, the company is looking to expand its datacenter and storage business and widen its clientele. As noted earlier by Cavium, the combined company will generate $900 million in LTM revenues with $45 million of cost synergies to be achieved by 2017. The deal will boost Cavium’s 2017 non GAAP earnings by 60 to 70 cents.

The acquisition was announced in Jun 2016. The deal valued each share of QLogic at $15.50, of which $11 will be paid in cash and the rest in Cavium’s stock.

Buyout rumors surrounding QLogic have been doing the rounds for some time now. QLogic is a leading name in the Ethernet market on the back of to its strong product portfolio. In 2015, the company had double-digit lead in terms of market share over its peers. The company was struggling to drive growth owing to the ongoing transition from Ethernet to Fibre Channel networks on the one hand and the shift from on-premise infrastructure to cloud deployments on the other.

In April this year, a Bloomberg report revealed that the networking infrastructure company teamed up with financial advisor, Qatalyst Partners. It was widely speculated that the company was exploring strategic opportunities for its potential sale.

At present, Cavium carries a Zacks Rank #3 (Hold). Better-ranked stocks in the tech space are Facebook Inc. (NASDAQ:FB) MeetMe Inc. (NASDAQ:MEET) and VeriSign Inc (NASDAQ:VRSN) . While Facebook sports a Zacks Rank #1 (Strong Buy), MeetMe and VeriSign carry a Zacks Rank #2 (Buy).