NVIDIA (NASDAQ: NVDA) Has Officially Closed Its $6.9 Billion Deal to Acquire Mellanox (NASDAQ: MLNX)
On the 16th of April, China granted a conditional approval to the merger, stipulating only generic conditions, such as a prohibition on employing “unreasonable” tactics – including bundling – while selling devices in China. The U.S. and the European Commission have already approved the merger, with the latter’s approval having been formalized only in December 2019.
Following a nod from China's Anti-Monopoly Bureau of the State Administration for Market Regulation, NVIDIA had announced around 2 weeks back through a filing with the U.S. Securities and Exchange Commission (SEC) that the merger deal will attain an official closure on the 27th of April. Today, as per the stated timeline, NVIDIA has officially completed this acquisition process.
As per the details of the original agreement, announced back in March 2019, NVIDIA would pay $125 for each share of Mellanox, equating to a total purchase price of $6.9 billion. Notably, the acquisition was to be financed entirely through cash without any equity component and constitutes the largest such deal by the U.S. chipmaker.
The merger will produce significant synergies for the two firms. Mellanox has pioneered the InfiniBand interconnect technology, which in conjunction with its high-speed Ethernet products, is employed in over half of the world’s fastest supercomputers and multiple leading hyper-scale datacenters. This deal will allow NVIDIA to optimize its data center-based computing and cloud solutions and tap the growing demand for data storage and processing that has been driven, in large part, by AI applications, cloud services, smartphones, IoT devices, and autonomous vehicles. Moreover, the merger will provide NVIDIA the requisite tools for increasing rack-to-rack communications which, in turn, will help in reducing the latency of its hyperscale systems. Furthermore, Mellanox's data center solutions will facilitate NVIDIA in offloading networking tasks from central processing units to accelerators in an AI-driven, optimized manner.
NVIDIA’s Tesla line of GPUs marked the chipmaker's first foray in the data center sphere. As a refresher, these GPUs were modeled after its Quadro professional-grade workstations. The U.S. chipmaker had developed a number of products geared towards the market for servers in collaboration with Mellanox. It was the successful execution of these joint development projects that had prompted NVIDIA to table a merger proposal, culminating in today’s official closure of the deal.
NVIDIA’s stock is up 2.85 percent today, hovering around $297.88 as of 12:38 p.m. ET. Year to date, the stock is up by a healthy 23.07 percent. For comparison, the NASDAQ 100 index is down around 2.55 percent during the same timeframe.
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