Cavium to Buy Networking Products Company QLogic

Semiconductor products company Cavium Inc. has agreed to buy QLogic Corp., a maker of adapters, switches and other networking products.

The deal, which has an enterprise value of about $1 billion, will enhance Cavium's data-center and storage business and is projected to boost 2017 adjusted earnings per share by 60 cents to 70 cents.

The cash-and-stock deal has an equity value of about $1.36 billion, inclusive of about $355 million of QLogic's balance sheet cash, based on Cavium's stock price in recent days. It is valued at about $15.50 a share, a 14% premium to QLogic's Wednesday closing price.

Cavium said the deal would provide "substantial customer and revenue diversification."

The company expects to realize $45 million of synergies by the end of 2017.

In a tender offer, each QLogic share will be exchanged for $11 in cash and 0.098 of a Cavium share. The deal is expected to close during the third quarter.

Cavium products, which include ThunderX processors and XPliant switches, are used for networking, data center and wireless applications. Cavium's revenue last year was $412.7 million.

QLogic's revenue was $458.9 million for its fiscal year ended April 3.

Margin pressure has contributed to a wave of consolidation in the semiconductor industry. Avago Technologies Ltd. bought Broadcom Corp. for $37 billion, forming Broadcom Ltd., while Intel Corp. purchased Altera Corp. for $16.7 billion.

Cavium completed the purchase of Xpliant Inc. in early 2015.

Write to Josh Beckerman at [e-mail]

(END) Dow Jones Newswires

June 15, 2016 23:25 ET (03:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.