Marvell to acquire Lumentum for $115 billion: Why both stocks plunged as “optics” emerged as AI’s next battleground

Announced on 2 November, the major acquisition involves semiconductor giant Marvell acquiring Lumentum, a supplier of optical communications components, at an enterprise value of approximately $115 billion. The transaction will be conducted entirely in shares, with an exchange ratio of 4.5 Marvell shares for each Lumentum share, an implied value of approximately $1,132 per share and a premium of approximately 23.9%. Completion is expected in the first half of 2028, subject to approval by both companies' shareholders and review by regulatory authorities.

Following the acquisition, Marvell is expected to hold approximately 67% and Lumentum approximately 33% of the combined company. Chairman and CEO Murphy is expected to remain with Marvell, while 3 directors from Lumentum are expected to join Marvell's board. The review process following the announcement is expected to take time, and the final value will depend on Marvell's share price.

The companies are seeking to capture demand for high-performance data center connectivity accompanying the expansion of AI. The shift from copper to optical connectivity and the importance of optical components were emphasized. The companies said that the combined market opportunity is expected to be $550 billion and that annual cost savings are expected to exceed ¥100 billion.

According to CNBC, Marvell shares fell approximately 13% and Lumentum shares approximately 19% following the announcement. Factors cited include overall trends in semiconductor stocks, the impact of other companies' earnings outlooks, and a reaction following share-price gains over the past year. Nvidia has invested $2 billion in each company this year, and some views hold that the transaction will further support Nvidia. Going forward, the focus will be on regulatory reviews in each country, shareholder support or opposition, and supply and demand trends for optical components.