Analog Devices said on Monday it has agreed to buy rival Maxim Integrated for more than $20 billion in stock to expand its scale and broaden its product portfolio in the market for analog semiconductors.
The all-stock deal would value the combined company at more than $68 billion, creating an analog semiconductor giant that will better compete with market leader Texas Instruments.
Under the terms of the agreement, Maxim shareholders would receive 0.63 of Analog Devices stock for each share they own. Once the deal closes, shareholders in Analog Devices would own about 69% of the combined company, with Maxim stockholders holding the other 31%.
Analog Devices said the deal would combine Maxim’s strength in automotive and data center segments with its footprint in the industrial and communications markets. Once the transaction closes, the combined company will sell more than 50,000 products, giving it the ability to offer more complete solutions. The new company will serve over 125,000 customers and be better positioned to capture a larger share of a $60 billion market.
Analog Devices would also swoop up thousands of Maxim’s hardware engineers in the deal. Between them, the companies employed more than 10,000 engineers and invested $1.5 billion in research and development in 2019. Competition for analog engineering talent has been escalating in recent years, the company said. Once the deal closes, Analog Devices believes that it will be in a better position to lure the industry’s top analog engineers.
A combination would also create a stronger rival to Texas Instruments, the largest analog chip vendor, with a market value of $120 billion. TI sells the widest range of chips to the longest list of customers in the global chip business, and commands nearly one-fifth of the $55 billion analog segment. That is almost double the market share of Analog Devices, its closest rival. Maxim controls about 4% of the analog IC market, according to IC Insights.
“Maxim is a respected signal processing and power management franchise with a proven technology portfolio and impressive history of empowering design innovation,” Vincent Roche, chief executive officer of Analog Devices, said in a statement. “Together, we are well-positioned to deliver the next wave of semiconductor growth.”
Analog Devices said the combined company would have about $8.2 billion in sales annually, and more than 60% of its overall sales will be tied to the industrial and automobile markets, with 21% stemming from wired and wireless communications. Sales of chips slapped on smartphones and other consumer electronics should account for 18% of the combined company’s total business, it added.
Analog Devices said it should be able to slash $275 million in unnecessary annual costs within 24 months of closing the deal, which is expected to occur in mid 2021. Any deal between Analog Devices and Maxim probably need to get through regulators in the US, China, and Europe before it closes. Boards of both companies have approved the deal. Maxim CEO Tunc Doluca plans to join Analog Devices’ board as part of the agreement.
In 2016, Analog Devices agreed to buy out Linear Technology, another major rival in the market for analog semiconductors, and its army of electrical engineers for $14.8 billion.
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