Marvell Technology Group Ltd. (MRVL - Get Report)  had opportunities to sell itself in 2016 for a premium but the chipmaker's activist-backed board believed at the time that such a deal would have undervalued the company over the long-term, people familiar with the situation said.

The possibility that Marvell could have sold itself last year comes as the chipmaker on Monday announced it has acquired Cavium Inc. (CAVM  in a $6 billion purchase that came roughly a year-and-a-half after activist investor Starboard Value LP's Jeff Smith reached a settlement with the company. In April, 2016, as part of a deal with Starboard, Marvell agreed to reshuffle its boardroom, bringing five new directors onto what ultimately became a nine-person board.

That settlement installed Peter Feld, a Starboard managing member, and Rick Hill, a former CEO and director at Novellus Systems Inc., onto Marvell's board. Under pressure from Starboard, Marvell removed CEO Sehat Sutardja and President Weili Dai, a husband-and-wife duo that founded the company. Feld chaired a Marvell executive search committee that later brought on a new CEO, Matt Murphy.

The Starboard Value Marvell board shakeup left analysts and observers with the distinct impression that the chipmaker could become a serious acquisition candidate. Hill, a Starboard-backed director who became Marvell's chairman, had been involved in M&A in the past. He was CEO of Novellus Systems until it was acquired by Lam Research Corp. in 2012.

However, Starboard Value's goals at Marvell were not focused on having Marvell sold. The people familiar with the situation noted that there were opportunities to sell Marvell in 2016 at prices that were material premiums to the company's then much-lower share price. One observer noted that the Marvell board rejected potential bids, arguing that offers "in the mid-teens" undervalued the company, which now trades at roughly $23 a share.

Instead, Starboard was pushing to bring in significant improvements in operating performance, revenue growth and profitability, a person familiar with the situation said. Since the April Starboard settlement, Marvell has cut 17% of its global workforce, removed $250 million in costs and divested some non-core businesses leading to a hike in operating performance for 2017.

The improvements have helped drive Marvell's share price up from around $10.50 a share in April 2016 to trade recently at $23.14 a share, significantly higher than the $7.52 to $8.70 a share price Starboard acquired an original 6.7% stake for in late 2015 and early 2016.

Starboard Value's Jeff Smith
Starboard Value's Jeff Smith

In addition, it is very likely that Starboard supported Marvell's transformational Cavium acquisition, since Feld, the activist-backed directors and entire board unanimously approved the deal.

A number of analysts have hiked their price targets for Marvell in light of the deal. For example, Benchmark Co. analysts on Nov. 20 upgraded Marvell from a hold to a buy and issued a $30 a share price target on the chipmaker's shares, up from a previous price target of $17 a share.

Could Marvell still consider a sale of the business in the months to come? It has to be a possibility considering all the M&A in the chipmaker space, especially Broadcom Ltd.'s (AVGO - Get Report)  unsolicited $130 billion bid to buy Qualcomm Inc., (QCOM - Get Report)  which is in the midst of completing its NXP Semiconductor (NXP - Get Report)  acquisition.

In addition, Starboard's record in semiconductors suggests that a deal could still happen down the road. Starboard has filed activist 13D filings on twelve companies in the semiconductor space, including an activist filing reporting a 9.8% stake on Monday evening in Mellanox Technologies Ltd. (MLNX - Get Report) , a chipmaker. Some of these have sold for substantial premiums under pressure from Starboard, including TriQuint Semiconductor Inc., which was sold to RF Micro Devices Inc. in 2014 for $1.6 billion. 

A Marvell spokesperson did not return a request for comment.

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