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KKR Announces 6.8% Stake in Marvell

Zacks Equity Research

Kohlberg Kravis Roberts & Co. L.P. (KKR) declared a 6.8% stake in Marvell Technology Group Ltd. (MRVL), a Bermuda based semiconductor maker, in a recent regulatory filing. In November, a Bloomberg report had mentioned the same though nothing was confirmed officially as of then.

Moreover, Kohlberg Kravis also hinted a proposed business streamlining deal or merger with Marvell Technology. However, the negotiations with regard to this have not begun.

Kohlberg Kravis’ intra-day stock price movement following the stake announcement on Dec 30 depicted a negative market sentiment, with shares sliding almost 1% from the previous day’s closing. However, instead of being disappointed, the price movement can be interpreted in a different way. Let us see how.

The market has been witnessing similar deals by Kohlberg Kravis on a regular basis and hence the recent news is not a surprise to the public. Therefore, the adverse market reaction may not actually be a consequence of the aforementioned stake announcement. Other factors like volatility in the equity market, sluggish economic recovery and intensifying competition could have dampened investor sentiment instead.

Kohlberg Kravis is known for its efficient inorganic growth strategies and has been growing through meaningful acquisitions in the recent past. Marvell Technology’s stable cash position, capital generating ability and a debt free balance sheet make it an attractive option for investment managers like Kohlberg Kravis.

Kohlberg Kravis’ latest stakes, mergers and acquisitions reflect its interest in varied markets ranging form software to industrial equipments. Moreover, the company’s trend of investments depicts its intention to expand globally as well. We believe that the company’s broad diversification strategy will enable it to benefit from enhanced global investment flows.

Currently, Kohlberg Kravis carries a Zacks Rank #3 (Hold). Some better-ranked investment mangers include Brookfield Asset Management Inc. (BAM) and GAMCO Investors, Inc. (GBL)). Both these stocks have a Zacks Rank #1 (Strong Buy).

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