Chip company Marvell is buying Lumentum, a specialist in lasers and optical components, for 115 billion dollars in shares. Together they want to deliver electrical and optical connectivity for AI data centres.
Marvell Technology is paying for the Lumentum acquisition entirely in shares. Lumentum shareholders receive 4.5 Marvell shares for each share they hold. That values Lumentum at 115 billion dollars (enterprise value), or roughly 1,132 dollars per share. That is a premium of around 23.9 percent on the closing price of 28 October, the last trading day before there was speculation about a deal.
After the acquisition, Marvell’s current shareholders will own about 67 percent of the combined company, and Lumentum’s shareholders 33 percent. Matt Murphy remains chairman and CEO. Three Lumentum directors, including CEO Michael Hurlston, will join Marvell’s board of directors, which currently has seven members.
AI connectivity
Marvell develops chips for electrical and optical interconnect, network switches and custom processors for AI, known as XPUs, along with the chips that connect to them. Lumentum makes high-speed, high-power lasers, optical transceivers and systems for optical circuit switching, in which light signals are switched without first converting them into electrical signals. The San Jose company also has its own production of compound semiconductors, including indium phosphide.
Together they cover CMOS chips, silicon photonics, compound semiconductors and advanced chip packaging. With this, the companies want to deliver connections over all distances, from links between distributed data centres to links within a single chip package.
Copper is reaching its limit
Marvell and Lumentum justify the deal by pointing to the shift from copper to optical connections in AI infrastructure. Copper connections are physically reaching their limit as the required bandwidth rises rapidly. According to both companies, customers are therefore moving from separate, modular components to highly integrated optical solutions, in which the electrical and optical parts have to be designed together.
“AI infrastructure is undergoing a fundamental architectural shift towards optical connectivity, creating a once-in-a-generation opportunity,” says Matt Murphy, chairman and CEO of Marvell. Michael Hurlston, president and CEO of Lumentum, wants the combination to help customers get to market faster: “Together with Marvell, we will meet our customers’ full interconnect needs.”
Marvell estimates the addressable market of the combined company at 550 billion dollars. It expects more than a billion dollars in annual cost savings. The boards of both companies approved the deal unanimously. Completion is expected in the first half of 2028, after approval by shareholders and regulators.