EZchip Surges to Two-Month High on Acquisition Speculation
EZchip Semiconductor Ltd. (EZCH) surged to the highest level in almost two months in Tel Aviv on speculation Marvell Technology Group Ltd. (MRVL) will buy the Israeli maker of network processors to stave off growing competition.
The stock soared 10 percent to 122.50 shekels, or the equivalent of $32.96, at the 4:30 p.m. close in Tel Aviv, the highest since July 20. The U.S.-traded shares climbed 11 percent to $32.65 on the Nasdaq Stock Market yesterday.
Benchmark Co. and MKM Partners LP said Broadcom Corp. (BRCM)’s plan to acquire semiconductor company NetLogic Microsystems Inc. (NETL) for $3.7 billion will compel Marvell to buy EZchip. Broadcom, the Irvine, California-based maker of communications chips, agreed to buy Santa Clara, California-based NetLogic to gain processors used in data networks, the companies said yesterday in a statement.
“EZchip is in a position of strength right now,” Gary Mobley, an analyst at Benchmark in New York, said by telephone. “Marvell needs to step up its acquisitions to keep the pace. EZchip would be very complementary to their portfolio.”
Ehud Helft, who handles EZchip’s investor relations in New York, and Daniel Yoo, a corporate communications manager at Marvell, declined to comment on a possible acquisition.
NetLogic shareholders will get $50 a share, or 57 percent more than the semiconductor company’s closing price on Sept. 9. Netlogic shares surged 51 percent yesterday, the most on record.
The deal “increases the value that investors should be putting on EZchip given what Broadcom was willing to pay for NetLogic,” Jeffrey Schreiner, an analyst at Capstone Investments in San Diego, California, said by telephone yesterday.
EZchip, whose products allow for quicker data delivery, reported adjusted second-quarter earnings of 33 cents per share, beating the 28-cent average estimate of eight analysts surveyed by Bloomberg. Net income more than doubled to $4.77 million from $2.25 million a year earlier, the Yokneam, Israel-based company said Aug. 3.
Marvell, based in Hamilton, Bermuda, had $863 million in cash and near cash items at the end of the second quarter, according to data compiled by Bloomberg.
“The most logical deal in this space would be Marvell for EZchip,” Daniel Berenbaum, an analyst at MKM Partners in Stamford, Connecticut, wrote in an e-mailed report.
EZchip shares rose to a record high of $37.74 in New York on July 7, and have retreated 13 percent since then. The Bloomberg Israel-US 25 Index fell for a third day, dropping 1.1 percent to 80.21 yesterday. Israel’s TA-25 index advanced for the first time in four days today, increasing 2 percent.
Israel, whose population of 7.7 million is similar to Switzerland’s, has 57 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It is also home to the largest number of startup companies per capita in the world.
Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.
The nation’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation.
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