“I have mixed feelings about this day. It is a happy and sad day,” Mellanox Technologies founder and CEO, Eyal Waldman, told a gathering of journalists at the company offices in North Tel Aviv, after US gaming and computer graphics giant Nvidia Corp. said it will acquire Israeli chip maker Mellanox Technologies Ltd. for $6.9 billion, making it Israel’s second largest tech deal ever.
As part of the deal the US firm will acquire the Israeli company, which makes chips and high-speed servers and storage switching solutions, for $125 a share in cash, the companies said in a statement earlier Monday, representing a 14 percent premium to the market value of the Mellanox shares.
This is Nvidia’s largest acquisition to date and it paves the way for the US firm to get a better foothold in the growing market for data center components. Mellanox technology helps transfer, faster and more efficiently, information within and between computers.
Waldman, a kite border and a scuba diver who studied electrical engineering at the Technion Israel Institute of Technology, set up Mellanox in 1999, and at a company event just two years ago, spoke about leading the company for the next 20 years.
Mellanox could have continued to survive as an independent firm, Waldman said at the press conference, even as the $470 billion semiconductor industry has seen a large amount consolidation over the past five years. Under the circumstances, though, he said, the sale to Nvidia “was the right thing to do,” for the best interests of the shareholders, the company, its workers, and Nvidia.
“As a public company we owed it to the shareholders,” he said. “We are already at it for 20 years. It is not something that can continue eternally.”
In November 2017, New York activist investor Starboard Value LP acquired a 10.7% stake in Mellanox, urging it to improve its performance and explore a potential sale. The investor’s stake was down to some 5.8% at the time of the sale.
Mellanox will remain as a semi-autonomous entity within Nvidia, Waldman said, and the plan is not to cut back on workers in Israel, but enlarge the team to speed up development of plans, he said. The company employs some 2,000 workers in Israel and 1,000 abroad.
The company also employs workers in Gaza, and the West Bank cities of Rawabi, Nablus, and Hebron, he said, and will continue to do so, he said. “They contribute significantly,” he said, adding that all Mellanox current plans will continue also under Nvidia.
Mellanox employees hold over 7% of company shares, he said, so they will also be benefiting financially from the deal. A spokesman for Mellanox said that Palestinian workers also held options in the firm.
Waldman would not commit as to what his fate would be at the firm going forward. “I don’t know about my future,” he said. “We haven’t decided yet.” He said he was committed to see the deal reach completion, expected for some time in 2019. The transaction has been approved by the boards of directors of the two companies, and is still subject to regulatory approvals and the approval of Mellanox shareholders.
Waldman, who holds a 3.6% stake in Mellanox, is expected to make $250 million from the deal, Calcalist website reported, while Israeli institutional investor Clal Insurance will make $262 million, as it holds a 3.8% stake in the firm. Starboard, which meanwhile sold shares in the firm and today holds a 5.9% stake, will make $407 million, Calcalist said.
Before setting up Mellanox, Waldman worked at Intel and then helped set up Galileo Technology Ltd., which in 2000 was sold to Marvell Technology Group for $2.7 billion. Waldman left Galileo a year before it was sold, because of disagreements with his partners, to set up Mellanox.
When asked in a 2017 interview with The Times of Israel whether he would move onto another project after Mellanox, he said: “I would not want to set up another startup. It is just so hard to set up something new and to succeed.”
The Mellanox name comes from combining a Xerox-sounding name with Millennium, because the firm was founded in 1999, and Ella, the name of his former wife.
When the company went public on the Nasdaq in 2007, raising $100 million, one of the first people he called after the successful IPO was Ella, with whom he was already not together, he said in a 2016 interview.