Analog Devices, Inc (ADI), the semiconductor maker, will be buying off rival Maxim Integrated for $20 billion in one of the largest merger deals of the year. It will be an all-stock deal, and the new company will be worth $68 billion.
According to the share trade-off, one Maxim share will equal .63 of an Analog share. Maxim’s valuation at close of Friday stocks was $17 billion. Upon closing of the deal, current ADI stockholders will own approximately 69 percent of the combined company, while Maxim stockholders will own approximately 31 percent.
Analog, with a market value of roughly $46 billion, is based in Norwood, Mass. The companies have held talks on and off for years.
The semiconductor industry is booming with all new technology and innovations turning to chips to keep them connected and carry the load of information. Both Maxim and Analog are major players in analog semiconductors, which are used in areas such as power management for automotive batteries.
Analog and Maxim coming together should worry Texas Instruments, a worthy competitor and a leader in analog semiconductors with a $119 billion market value.
“Today’s exciting announcement with Maxim is the next step in ADI’s vision to bridge the physical and digital worlds. ADI and Maxim share a passion for solving our customers’ most complex problems, and with the increased breadth and depth of our combined technology and talent, we will be able to develop more complete, cutting-edge solutions,” said Vincent Roche, President and CEO of ADI. “Maxim is a respected signal processing and power management franchise with a proven technology portfolio and impressive history of empowering design innovation. Together, we are well-positioned to deliver the next wave of semiconductor growth, while engineering a healthier, safer and more sustainable future for all.”
“For over three decades, we have based Maxim on one simple premise – to continually innovate and develop high-performance semiconductor products that empower our customers to invent. I am excited for this next chapter as we continue to push the boundaries of what’s possible, together with ADI. Both companies have strong engineering and technology know-how and innovative cultures. Working together, we will create a stronger leader, delivering outstanding benefits to our customers, employees and shareholders,” said Tunç Doluca, President and CEO of Maxim Integrated.
ADI was founded in 1983 and is based in San Jose, Calif. Its market position as an analog leader will be enhanced with the deal, and an expected revenue of $8.2 billion1 and free cash flow of $2.7 billion on a pro forma basis. Maxim’s strength in the automotive and data center markets, combined with ADI’s strength across the broad industrial, communications, and digital healthcare markets are highly complementary.
The combined company will be able to offer more complete solutions in sensor to clouds with more than 50,000 products, serve more than 125,000 customers and capture a larger share of a $60 billion total addressable market.
ADI expects the combined company to yield a stronger balance sheet. This transaction is also expected to be accretive to free cash flow at close, enabling additional returns to shareholders.
The deal will close in the summer of 2021, subject to all regulatory approvals. Morgan Stanley served as lead financial advisor to ADI. BofA Securities also served as a financial advisor. Wachtell, Lipton, Rosen & Katz served as legal counsel.
J.P. Morgan served as exclusive financial advisor to Maxim, and Weil, Gotshal & Manges LLP served as legal counsel.