As Chip Makers Consolidate, Marvell to Buy Cavium in $6 Billion Deal

Chip making is increasingly a competition between ever-larger companies, a trend that was highlighted by the announcement on Monday that Marvell would take over Cavium in a $6 billion deal.

The deal would create an industry giant with annual revenue of $3.4 billion, and comes amid fears that a rush of consolidation has left the chip industry too heavily concentrated.

Monday’s announcement, for example, follows Broadcom’s $105 billion bid for rival chip maker Qualcomm. The offer was rejected, with Qualcomm arguing it was too low, setting the stage for a takeover battle.

Qualcomm is itself in the process of taking over NXP Semiconductor, while Broadcom recently announced the completion of its takeover of Brocade Communications.

The latest deal would involve Marvell, which has its headquarters in Bermuda, buying Cavium, based in San Jose, Calif. The resulting company will produce chips used in hard disk controllers, data processors and network channels. The companies expect to save as much as $175 million within 18 months of closing the deal.

“This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” Matt Murphy, Marvell president and chief executive, said in a news release.

Mr. Murphy, who joined in 2016 after his predecessor was ousted following a battle with the activist investor Starboard Value, will lead the combined company, while Syed Ali, Cavium’s chief executive, will become a strategic adviser and join Marvell’s board.

The executives said the deal would broaden their range of offerings, bringing Marvell’s digital storage together with Cavium’s network and communications products.

“Individually, our businesses are exceptionally strong, but together, we will be one of the few companies in the world capable of delivering such a comprehensive set of end-to-end solutions to our combined customer base,” Mr. Ali, who helped found Cavium, said.

The transaction is expected to close in mid-2018, but is subject to regulatory approval.

Goldman Sachs and Hogan Lovells advised Marvell, while Qatalyst Partners, JPMorgan and Skadden, Arps, Slate, Meagher & Flom advised Cavium.