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The semiconductor manufacturing industry is consolidating further with the news Monday that chipmaker Marvell Technology Group Ltd. has agreed to acquire Cavium Inc. for $6 billion.

The acquisition, expected to close in mid-2018, will enable Marvell to diversify from a large business selling chips for storage gear by expanding into networking equipment with the acquisition.

“As networking becomes increasingly software-defined and integrated onto a system on a chip, networking companies feel the pressure to integrate,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “This is what is happening with Marvell and Cavium.”

Marvell will pay Cavium shareholders $40 a share in cash and about 2.18 Marvell common shares for each share of Cavium stock. That translates to a purchase price of $80 per share, based on Marvell’s stock prices before Nov. 3, when reports of a possible deal first surfaced. Cavium shareholders will own about 25 percent of the combined company.

Marvell’s shares were rising a fraction of 1 percent in early morning trading, while Cavium stock were rising 7 percent.

The transaction will be financed with Marvell’s and Cavium’s own cash on hand plus $1.75 billion in debt financing, including an $850 million bridge loan commitment and a $900 million committed term loan from Goldman Sachs Bank USA and Bank of America Merrill Lynch.

Marvell said the combined company will have annual revenue of about $3.4 billion. “This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” Marvell Chief Executive Matt Murphy, who will be CEO of the combined company, said in a statement.

The deal, which the company said will create an “infrastructure solutions powerhouse,” comes around a year and a half after Marvell found itself targeted by the activist hedge fund Starboard Value LP. In February 2016, Starboard announced it had taken a 7 percent stake in the chipmaker, saying that it believed the firm was “undervalued” and would look to cut costs by restructuring its operations.

Marvell later that year agreed to accept three new directors nominated by Starboard to its board of directors. That move was followed by the appointment of Matt Murphy as the company’s new chief executive officer. Murphy promptly began a large-scale restructuring of Marvell’s businesses, cutting jobs and moving to add new offerings in data centers and wireless communications.

Cavium, which is based in San Jose, California, builds computer chips for networking, security, server and switch devices. The company also recently branched out into interface devices for storage area networks following its $1.3 billion acquisition of Qlogic Corp. last year.

If the deal does go ahead as expected, it would accelerate an ongoing consolidation in the chipmaking industry that was highlighted earlier this month with Broadcom Ltd.’s enormous $105 billion bid for Qualcomm Technologies Inc. That deal would have been the tech industry’s biggest ever, surpassing even Dell Inc.’s $67 billion acquisition of EMC Corp. However, Qualcomm’s board rejected the offer, saying that it undervalued the company and would face regulatory hurdles.

Broadcom itself was reborn in 2016 when Avago Technologies Ltd. acquired Broadcom Corp. for $37 billion. Last week, Broadcom said it would move its headquarters from Singapore back to the U.S., where it lists a headquarters in San Jose. And on Friday, Broadcom closed the $6 billion takeover of Brocade Communications Systems Inc. that was announced a year ago.

Meanwhile, Qualcomm is also seeking to complete its own $47 billion acquisition of Dutch-based semiconductor firm NXP Semiconductors, which was announced more than a year ago but has yet to be finalized. That deal has been dogged by regulatory scrutiny in Europe, and the involvement of another activist investment firm, Elliott Management Corp., which said the terms undervalue NXP. However, a Reuters report Saturday said Japanese regulatory approval is imminent and European authorities could follow suit with some adjustments to Qualcomm concessions by year-end.

Marvell currently has a market capitalization of $10 billion, compared with Cavium’s market cap of $5.2 billion. Cavium’s shares had jumped more than 10 percent since the Journal report. Marvell today also issued a new forecast for third-fiscal quarter results to be reported Nov. 28: revenue of $610 to $620 million and earnings per share between 32 and 34 cents a share before certain costs such as stock compensation, above the midpoint of guidance provided on Aug. 24.

With reporting from Robert Hof

Image: Marvell/Facebook