Marvell Stock Slides. Why the Market Hates the Idea of a Lumentum Buyout.

The deal would be by far the largest of a recent spending spree by Marvell. (Dreamstime)

Key Points

Marvell Technology shares fell following a report that the company is in advanced talks to acquire Lumentum Holdings.
Lumentum shares rose after Bloomberg reported the potential acquisition, which could be announced as early as next week.
Investors likely fear significant dilution because Lumentum had an $82.79 billion market valuation compared with Marvell’s $220.67 billion.

Shares in Marvell Technology were dropping early Thursday. Shareholders look to be upset about the company’s reported interest in a shock acquisition of optical-networking peer Lumentum Holdings .

Marvell shares were down 9.7% in premarket trading, while Lumentum was rising 6.0% after Bloomberg reported the two companies were in advanced talks over an acquisition with an announcement potentially as early as next week, citing unidentified sources.

Marvell and Lumentum didn’t immediately respond to Barron’s requests for comments early on Thursday.

Investors likely fear significant dilution if the deal is paid for in Marvell shares. Lumentum had a market valuation of $82.79 billion as of Wednesday’s close, which would be a hefty chunk of Marvell’s own $220.67 billion market cap.

The price tag could end up being even larger. Mizuho Securities analyst Vijay Rakesh noted that large semiconductor deals in the last 15 years have come with an average 38% premium to the undisturbed stock price—which would imply a Lumentum price of more than $1,260 a share, compared with its closing price of $913.95 on Wednesday.

The deal would be by far the largest of a recent spending spree by Marvell. Within the past year Marvell has announced the acquisitions of optical-networking company Celestial AI for $3.25 billion and interconnect technology company XConn for $540 million.

Write to Adam Clark at adam.clark@barrons.com

参与讨论