Marvell shares drop 12.8% after Lumentum all-stock merger deal

Marvell Technology (MRVL) entered into a merger agreement on Nov. 1 to acquire Lumentum Holdings Inc. in an all-stock deal, a regulatory filing showed on Nov. 2.

Shares fell 12.8% in regular trading as of 3:59 p.m. ET on Nov. 2, from a regular-session close of $196.40.

Under the terms, Merger Sub I would merge into Lumentum, which would then become a wholly owned subsidiary of Marvell. The surviving company would then merge into a second Marvell subsidiary.

Each share of Lumentum common stock would be converted into the right to receive 4.500 shares of Marvell common stock, with cash paid in lieu of fractional shares.

Lumentum Series A convertible preferred stock would convert into Marvell common stock, calculated as the shares of Lumentum common stock each preferred share converts into, multiplied by the exchange ratio.

Holders of the Lumentum preferred stock may instead elect to receive Marvell Series B convertible preferred stock, which the company said is intended to carry the same terms and rights as the Lumentum Series A preferred.

The Marvell board unanimously approved the agreement and the transactions it contemplates, and resolved to recommend that Marvell stockholders approve the charter amendment increasing authorized common shares and the share issuance.

Lumentum equity awards, including stock options, restricted stock units and performance stock units, would convert into equivalent Marvell awards. Performance stock units would become solely time-vesting restricted stock units.

Restricted stock units held by Lumentum non-employee directors would instead be cancelled and converted into the right to receive the common stock merger consideration.

After the merger closes, Marvell would appoint three individuals designated by Lumentum to the Marvell board. Marvell would nominate each of them who is still serving for election at its first annual meeting after the closing.

Completion is subject to adoption of the agreement by Lumentum stockholders and approval of the share issuance and charter amendment by Marvell stockholders. It also requires expiration of the Hart-Scott-Rodino waiting period, other required regulatory approvals, and effectiveness of a Form S-4 registration statement.

The Marvell shares to be issued would be listed on the Nasdaq Global Select Market.

Either party may terminate if the merger is not completed by 11:59 p.m. Pacific Time on Nov. 1, 2027. That date may be extended to Feb. 1, 2028, May 1, 2028 and Aug. 1, 2028 if required regulatory approvals are still outstanding.

Marvell would pay Lumentum a $5.80 billion termination fee if Marvell's board withdraws its recommendation or Marvell terminates to enter a superior proposal. Lumentum would owe Marvell a reciprocal $2.90 billion fee in corresponding circumstances.

Marvell would also owe a $3.20 billion regulatory termination fee in specified cases, including a final, non-appealable legal restraint under the HSR Act or a denied regulatory approval, provided other closing conditions were satisfied at termination.

The companies plan to file a joint proxy statement and prospectus on Form S-4 with the SEC, and the proxy statement will go to stockholders of both companies once the registration statement is declared effective.