US tech firm Xilinx mulls buying Israel’s Mellanox – report

If it happens, the deal could value the Israeli maker of storage and switching solutions at about $5.5 billion, CNBC says

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Mellanox headquarters in Yokne'am (Moshe Shai/Flash90)
Mellanox headquarters in Yokne'am (Moshe Shai/Flash90)

US tech firm Xilinx Inc. is mulling an acquisition of Israel’s Mellanox Technologies Ltd., a maker of servers and storage switching solutions, CNBC reported on Wednesday, citing people familiar with the matter.

The US firm has hired Barclays to advise on its bid to acquire Mellanox, the people said, in line with a trend of consolidation in the semiconductor industry.

The deal isn’t imminent and may not happen, the people said, according to CNBC. If it does happen, however, it will be announced sometime in December, the people said.

If a deal takes place, the price could be over $100 a share, valuing the firm at about $5.5 billion, two of the people cited by CNBC said. Mellanox shares closed 4.7 percent higher on Wednesday, after the CNBC report was published, bringing its market value to almost $5 billion. Xilinx, whose shares are traded on the Nasdaq, has a market value of $21.5 billion.

Buying Mellanox would give Xilinx a wider set of products to sell to the data center market, CNBC said.

Last year, New York activist investor Starboard Value LP acquired a 10.7 percent stake in Mellanox in a bid to improve its performance and push it to explore a potential sale.

Last month, Mellanox reported record quarterly revenue, of $279.2 million, up 24 percent, year on year. The “strong” results stemmed from the growth in demand for Mellanox’s high-speed Ethernet adapters, switches and cables, for use in the cloud, in enterprise data centers and by artificial intelligence customers, to maximize the efficiency of computers.

The Yokneam, Israel based-firm said revenue from its Ethernet products was up 59% year on year, as market share grew. The firm projected fourth quarter revenue of $280 million to $290 million.

On October 25, CNBC reported that Mellanox hired a financial adviser to seek a sale, after receiving acquisition bids.

A Mellanox spokesperson didn’t immediately respond to an email seeking comment.

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