Nvidia to buy Mellanox Technologies for $6.8bn

May 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2019 Issue

In a transaction which unites two of the world’s leading companies in high performance computing (HPC) and builds on their long history of collaboration and joint innovation, Nvidia is to acquire Mellanox in a deal valued at approximately $6.9bn.

Under the terms of the definitive agreement, Nvidia will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash. Furthermore, Nvidia intends to fund the acquisition through cash on its balance sheet. Once complete, the transaction is expected to be immediately accretive to Nvidia’s non-generally accepted accounting principles (GAAP) gross margin, non-GAAP earnings per share and free cash flow.

Innovative and well-established, Nvidia’s invention of the graphics processing unit in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionised parallel computing. In comparison, Mellanox, a leading supplier of end-to-end smart interconnect solutions and services for servers and storage, increases data centre efficiency by delivering data faster to applications and unlocking system performance capability.

Together, Nvidia’s computing platform and Mellanox’s interconnects power over 250 of the world’s TOP500 supercomputers and count as customers every major cloud service provider and computer maker. The companies’ collaborative and innovative approach was reflected in their recent contributions to building the world’s two fastest supercomputers, Sierra and Summit, operated by the US Department of Energy.

“The emergence of artificial intelligence (AI) and data science, as well as billions of simultaneous computer users, is fuelling skyrocketing demand on the world’s data centres,” said Jensen Huang, founder and chief executive of Nvidia. “Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant data centre-scale compute engine.”

Once the combination of Nvidia and Mellanox is complete, Nvidia will continue its investment in local excellence and talent, particularly in Israel, which is one of the world’s most important technology centres. Nvidia has also confirmed that customer sales and support will not change as a result of it acquiring Mellanox.

“We share the same vision for accelerated computing as Nvidia,” said Eyal Waldman, founder and chief executive of Mellanox. “Combining our two companies comes as a natural extension of our longstanding partnership and is a great fit given our common performance-driven cultures. This combination will foster the creation of powerful technology and fantastic opportunities for our people.”

Goldman Sachs & Co. LLC served as financial adviser to Nvidia, while Jones Day served as legal adviser. Credit Suisse Group and J.P. Morgan Chase & Co. served as financial advisers to Mellanox and Latham & Watkins, LLP and Herzog Fox & Neeman served as legal advisers.

The transaction has been approved by both companies’ boards of directors and is expected to close by the end of 2019, subject to regulatory approvals as well as other customary closing conditions, including the approval by Mellanox shareholders of the merger agreement.

Mr Huang concluded: “We are excited to unite Nvidia’s accelerated computing platform with Mellanox’s world-renowned accelerated networking platform under one roof to create next-generation data centre-scale computing solutions. I am particularly thrilled to work closely with the visionary leaders of Mellanox and their amazing people to invent the computers of tomorrow.”

Fraser Tenant