Mellanox Technologies, Ltd. (NASDAQ:MLNX) has announced earlier today that it will acquire EZchip Semiconductor Ltd (NASDAQ:EZCH) in a transaction valued at $811 million, driving the shares of both companies in opposite directions. EZchip surged by over 14% in the intraday trading on Wednesday, while Mellanox lost over 6%. However, hedge funds have been bullish on Mellanox, and not so thrilled regarding EZchip, according to our data.
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The all-cash transaction between Mellanox and EZchip, will be covered with cash on hand and $300 million in fully committed financing. Mellanox will acquire each share of EZchip for $25.50, which represents a 16% premium to the stock’s close on Tuesday. Mellanox, which sells solutions that enable servers, computers and databases to interconnect, expects the deal to be immediately accretive to adjusted earnings.
In a conference call about the deal, Eyal Waldman, CEO of Mellanox, said that EZchip, which makes data communications chips for the carrier, cloud and data center network market, will boost the combined company’s addressable market by $2.2 billion to $14.5 billion in 2017, according to Reuters. According to Nomura analyst Sanjay Chaurasia in a research note, Mellanox and EZchip have little overlap in terms of customers, which presents an opportunity for the combined company to grow over the next few years. Waldman is quoted mentioning Huawei, ZTE, Ericsson and Avaya as EZchip customers that have the potential to become Mellanox customers after the deal is completed.