Starboard concentrated Waldman's mind

Shiri Habib-Valdhorn

Mellanox founder and CEO Eyal Waldman had been perceived as wanting to keep the company independent.

The $6.9 billion sale of Israeli company Mellanox (MLNX) to US semiconductors giant Nvidia is the latest in a series of acquisition deals involving Israeli public companies in the past few months. It follows the sales of food flavors company Frutarom, automated optical inspection company Orbotech, beverages company Sodastream, medical device company Mazor, and enterprise data solutions company Attunity. What most of these companies have in common is that they announced that they were being acquired during boom periods for their businesses, with expectations that they would continue to grow as independent companies.

However, when a good offer turns up (and, at least according to some reports, Mellanox had other offers as well) it is hard for a company's management to refuse, given its responsibility to generate value for the shareholders, and knowing that such an offer might not be made again.

There has been a strong trend of consolidation in Mellanox's market in the past few years, and Mellanox itself has had offers in the past. When the Starboard Value fund became a party at interest in Mellanox in 2017, it pointed out that semiconductor company Marvell had expressed interest in buying Mellanox but was repulsed. It could be that it was actually the battle with Starboard (which ended in compromise) that led to change in the thinking of Mellanox founder and CEO Eyal Waldman, who had been perceived as someone who wanted to keep the company independent and who would not be in a hurry to sell it. "Mellanox will remain independent as long as the management thinks that the return on investment and the ability to grow independently are higher than in a sale. We believe that we are able to grow," Waldman said after his company bought EZchip three and a half years ago.

Unlike Waldman, one of the outstanding gainers from the deal, Israeli investment institutions will benefit little. In 2013, Waldman annoyed the Israeli capital market when he delisted Mellanox from the Tel Aviv Stock Exchange, complaining about onerous regulation. Up to that time, Israeli institutions held a fairly large slice of the company, for the simple reason that it was a component of the Tel Aviv Stock Exchange's leading index. When it was delisted from the exchange, Mellanox had a market cap of $2.2 billion. Now, with a valuation of $6.9 billion, only two Israeli institutions are on the list of Mellanox's ten largest shareholders: Clal Insurance, and hedge fund ION.

Published by Globes, Israel business news - - on March 11, 2019

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