KKR sees the Hamilton, Bermuda-based company as undervalued and has discussed its holding with the company’s co-founders, Chief Executive Officer Sehat Sutardja and his brother Pantas, said one person, who asked not to be identified as the information is private. One scenario New York-based KKR is considering is a leveraged buyout of Marvell, though no such deal is imminent, the person said.
Marvell’s ability to generate cash, its lack of debt and ability to borrow cheaply make the company a good candidate for a transaction, according to Doug Freedman, an analyst at RBC Capital Markets in San Francisco. The large stake still held by the founders would also simplify the process, he said.
“The fundamentals at Marvell are some of the best in the semiconductor industry right now,” said Freedman, who recommends buying the stock. “It is very tightly held by ownership, which makes it an easier leveraged buyout.”
A 5 percent stake, which would have to be publicly disclosed, is valued at about $296 million, based on Marvell’s market value of $5.9 billion yesterday. The Sutardja brothers own over 20 percent of the company, while Greenlight Capital Inc., the hedge fund run by David Einhorn, owns another 9 percent, according to data compiled by Bloomberg.
Kristi Huller, a spokeswoman for KKR, and Sukhi Nagesh, a spokesman for Marvell, declined to comment. Sehat Sutardja didn’t reply to a phone call and e-mail seeking comment.
The company has $1.7 billion of cash and equivalents, it said in August. It has no debt and reported net income of $61.8 million on $807.1 million of sales in its latest quarter.
Marvell, which designs processors used in communications equipment and mobile phones, has gained 65 percent this year through yesterday. Shares tumbled late in 2012, when a federal jury in Pittsburgh ordered the company to pay a $1.17 billion award for infringing Carnegie Mellon patents covering integrated circuits.
The decision, the fourth-largest U.S. patent verdict ever according to data compiled by Bloomberg, was upheld by a judge in September. Marvell has pledged to appeal the decision.
KKR, which had $90.2 billion in assets under management at the end of the third-quarter, has announced only one technology related takeover in the last year, data shows. The company in September agreed to buy Mitchell International Inc., a company that provides technology to insurance firms and collision-repair facilities.
KKR’s biggest technology deal was its $27.5 billion buyout of First Data Corp., a debt- and credit-card processor, in 2007. Its technology holdings include financial-software supplier SunGard Data Systems Inc. and chipmaker NXP Semiconductor NV. (NXPI)