Marvell: Are Acquisition Rumors True?

Shares of technology company Marvell Technology (MRVL), spiked on Friday as rumors swirled about a potential acquisition of the firm at a really sweet premium.

Eric Savitz wrote on the Tech Trader Daily:

Marvell shares are sharply higher this morning on rumors the company might be a takeover target, according to trading sources. The talk is that Texas Instruments (TXN) or private equity firm Silver Point Partners might make an offer; the rumored bid price is $24 a share. That would value the company at $14.4 billion. I repeat: this a rumor, of uncertain validity, so treat it accordingly.

Not only did the stock price jump but trading in Marvell options also surged. Andrew Wilkinson wrote on SeekingAlpha.com:

With  80,000 options already in play Marvell ranks early among the most active tickers on our platform, as calls are heavily bought in excess of open interest at the 17.50 strike in the June and July contracts. Premiums are more than 150% higher today at both these strikes.

We have written about the turnaround taking place at Marvell, and in general we would rather see the turnaround play out, than for the company to accept a buyout offer. However, in this case we are taking about a potential premium over 40%. Giddy up! Take the money and run.

Keep in mind that this is only a rumor. Investors should keep an eye on how Marvell options trade over the next few days to try and get an idea if the rumor has any legs. It wouldn’t be the first time that option traders knew something was going on and loaded up the boat for a trade.

Disclosure: Author’s fund has a position in MRVL. He has no position in any other stock mentioned as of June 15, 2008.

Comments

[False Profit]

Just one of those rumors thrown around to pump up a stock already at an inflated value. MRVL is trading at 30x GAAP EPS - why would anyone pay a premium to buy it?

[deals]

I agree that Marvell is not a good deal at this time for Texas instruments, considering the rumored price.