Goldman Sachs: Marvell plans all-stock acquisition of Lumentum, betting on AI networks' shift to optical connectivity

What are the transaction terms?

On 2 November, Marvell and Lumentum announced a definitive acquisition agreement in an all-stock transaction. Lumentum shareholders will receive 4.5 Marvell shares for each 1 share they hold.
At the prices at announcement, the transaction represents an enterprise value of approximately 125 billion dollars for Lumentum. After closing, existing Marvell shareholders are expected to own approximately 67% of the combined company, and existing Lumentum shareholders approximately 33%.

Management believes that as AI network connections shift from copper cables to optical solutions, the two complementary product portfolios can be more closely co-designed to provide more integrated end-to-end connectivity solutions and accelerate time to market.
Management expects the combined company's 2030 serviceable market to expand from approximately 490 billion dollars for the two companies operating independently to approximately 550 billion dollars; the additional approximately 60 billion dollars in opportunity comes from optical connectivity solutions such as NPO and CPO.
With AI-driven demand for components exceeding supply, the company believes combining Lumentum's in-house indium phosphide manufacturing capacity with Marvell's supply chain partner network can help strengthen supply assurance and manufacturing flexibility.

Marvell expects the transaction to be accretive to its non-GAAP earnings per share one year after closing, supported by faster growth, margin expansion and more than 1 billion dollars in annualized cost synergies, with savings coming primarily from cost of sales.
Goldman Sachs maintains no rating on Marvell. Goldman Sachs and its affiliates are acting as financial adviser on an announced strategic matter involving Marvell.