Chip companies strike $21 billion megamerger

Daniel Fowler
July 13, 2020

Semiconductor maker Analog Devices (NASDAQ:ADI) sealed the United States' biggest merger this year on Monday, buying rival Maxim Integrated Products (NASDAQ:MXIM) for around $21 billion in a move to expand market share in automotive and 5G chipmaking. More specifically, Analog has tended to focus on sensors and signal-processing products, while Maxim is more geared toward microchips for the autos and industrial industries. At £98.84 per share, the American multinational is roughly 3% up year to date in the stock market after recovering from a low of £65.28 per share in March.

The Maxim takeover would boost Analog's presence in the auto market, which represented about 16% of its sales past year, a person with knowledge of the deal told the Financial Times.

The offer, as per the sources, values Maxim at £62.26 a share that translates to a roughly 22% premium on the price at which its stock closed the regular session on Friday.

In case the discussions are fruitful, and an agreement is reached, it could lead to the biggest merger transaction in the USA market in this year, which has mostly been marred by the coronavirus outbreak and the resulting slowdown.

The deal is expected to be accretive to free cash flow at closing and adjusted EPS in 18 months post close.

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The Wall Street Journal first reported Sunday that the two companies were nearing such a deal. The company has more than 7,000 employees, 35,000 customers globally and as of 2019 had $2.31 billion in sales. Analog Devices recently won the Transatlantic Growth Award.

"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", Analog President and CEO Vincent Roche said in a statement.

Maxim's stock rose 11% on Monday.

Norwood, Massachusetts-based Analog has a market value of US$46 billion and also has a large office in the San Jose area. Separately, ADI raised its third-quarter guidance, saying it now expects revenue of about $1.45 billion, plus or minus $30 million.

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