Marvell Technology, the US chip designer, has agreed to buy Lumentum Holdings, which makes lasers and optical components, in an all-stock deal valuing the company at $115 billion including debt.
The deal aims to create a stronger challenger to Broadcom in the market for equipment that connects computers inside artificial intelligence (AI) data centres.
Marvell will issue 4.5 of its own shares for each Lumentum share, worth about $1,132 each.
That is a 23.9% premium to Lumentum's closing price on 28 October.
The deal values Lumentum's equity at about $102.5 billion.
Marvell shareholders will own about 67% of the combined company, with Lumentum investors holding the remaining 33%.
Marvell designs chips for data centres, networks and storage systems.
Lumentum's lasers and optical parts carry data between servers, graphics processors and switches using light rather than electrical signals.
The companies said demand was shifting from copper cables to optical connections as AI data centres grow larger and need to move more data at higher speeds.
They expect to make more than $1 billion a year in cost savings.
The deal is also expected to increase Marvell's adjusted earnings per share in its first full year after completion.
Both boards have approved the transaction unanimously.
It is expected to complete in the first half of 2028, subject to approval by shareholders and regulators.
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