Investors fear China's regulator could sink Nvidia-Mellanox deal

Eyal Waldman and Jensen Huang Photo: Kadia Levy

The Israeli big data connectivity company's share price remains 12.8% below the price Nvidia is committed to pay to complete the deal.

Three months after US tech giant Nvidia Corp. announced that it was buying Israel big data connectivity company Mellanox Technologies Ltd. (Nasdaq:MLNX) for $6.9 billion, Wall Street investors remain unconvinced that the deal will ever be completed. Yesterday on Nasdaq, Mellanox's share price closed up 0.62% at $110.79, giving a market cap of $6.07 billion.

This is still 12.8% below the $125 per share that Nvidia is committed to paying shareholders under the terms of the deal signed in March. In other words, if the deal is completed by the end of the year as Nvidia is committed to do, then investors buying the share today could potentially make close to 25%, on an annualized basis.

The main concern regarding completion of the deal is that in the current climate of US-China trade tensions, the Chinese regulator will not approve the deal. Several weeks ago Nvidia CEO Jensen Huang assured CNBC's Jim Cramer that the deal won't be blocked by the Chinese but investors remain unconvinced.

Last year at the height of the trade tensions, the Chinese regulator nixed Qualcomm's acquisition of NXP Semiconductor. However, earlier this year China was being more conciliatory, as demonstrated by its approval of US company KLA-Tencor's $3.4 billion acquisition of Israeli electronics company Orbotech, after months of foot-dragging.

Of course, even in a worst case scenario, if the deal were to break down, Mellanox, still led by its founder and CEO Eyal Waldman, would remain a highly coveted company with a bright technological future, so that while investors might not make a handsome short-term gain, the investment could still prove profitable in the medium to long term.

Published by Globes, Israel business news - - on June 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Eyal Waldman and Jensen Huang Photo: Kadia Levy
Eyal Waldman and Jensen Huang Photo: Kadia Levy
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