Lumentum shares drop 18.7% after Marvell all-stock deal

Marvell (MRVL) said on Nov. 2 that it would buy Lumentum (LITE) in an all-stock transaction with an implied enterprise value of $115 billion, a regulatory filing showed.

Lumentum shares fell 18.7% to $683.83 in regular trading as of 3:59 p.m. ET, from a regular-session close of $840.70.

Lumentum stockholders will receive 4.500 shares of Marvell common stock for each share they own. The exchange ratio is fixed.

The offer implies about $1,132 per Lumentum share and a premium of approximately 23.9%. The premium is measured against each company’s closing share price on Oct. 28, the last trading day before market speculation about a deal began.

After closing, current Marvell stockholders would own about 67% of the combined company on a fully diluted basis. Lumentum stockholders would own about 33%.

Marvell said the combination would join its electrical and optical interconnect, switching and custom silicon technologies with Lumentum’s lasers, optical transceivers and optical circuit switching, or OCS, capabilities.

The companies said they expect the deal to be accretive to Marvell’s non-GAAP earnings per share in the first year after closing. They also expect more than $1 billion in annual run-rate cost synergies, primarily in cost of goods sold.

“AI infrastructure is undergoing a fundamental architectural shift toward optical connectivity, creating an opportunity that comes along once in a generation,” said Chairman and CEO Matt Murphy of Marvell.

“Surging AI data traffic requires rapid hardware innovation, and this combination enhances our ability to deliver next-generation solutions at scale,” said President and CEO Michael Hurlston of Lumentum.

Lumentum makes lasers, modules and optical subsystems for data center connectivity, advanced telecom networks and sensing applications.

Marvell would pay Lumentum a termination fee of $5.8 billion in specified circumstances. Lumentum would pay Marvell $2.9 billion in corresponding circumstances. A separate $3.2 billion regulatory termination fee would be payable by Marvell in certain cases where regulatory approval fails.

Murphy will remain Chairman and CEO of the combined company. Three Lumentum directors, including Hurlston, will join Marvell’s board, which currently has seven directors.

The transaction is expected to close in the first half of calendar 2028. It requires approval from stockholders of both companies, receipt of regulatory approvals and other customary conditions. The agreement can be terminated if the merger is not completed by Nov. 1, 2027, though that date can be extended to Aug. 1, 2028 in certain circumstances.

Separately, Lumentum entered into a tax reimbursement agreement with Hurlston covering excise tax under Section 280G of the Internal Revenue Code. The agreement would be void if the merger agreement is terminated before the merger takes effect.

Marvell also said it expects preliminary revenue for its fiscal third quarter of 2027 to be consistent with prior guidance. It kept the midpoint of that guidance and narrowed the range to plus or minus 2%, from plus or minus 5%.

Qatalyst Partners is lead financial adviser to Marvell, with J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC as financial advisers. Citigroup Global Markets Inc. and Evercore are financial advisers to Lumentum, and Davis Polk & Wardwell LLP is its legal adviser.