After buying Mobileye for $ 15 billion and starting its $10 billion investment to set up a new plant in Kiryat Gat, Israel, Intel is preparing to buy its Israeli rival, Mellanox, for $5.5 – 6 billion, according to a Calcalist report.
Apparently, Intel’s offer includes mainly cash and a certain share of payment shares. Intel is not alone in submitting an offer to acquire Mellanox. At least one additional company offered the Company a similar transaction, according to Calcalist.
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It is still not clear whether Mellanox CEO Eyal Waldman and the company’s board of directors will be satisfied with the offers they received, and will apparently try to demand a higher price for Mellanox.
In October 2018, CNBC reported that Mellanox had hired an investment bank following requests from several companies to buy the company and that the talks were in the initial stages.
The Mellanox share responded with aggressive rises to more than $90, reflecting a company value of $5 billion.
However, in light of the quiet that has prevailed since then, and in parallel with the appointment of a new CFO in Mellanox, the company’s share has since fallen to $4.4 billion, meaning that Intel’s acquisition offer is 36% higher than its market value of $120.
Among the companies interested in acquiring the multinational supplier of computer networking products are Broadcom, IBM, Oracle, Nvidia, and Xilinx. Marvell also bought Mellanox two years ago, but was rejected by the board of directors and acquired Mellanox’s rival, Cavium, for $6 billion.
Mellanox develops and markets communications equipment for fast data transfer using Ethernet and InfiniBand technologies. Intel is a competitor but also a customer.
In the past, Waldman said that competition with Intel does not worry him because Mellanox’s products are better. In 2017, Mellanox appointed Shlomit Weiss, a former Intel executive, to a senior vice president for chip development.
After Intel acquired the driving systems company Mobileye in March 2017, its founder, Amnon Shashua, became Intel’s senior vice president.
Mellanox has been shaken in the past year when the activist Starboard Fund entered into a substantial holding in its shares. The fund raised complaints about its relatively low operating profitability and began putting pressure on Waldman to improve the company’s performance and replace its members.
In the compromise reached, Starboard appointed two representatives on the board of the company. As far as is known, Starboard supports the acceptance of offers and the sale of the company.
According to Calcalist, a source at Intel, who was involved in negotiations with the Ministry of Finance to invest in the construction of the plant in Kiryat Gat, said at one meeting, that Intel is interested in acquiring another large company in Israel and is negotiating with such a company. The official did not elaborate on the company in question, but according to estimates, it is indeed Mellanox.