Marvell (NASDAQ: MRVL) agrees to buy Lumentum for 4.500 of its shares per Lumentum share

What happened

Marvell Technology, Inc. (NASDAQ: MRVL) agreed to buy Lumentum Holdings Inc. in a stock merger. Lumentum common holders will get 4.500 Marvell shares each.

Marvell is paying in its own stock, so its stockholders must approve both the share issuance and a charter amendment that raises the number of authorized shares. The deal is signed but not closed.

The Agreement and Plan of Merger is dated Nov. 1. Marvell reported it in a filing signed Nov. 2. Marvell's board unanimously approved it and found it fair to Marvell and its stockholders. The board also resolved to recommend that stockholders approve the charter amendment and the share issuance.

The deal has two steps. First, Java Merger Sub, Inc., a Marvell subsidiary, merges into Lumentum, which survives as a wholly owned Marvell subsidiary. Soon after, Lumentum merges into a second subsidiary, Java Merger Sub II, Inc. The new Marvell shares will be listed on the Nasdaq Global Select Market.

Key numbers

Metric	Latest	Change	Source
Exchange ratio (Marvell shares per Lumentum common share)	4.500 shares		SEC 8-K
Marvell Termination Fee	$5.8 billion		SEC 8-K
Lumentum Termination Fee	$2.9 billion		SEC 8-K
Regulatory Termination Fee (payable by Marvell)	$3.2 billion		SEC 8-K
Marvell fee as a multiple of Lumentum fee	2.0x		Calculated from SEC 8-K

Read more: Marvell Technology (MRVL) company research

What Lumentum holders get

Holders of Lumentum Series A Convertible Preferred Stock receive Marvell common stock. The amount equals the Lumentum common shares their preferred converts into, multiplied by the exchange ratio. A holder can instead elect one share of a new Marvell Series B Convertible Preferred Stock per Lumentum preferred share. Marvell intends the Series B shares to carry the same terms and rights as the Lumentum preferred, except for what they convert into.

Lumentum stock options, restricted stock units and performance stock units convert into Marvell awards with the same vesting conditions. Each award's share count is multiplied by the exchange ratio. Each option's exercise price is divided by it. Performance units become solely time-vesting restricted stock units. Restricted units held by non-employee directors are cancelled and paid the common stock consideration instead.

Lumentum also gets a say in Marvell's boardroom. Right after the effective time, Marvell will appoint three Lumentum board members to the Marvell board. They must be reasonably acceptable to Marvell. Marvell will nominate each who is still serving at its first annual meeting after that.

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Why it matters

OptimistFi has argued that Marvell earns durable cash by winning multi-year design cycles in data-infrastructure silicon and capturing higher gross margins. A stock-funded merger adds a second test. The case now also depends on Marvell closing and absorbing a deal it is paying for in shares. OptimistFi reads the filing as mixed for that case.

The termination fees show where the risk sits. Marvell owes Lumentum $5.8 billion if its board withdraws its recommendation or it ends the agreement to take a superior proposal. The fee is also due if the deal ends in certain circumstances after an alternative proposal, and Marvell agrees to or completes a deal for a majority of Marvell within twelve months. Lumentum owes a reciprocal $2.9 billion in matching circumstances. By OptimistFi's calculation, Marvell's fee is twice Lumentum's.

Regulatory risk also falls on Marvell. It must pay Lumentum $3.2 billion if the deal ends because it is not completed by the outside date, or because of a final antitrust or foreign-investment restraint or a final regulatory denial. That fee applies only if every other closing condition has been met or can be met at closing.

Signing does not guarantee completion. Closing still depends on stockholder votes at both companies, HSR Act clearance and other regulatory approvals. It also requires no material adverse effect on either company.

What's next

Marvell and Lumentum will jointly file a registration statement on Form S-4 as soon as reasonably practicable. It will include the joint proxy statement for each company's stockholder meeting.

Closing requires Lumentum stockholders to adopt the agreement and Marvell stockholders to approve the share issuance and charter amendment. It also requires expiration or termination of the HSR waiting period, other required regulatory approvals, an effective Form S-4, Nasdaq listing authorization and no legal restraint.

Either company can walk away if the merger is not completed by 11:59 p.m. Pacific Time on Nov. 1, 2027. That date can move to Feb. 1, 2028, May 1, 2028 and Aug. 1, 2028 if required regulatory approvals are still missing.

The next test is SEC effectiveness of the Form S-4 and the two stockholder meetings. A Marvell vote approving the charter amendment and share issuance would clear a main hurdle. A regulatory delay would push the deal toward its outside date.

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