Analog Devices to acquire Maxim Integrated, strengthening its analogue semiconductor leadership
14 July 2020
Semiconductor company specialising in data conversion, signal processing & power management, Analog Devices (ADI) has announced that it is to acquire Maxim Integrated Products, which focuses on IC technologies to make systems smaller & smarter, with enhanced security & increased energy efficiency, in an all stock transaction that values the combined enterprise at over $68 billion.
The transaction, which puts Maxim's value at around $21bn, has been unanimously approved by the Boards of Directors of both companies and will strengthen ADI's analogue semiconductor leadership through increased breadth and scale across multiple end markets – with Maxim's strength in automotive and data centre markets complementing ADI’s strength across broad industrial, communications and digital healthcare markets.
According to ADI, the move will result in increased scale and diversification, positioning it to capitalise on key secular growth trends, and enhanced domain expertise and breadth of engineering capabilities will enable it to develop more complete solutions to solve customers’ most complex problems.
Under the terms of the agreement, Maxim stockholders will receive 0.630 of a share of ADI common stock for each share of Maxim common stock they hold at the closing of the transaction. Upon closing, current ADI stockholders will own approximately 69% of the combined company, while Maxim stockholders will own approximately 31%.
“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 & 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 & CEO of Maxim Integrated.
Upon closing, two Maxim directors will join ADI’s Board of Directors, including Maxim President & CEO, Tunç Doluca.
Compelling strategic & financial rationale
• Industry leader with increased global scale: The combination strengthens ADI’s analogue semiconductor leadership position with expected revenue of $8.2 billion and free cash flow of $2.7 billion on a pro forma basis. Maxim’s strength in the automotive and data centre markets, combined with ADI’s strength across the broad industrial, communications and digital healthcare markets are highly complementary and aligned with key secular growth trends. With respect to power management, Maxim’s applications-focused product offerings complement ADI’s catalogue of broad market products.
• Enhanced domain expertise & capabilities: Combining best-in-class technologies will enhance ADI’s depth of domain expertise and engineering capabilities from DC to 100 gigahertz, nanowatts to kilowatts and sensor to cloud, with more than 50,000 products. This will enable the combined company to offer more complete solutions, serve more than 125,000 customers and capture a larger share of a $60 billion total addressable market.
• Shared passion for innovation-led growth: The combination brings together similar cultures focused on talent, innovation and engineering excellence with more than 10,000 engineers and approximately $1.5 billion in annual research & development investment. The combined company will continue to be a destination for the most talented engineers in multiple domains.
• Earnings accretion & cost savings: This transaction is expected to be accretive to adjusted EPS in 18 months subsequent to closing with $275 million of cost synergies by the end of year two, driven primarily by lower operating expenses and cost of goods sold. Additional cost synergies from manufacturing optimisation are expected to be realised by the end of year three subsequent to closing.
• Strong financial position & cash flow generation: ADI expects the combined company to yield a stronger balance sheet, with a pro forma net leverage ratio of approximately 1.2x4. This transaction is also expected to be accretive to free cash flow at close, enabling additional returns to shareholders.
With both companies currently selling more than half of their component volume through distribution channels, the impact of any post-acquisition consolidation or re-alignment is potentially substantial.
Timing & approvals
The transaction is expected to close in the summer of 2021, subject to the satisfaction of customary closing conditions, including receipt of US and certain non-US regulatory approvals, and approval by stockholders of both companies.
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