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(Reuters) -German chipmaker Infineon Technologies said on Monday it would buy Marvell Technology's automotive ethernet business for about $2.5 billion in cash, to expand its microcontroller segment.
The automotive ethernet business, which will become a part of Infineon's automotive division, is expected to generate revenue between $225 million and $250 million in calendar year 2025, with a gross margin of nearly 60%.
Infineon has secured acquisition financing from banks, will incur additional debt to finance the deal, and expects it to close this year.
"Marvell has made it abundantly clear that they are an AI- first company, focusing on both custom silicon and networking," said C.J. Muse, senior managing director, Cantor Fitzgerald.
"With that as a backdrop, it would make sense that automotive ethernet would be less of a focus and therefore something they would be willing to sell at the right price. At 10x sales, that's a fairly attractive price."
Marvell's shares rose nearly 4% in extended trading on Monday. The company had projected its first-quarter revenue to align with Wall Street estimates last month.
J.P.Morgan analysts attributed the tepid forecast to "a slowdown in on-premise data center products", referring to weaker demand for ethernet cables and fiber channels that transfer data across servers.
The chip sector is also expected to take a hit from the tariffs imposed by President Donald Trump on countries, including China.
On April 2, Trump introduced a baseline 10% tariff on all U.S. imports and additional reciprocal duties on major trading partners. China faced an extra 34% tariff, leading to a total new levy of 54%, which triggered China's retaliation with a 34% duty on all goods.
Infineon slightly revised up its full-year revenue forecast in February due to expected currency effects after a fall in fiscal first-quarter revenue was not as bad as expected.
(Reporting by Vallari Srivastava, Jaspreet Singh in Bengaluru and Juby Babu in Mexico City; Editing by Alan Barona and Mohammed Safi Shamsi)
