April 17—Nvidia revealed yesterday that Chinese officials have approved its $6.9 billion acquisition of Mellanox, a deal it announced in March 2019. The two corporations plan to finish their tie-up on April 27 now that they have cleared this last regulatory hurdle.
The merger will add hardware and software products to Nvidia’s portfolio and expand its addressable market by over $60 billion.
Why Nvidia’s Mellanox Acquisition Took Longer Than Expected
Last spring, Nvidia successfully outbid Intel and Microsoft to purchase the Israeli manufacturer and announced a late 2019 acquisition close. However, because Nvidia and Mellanox operate internationally, they needed merger approval from regulators in China, Europe, Mexico, and the U.S. Although the two firms received regulatory go-ahead’s from most countries in which they do business, China’s approval remained in question.
Zacks Equity Research reports market analysts believed Sino officials might nix the deal because of lingering trade tensions between the U.S. and China. In 2018, Qualcomm scrapped a $44 billion takeover of NXP Semiconductors NV because the Asian superpower delayed sanctioning the deal. That same year, Qualcomm rejected a $117 billion acquisition bid from Broadcom in part due to objections from U.S. regulators.
Ultimately, Beijing opted not to block the $6.9 billion transaction, possibly because the Sino-American trade war significantly de-escalated last December.
Nvidia HPC Plans Can Proceed
Currently, Nvidia is best known for producing best in class graphics cards, but recently, the firm has worked to expand its footprint in the high-performance computing (HPC) space.
The corporation’s acquisition of Mellanox is a big part of its repositioning. The Israeli company produces a range of server hardware and maintained data center contracts with Alibaba, JD.com, Baidu, and Dell. By making the purchase, the chipmaker can pursue exascale projects as it now possesses high-level CPU and GPU resources.
Zacks notes the Nvidia-Mellanox merger will give the combined company access to the $50 billion HPC market and the $11 billion high-speed networking sector.
Nvidia also announced itself as a player in next-generation telecommunications with its appearance at last year’s Mobile World Conference. At the event, the corporation unveiled an edge supercomputing platform that provides 5G-enabled, artificial intelligence-enhanced Internet of Things services. The company also detailed its smart city infrastructure offerings and advanced virtualization radio area network solutions.
With its takeover of Mellanox finally proceeding and its supply chain at near full strength despite COVID-19 related disruption, Nvidia should have a very productive year.