US computer chip developer and marketer Marvell Technology (MRVL) today announced it was acquiring Israeli company Galileo (GALT) for $2.7 billion in shares, thereby expanding its activity in one of the world’s fastest growing sectors - communications chips – and speeding up its penetration of this market. Following the acquisition, Galileo will become a division of Marvell.
Under the terms of the deal, Marvell is offering 0.674 of a share for one Galileo share. Yesterday, the Marvell share closed at $81.75 following after a fall of over 10%, while the Galileo share rose 5.6% to $30.77. Based on a $55.1 per share offer, this constitutes a 79% premium. Holders of Galileo shares and options will receive a total of 32.9 million Marvell shares, constituting 25% of the merged company. The deal is expected to be closed in the first quarter of 2001.
Marvell consulted Goldman Sachs about the transaction, while Galileo consulted Salomon Smith Barney.
Galileo CEO Avigdor Willenz, who owns 21% of the company, is the big winner from the deal. He is expected to receive Marvell shares worth $490 million, and will be appointed an active VP in Marvell and be co-opted to the management of the Galileo division of the US company.
Marvell, traded at a $7 billion market value, was originally set up five years ago as a company for developing storage chips. Last year, the company expanded its activity and entered into communications chips. The company has 350 employees. Marvell was issued in June and the share price tripled on the first day of trading, from $15 to $45. The company profit in the first six months of the year was $4.6 million ($0.12 per share) and sales reached $61.8 million.
Fabless Marvell’s customers include Toshiba, Fujitsu, Samsung and Seagate Technology. The company develops and markets chips, but manufacturing is done by contractor Taiwan Semiconductor.
Israeli company Galileo, which has 300 employees, develops and markets smart chips for the communications products market. It was founded in 1993 and issued on Nasdaq in July 1997. The company’s chips are manufactured mainly in Taiwan, while its management is located in Israel. Galileo posted revenues of $44.5 million in the first half of the year, a 33% increase over the corresponding period in 1999, and profits of $7.8 million, a fall of 30% compared with the same period last year.
Galileo is traded on Nasdaq at a value of $1.4 billion. The company has been expecting acquisition offers for a long time. Less than two months ago, Willenz told “Globes” that the company was examining proposed mergers.
The two companies have been cooperating since May in marketing and sales.
Published by Israel's Business Arena on 17 October, 2000