- Opportunity to drive significant growth
at scale in data center and storage markets
- Substantial customer and revenue
diversification
- Transaction enterprise value of $1
billion
- $45 million of identified annualized
cost synergies to be realized by the end of 2017
- $0.60 to $0.70 accretive to Cavium’s CY
2017 non-GAAP EPS
Cavium, Inc. (NASDAQ:CAVM) (“Cavium”), a leading provider
of semiconductor products that enable intelligent processing for
enterprise, data center, cloud, wired and wireless networking, and
QLogic Corp. (NASDAQ:QLGC) (“QLogic”), a leading supplier
of high performance networking infrastructure solutions,
today announced that they have entered into a definitive
agreement for Cavium to acquire all of the outstanding QLogic
common stock for approximately $15.50 per share, comprised of
$11.00 per share in cash and 0.098 of a share of Cavium common
stock for each share of QLogic common stock (valued at
approximately $4.50 based on the volume weighted average Cavium
trading price for the three trading days beginning June 10, 2016),
through an exchange offer. The transaction values QLogic
at approximately $1.36 billion in equity value, inclusive of
approximately $355 million of cash on QLogic’s balance sheet, and
has been unanimously approved by the boards of directors of both
companies.
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The acquisition provides:
- Opportunity to drive significant growth
at scale in data center and storage markets: QLogic's leading
portfolio of advanced connectivity and storage solutions is highly
complementary to Cavium’s extensive portfolio of networking,
compute, and security solutions. The combination enables Cavium to
offer a complete end-to-end offering to customers in Enterprise,
Cloud, Data Center, Storage, Telco and Networking markets. QLogic
adds an incremental $2+ billion market opportunity for Cavium.
- Substantial customer and revenue
diversification: The combined customer base includes market leading
OEMs and end-customers across a broad set of end markets that
diversifies Cavium’s revenue and presents a unique opportunity to
accelerate further growth.
- $0.60 to $0.70 of accretion to Cavium’s
CY 2017 non-GAAP EPS: The combined company will have nearly $900
million in LTM revenue, with strong profitability and cash flow
generation. There are $45 million of identified annualized cost
synergies across COGS and operating expenses expected to be
realized by the end of 2017. The transaction is expected to create
significant value for the shareholders of both companies.
“Today’s acquisition of QLogic is highly complementary
and strategic to Cavium and it creates a diversified pure-play
infrastructure semiconductor leader,” stated Syed
Ali, President and Chief Executive Officer of Cavium.
“QLogic’s industry leading products extend our market position in
data center, cloud and storage markets, and further diversifies our
revenue and customer base. In addition to the compelling strategic
benefits, the manufacturing, sales and operating synergies will
create significant value for our shareholders.”
“QLogic with Cavium is a winning combination for customers and
employees and is financially compelling for QLogic shareholders,”
said Christine King, Executive Chairman of QLogic. “The scale of
operations of a nearly $1 billion revenue business will allow the
combined company to deliver better solutions for customers and
create more career opportunities for employees. Shareholders will
benefit from both the immediate premium, as well as the opportunity
to participate in the long-term value creation from the combined
company’s strong growth prospects.”
The transaction will be funded with a combination of $220
million balance sheet cash, $750 million of committed
financing, which includes $650 million of term loan and $100
million of short-term bridge debt, and $400 million
in new Cavium equity.
Under the terms of the definitive merger agreement, a
wholly-owned subsidiary of Cavium will commence an exchange offer
to acquire all of the outstanding shares of QLogic common stock for
$11.00 in cash and 0.098 of a share of Cavium common stock
(approximately $4.50 per share based on the volume weighted average
Cavium trading price for the three trading days beginning June 10,
2016) for each share of QLogic common stock tendered in the
exchange offer. Upon satisfaction of the conditions to the exchange
offer, and after the shares tendered in the exchange offer are
accepted for payment, the agreement provides for the parties to
effect, as promptly as practicable, a merger, which would not
require a vote of QLogic's stockholders, and which would result in
each share of QLogic common stock not tendered in the exchange
offer being converted into the right to receive $11.00 in cash and
0.098 of a share of Cavium common stock. The transaction is
expected to close in the third quarter of calendar year
2016 pending customary closing conditions, including the
tender into the exchange offer by QLogic stockholders of
shares representing at least a majority of the outstanding shares
of QLogic common stock, and the receipt of relevant
regulatory approvals, including the expiration or termination of
the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act.
J.P. Morgan acted as exclusive financial adviser and provided a
financing commitment to Cavium; Skadden, Arps, Slate, Meagher
& Flom LLP acted as Cavium’s legal
counsel. Qatalyst Partners acted as exclusive financial
adviser to QLogic and O'Melveny & Myers LLP acted as QLogic’s
legal counsel.
Conference Call
Cavium management will host a conference call to discuss details
of the transaction. A live webcast and the accompanying
presentation relating to the transaction will be available in the
"Investors" section of Cavium’s website
at http://www.Cavium.com in advance of the conference
call.
Conference call date: June 15, 2016Time: 2:00pm Pacific
(5:00pm Eastern)Dial in #: US 888-576-4398, International +1
719-325-2281Passcode is 7994851
A replay of the call will be available for one week by dialing
888-203-1112 (US) or +1 719-457-0820 (International) and the
passcode is 7994851. A webcast of the conference call will also be
available in the "Investors" section of Cavium’s website
at http://www.Cavium.com.
About Cavium
Cavium is a leading provider of highly integrated semiconductor
products that enable intelligent processing in enterprise, data
center, cloud, wired and wireless service provider applications.
Cavium offers a broad portfolio of integrated, software compatible
processors ranging in performance up to 100 Gbps that
enable secure, intelligent functionality in enterprise, data
center, broadband and access & service provider equipment.
Cavium’s processors are supported by ecosystem partners that
provide operating systems, tool support, reference designs and
other services. Cavium’s principal offices are in San Jose,
California with design team locations in California, Massachusetts,
India, and China. For more information, please
visit: http://www.Cavium.com.
About QLogic
QLogic is a global leader and technology innovator in high
performance server and storage networking connectivity products.
Leading OEMs and channel partners worldwide rely on QLogic for
their server and storage networking solutions. QLogic is
headquartered in Aliso Viejo, California, with offices in Mountain
View, California, India and Israel. For more information,
visit www.QLogic.com.
Cautionary Note Concerning Forward-Looking Statements
Certain statements made herein, including, for example,
information regarding the proposed transaction between Cavium and
QLogic, the expected timetable for completing the transaction, and
the potential benefits of the transaction, are "forward-looking
statements." These forward-looking statements reflect the current
analysis of existing information and are subject to various risks
and uncertainties. As a result, caution must be exercised in
relying on forward-looking statements. Due to known and unknown
risks, our actual results may differ materially from our
expectations or projections.
The following factors, among others, could cause actual results
to differ materially from those described in these forward-looking
statements: the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; the outcome of any legal proceedings that could be
instituted against QLogic or its directors or Cavium related to the
merger agreement; the possibility that various conditions to the
consummation of the Cavium exchange offer and merger may not be
satisfied or waived, including the receipt of all regulatory
clearances related to the merger; the failure of Cavium to obtain
the necessary financing pursuant to the arrangements set forth in
the debt commitment letter delivered pursuant to the merger
agreement or otherwise; uncertainty as to how many shares of QLogic
common stock will be tendered into the Cavium exchange offer; the
risk that the Cavium exchange offer and merger will not close
within the anticipated time periods; risks related to the ultimate
outcome and results of integrating the operations of Cavium and
QLogic, the ultimate outcome of Cavium's operating strategy applied
to QLogic and the ultimate ability to realize synergies; the
effects of the business combination on Cavium and QLogic, including
the increased level of indebtedness resulting from the transaction,
and the combined company's future financial condition, operating
results, strategy and plans; risks that the proposed transaction
disrupts current plans and operations, and potential difficulties
in employee retention as a result of the merger; the risk of
downturns in the semiconductor and networking industries; the
effects of local and national economic, credit and capital market
conditions on the economy in general; and other risks and
uncertainties described herein, as well as those risks and
uncertainties discussed from time to time in our other reports and
other public filings with the U.S. Securities and Exchange
Commission ("SEC"), including, but not limited to, those detailed
in QLogic's Annual Report on Form 10-K for the year ended April 3,
2016, and Cavium's Annual Report on Form 10-K for the year ended
December 31, 2015 and Cavium's most recent Quarterly Report on Form
10-Q filed with the SEC. The forward-looking statements contained
herein are made only as of the date hereof, and we undertake no
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or
otherwise.
Additional Information and Where to Find It
This document relates to a pending business combination
transaction between Cavium and QLogic. The exchange offer
referenced in this document has not yet commenced. This document
does not constitute an offer to sell or exchange, or the
solicitation of an offer to buy or exchange, any securities, nor
shall there be any sale of securities in any jurisdiction in which
such offer, sale or exchange would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. Cavium will file a registration statement on Form S-4
related to the transaction with the SEC and may file amendments
thereto. Cavium and a wholly-owned subsidiary of Cavium will file a
tender offer statement on Schedule TO (including a prospectus/offer
to exchange, a related letter of transmittal and other exchange
offer documents) related to the transaction with the SEC and may
file amendments thereto. QLogic will file a
solicitation/recommendation statement on Schedule 14D-9 with the
SEC and may file amendments thereto. QLogic and Cavium may also
file other documents with the SEC regarding the transaction. This
document is not a substitute for any registration statement,
Schedule TO, Schedule 14D-9 or any other document which QLogic or
Cavium may file with the SEC in connection with the transaction.
Investors and security holders are urged to read the
registration statement, the Schedule TO (including the
prospectus/offer to exchange, related letter of transmittal and
other exchange offer documents), the solicitation/recommendation
statement on Schedule 14D-9 and the other relevant materials with
respect to the transaction carefully and in their entirety when
they become available before making any investment decision with
respect to the transaction, because they will contain important
information about the transaction.
The prospectus/offer to exchange, the related letter of
transmittal and certain other exchange offer documents, as well as
the solicitation/recommendation statement, will be made available
to all holders of QLogic’s stock at no expense to them. The
exchange offer materials and the solicitation/recommendation
statement will be made available for free at the SEC’s website at
www.sec.gov. Additional copies of the exchange offer materials and
the solicitation/recommendation statement may be obtained for free
by contacting Cavium’s Investor Relations department at (408)
943-7417 or at angel.atondo@cavium.com. Additional copies of the
solicitation/recommendation statement may be obtained for free by
contacting QLogic’s Investor Relations department at (949) 542-1330
or at doug.naylor@qlogic.com.
In addition to the prospectus/offer to exchange, the related
letter of transmittal and certain other exchange offer documents,
as well as the solicitation/recommendation statement, Cavium and
QLogic file annual, quarterly and current reports and other
information with the SEC. You may read and copy any reports or
other information filed by Cavium and QLogic at the SEC’s website
at http://www.sec.gov.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160615006497/en/
Cavium ContactAngel AtondoSr. Marketing
Communications Manager(408)
943-7417angel.atondo@Cavium.comorQLogic ContactDoug
NaylorInvestor Contact(949) 542-1330doug.naylor@QLogic.com
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