Marvell Technology Group Ltd. MRVL announced a $6 billion acquisition of chip maker Cavium Inc CAVM Monday. Both stocks moved sharply higher.
The acquisition makes sense strategically from a product, R&D and customer perspective, said Curtis. (See Curtis' track record here.)
The deal has financial benefits for Marvell, as it adds much-needed growth, the analyst said.
The combination of the two companies will drive both earnings growth and multiple expansion, Curtis said.
Barclays estimates accretion of 27 cents or 15 percent in 2019 and 33 cents or 17 percent in 2020 using the guided synergies in COGS, SG&A and R&D expenses. Revenue synergies should contribute from 2020 forward, given two- to three-year design cycles. By 2020, Curtis expects that the combined entity is going to reach its long-term operating model, with revenue growing in mid-single digits.
The Price Action
Marvell is trading around 6 percent higher Tuesday and already gained around 6 percent Monday. Cavium is trading around 3 percent higher.
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