NXP Announces $1.76 Billion Purchase Of Marvell Wi-Fi Business

Marvell US HQ

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Dutch firm NXP Semiconductors NV (NASDAQ:NXPI) is set to purchase Marvell Technology Group's (NASDAQ:MRVL) Wi-Fi and Bluetooth product lines by the end of 2020.

The deal will see communications and storage company Marvell, headquartered in Santa Clara, California, receive $1.76 billion in an all-cash offer to offload Wi-Fi and Bluetooth related products and related assets.

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Nearly a year ago we learned that Qualcomm would be blocked from completing its intended $44 billion purchase of NXP. Chinese regulators didn't approve of the acquisition, and of the nine countries that weighed in, only China blocked the deal. In the end Qualcomm (NASDAQ:QCOM)had to pay a $2 billion dollar break-up fee, and NXP had to weigh its future as a stand-alone company. Looking back, the Chinese may have blocked the deal in light of the brewing trade war we find the two nations still fighting to this day, however that is another story entirely.

NXP, while not quite a household name, is a major chip supplier for automotive OEMs and has often lobbied for Wi-Fi standards to be included in industry standards that would govern how cars talk to one another. According to NXP Chief Executive Officer Rick Clemmer, the deal is a home run in terms of slotting into the company's automotive product offering.

We think it’s another important foundation in our total solutions for customers: having the connectivity to go with the processing and security.

-Rick Clemmer NXP VEO

Most analysts praised the deal saying NXP had under invested in Wi-Fi technologies and that the move would quickly bring the firm up to speed in this area. What isn't so great is the price NXP paid, with some industry experts saying the deal was paid at "full retail prices". Marvell seemed to agree with a statement that read, “This transaction yields a premium valuation and substantially higher economic return for Marvell shareholders".

For its part NXP cited a healthy amount of competition that drove the price upwards and believes the deal is going to pay dividends down the road.

Spending a premium on Wi-Fi technologies does come at a curious time as 5G networks are getting rapidly deployed and is considered a front-runner for a vehicle to vehicle communications standard. NXP believes Wi-Fi will still dominate the discussion for the next five years, so perhaps the investment will pay for itself before 5G takes over.

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