NVIDIA to Secure EU Approval This Week for its Acquisition of Mellanox

Dec 19, 2019
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NVIDIA (NASDAQ:NVDA)  is about to secure an unconditional nod from the European Commission (EC) vis-à-vis its $6.8 billion acquisition of Israel-based Mellanox Technologies (NASDAQ:MLNX), according to the reporting by Reuters.

EU authorities are expected to announce a formal approval of the deal within this week. Additionally, the U.S. has already approved the acquisition while an official response from China on this matter is still pending. It should be noted that NVIDIA has major customers in China such as Alibaba and Baidu. Consequently, the company is striving to win the Chinese approval on an expeditious basis. However, due to the complexities arising from the U.S. – China trade war and the efforts by the Trump administration to deprive China of key Western technologies, the matter remains delicate and may be subject to a Chinese whim for some sort of a retaliation. Nonetheless, NVIDIA CEO Jensen Huang reiterated in May that he was optimistic regarding the deal's prospects and that he didn’t think China would block the deal.

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NVIDIA first announced its acquisition of Mellanox on 11th of March after it outbid rivals including Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), and Xilinx (NASDAQ:XLNX). As per the details of the agreement, NVIDIA will pay $125 for each share of Mellanox. Interestingly, the acquisition is 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 hyperscale datacenters. This deal will allow NVIDIA to optimize its datacenter-based computing and cloud solutions and tap the growing demand for data storage and processing driven, in large part, by AI applications, cloud services, smartphones, IoT devices, and autonomous vehicles.

For the three months that ended on the 27th October 2019, NVIDIA reported revenue of $3.01 billion compared with $3.18 billion that the company reported in the comparable quarter last year. For reference, NIVIDIA earned a revenue of $2.58 billion in the previous quarter. Moreover, the company’s data center business contributed $726 million to its overall revenue, thereby, marking an increase of 10.84 percent relative to the preceding quarter.

NVIDIA’s stock price has jumped by about 71.92 percent year-to-date and the company now has a market capitalization of $140.51 billion. For reference, the NASDAQ composite has registered year-to-date gains of 33.28 percent. As of 10:26 a.m. ET, the company’s stock price is hovering around $235.01.

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