Nvidia to buy Israel's Mellanox for $6.8 billion in data center push

[March 11, 2019]    (Reuters) - Nvidia Corp said on Monday it will buy Israeli chip designer Mellanox Technologies Ltd for $6.8 billion in cash, a deal that would help the U.S. chipmaker boost its data center business.

The offer price of $125 per share represents a premium of 14 percent to Mellanox's Friday close.

Mellanox, based in Israel and the United States, makes chips and other hardware for data center servers that power cloud computing. The company had a market capitalization of about $5.9 billion at the end of trading on Friday.

Shares of Mellanox rose 8.8 percent and Nvidia shares fell 1.3 percent in premarket trading.

Nvidia has been pushing more into networking and connectivity with its own tailored solutions and Mellanox would bring further expertise along these lines, Bernstein analyst Stacy Rasgon said.

The deal is being announced after a competitive bidding process where other chipmakers such as Intel Corp and Xilinx Inc also bid for it, according to sources familiar with the matter. Reuters reported about the deal on Sunday.

Intel declined to comment on whether the company had for Mellanox.

The acquisition is a win for the New York-based activist investor Starboard Value LP, which owns a 5.8 percent stake and had reached a deal with Mellanox last year over the composition of its board.

Data center revenue accounts for nearly a third of Nvidia's sales. The chipmaker has grown at a rapid pace in the past few years under CEO Jensen Huang, but a slowdown in China and a fading cryptocurrency craze have started to weigh on its sales in recent quarters.

(Reporting by Supantha Mukherjee and Sayanti Chakraborty in Bengaluru; Tova Cohen in Tel Aviv; Editing by Arun Koyyur)

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