Marvell Technology Group Ltd. (NASDAQ: MRVL) is having an incredibly strong day in the market today, and for good reason. There’s chatter around the web and Wall Street alike that the company may be announcing a merger relatively soon. Today, we’ll talk about that potential merger, how the market is reacting to the news, and what we’ll be watching for with regard to MRVL ahead.
MRVL Gains On Merger “Rumor”
At the moment, most outlets online are talking about a rumor that Marvel Technology Group may end up in a merger. However, I don’t believe that this is a rumor. At the end of the day, rumors are not based in fact. Instead, they are made up stories designed to get a rise out of an audience. In the market, rumors are generally difficult to track back to a single source and simply aren’t based in fact. However, this time around, the story is different.
Last week, the Wall Street Journal reported that MRVL is in talks with Cavium Inc with regard to a merger between the two companies. This is the first bit of evidence that this is not a rumor. After all, the Wall Street Journal is one of the most trusted publications online today, and if they started to blatantly spread rumors, they would lose their reputation.
Not to mention, analysts are starting to weigh in on the merger, something that we don’t see along with the average market-based rumor. In fact, KeyBanc Capital Markets’ analyst, Michael McConnell said that Marvell is likely to present an all-cash offer of $82 per share, buying the company outright and imploying a premium of about 20%.
Not to mention, the merger would actually be a pretty good thing for MRVL. After all, if the merger took place, it would help the company with regard to improving gross margins, earnings per share networking exposure and more. Not mentioning the reduced exposure to the HDD storage market that the merger would create for the company.
At the end of the day, when we see rumors of potential mergers and takeovers in the market, we tend to be very skeptical. That’s because it’s so rare to come across what is being called a rumor that comes from a great source and comes with credibility as we’re seeing with the rumor surrounding Marvell Technology Group. In this case, the rumor simply isn’t likely a rumor. Chances are that MRVL and Cavium are sitting at the negotiations table as we speak and that we will hear a deal come down the line relatively soon.
What We’re Seeing From The Stock
As is normally the case when positive news is released regarding a publicly traded company, MRVL is doing incredibly well in the market today. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (11:33), MRVL is trading at $20.22 per share after a gain of $1.71 per share or 9.24% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on MRVL. In particular, we’ll be watching for any news associated with the potential merger and we will report it to you as it breaks!
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