Are Mellanox Shareholders Getting Enough in the Acquisition?

The news that Nvidia Corp. (NASDAQ: NVDA) will acquire Mellanox Technologies Ltd. (NASDAQ: MLNX) lifted shares of the latter on Monday. The transaction has been approved by both boards of directors and is expected to close by the end of calendar year 2019, subject to regulatory approvals and other customary closing conditions.

Under the terms of the agreement, Nvidia will acquire all the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9 billion.

Compared with the 50-day and 200-day moving averages of $95.15 and $86.09, the $125 price point offers premiums of 31.4% and 45.2%, respectively.

Ultimately, this acquisition will unite two of the world’s leading companies in high-performance computing. Together, Nvidia’s computing platform and Mellanox’s interconnects power over 250 of the world’s Top 500 supercomputers and have as customers every major cloud service provider and computer maker.

With Mellanox, Nvidia will be able to optimize datacenter-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilization and lower operating cost for customers.

Jensen Huang, founder and CEO of Nvidia, commented:

The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s datacenters. Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine.

Shares of Nvidia were last seen up 2% at $153.71 Monday morning, in a 52-week range of $124.46 to $292.76. The stock has a consensus price target of $186.53.

Mellanox traded up 8% to $118.51 a share. The consensus analyst target is $113.60, and the 52-week trading range is $65.68 to $119.10.