Nvidia To Buy Mellanox Technologies For $6.9B

Israel-based Mellanox Technologies, Ltd. MLNX reached an agreement to sell itself to U.S.-based Nvidia Corporation NVDA for $6.9 billion, or $125 per share in cash.

What Happened

Mellanox was reportedly in talks with data center chipmaker Xilinx, Inc. XLNX to sell itself in February but talks broke down, Israeli news sources reported. But on Sunday, Mellanox confirmed it will merge with Nvidia to create a new business that will power over 250 of the world's TOP500 supercomputers.

Nvidia will combine "Mellanox's datacetner-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilization and lower operating cost for customers," the press release said.

Why It's Important

Nvidia Founder and CEO Jensen Huang said the emergence of artificial intelligence and data sciences coupled with billions of users is "fueling skyrocketing demand on the world's datacenters." The acquisition of Mellanox will address this surge in demand.

"This combination will foster the creation of powerful technology and fantastic opportunities for our people," said Mellanox Founder and CEO Eyal Waldman.

What's Next

Nvidia's acquisition is expected to be immediately accretive to its non-GAAP gross margin, EPS and free cash flow. The acquisition will be financed through cash on hand and won't have any impact on the previously announced capital return program through the rest of fiscal 2020.

The deal is expected to close by the end of the calendar year and remains subject to regulatory approvals, including the approval by Mellanox shareholders.

Mellanox shares traded higher by 8.6 percent Monday morning, while Nvidia traded up about 1.6 percent.

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