The COVID-19 pandemic seems to have had little effect on mergers and acquisitions in the US. Semiconductor manufacturer Analog Devices Inc (Nasdaq: ADI) is acquiring integrated chip manufacturer Maxim Integrated Products Inc (Nasdaq: MXIM) in a $20.91 billion all-stock deal.
In separate media news, Analog upwardly revised its current-quarter outlook, citing robustness in the industrial and communication sectors. The stock of Analog Devices closed at $118.01, up $0.76 or 0.65% from the prior close. Likewise, the shares of Maxim gained $0.64 or 0.92% to close at $69.93.
For every share of Maxim owned by its stockholders, 0.630 shares of Analog Devices will be offered under the agreement. It is the largest US deal in 2020, intending to increase market share in 5G chip manufacturing and automobiles.
Following the takeover, shareholders of Norwood, Massachusetts-based Analog will have 69% ownership in the combined entity, while the San Jose, California-based Maxim shareholders will have remaining ownership.
The acquisition deal gives a value of $78.43 per share to Maxim, reflecting a premium of roughly 22% to Friday close. The deal is anticipated to be earnings (adjusted) accretive in approximately 18 months after the successful completion of the takeover.
Furthermore, the merged entity will also realize cost savings of $275 million at the end of the second year. Notably, in 2016, Analog acquired semiconductor chip manufacturer Linear Technology Corp for roughly $14.80 billion.
The takeover agreement, which is also the largest for Analog, will result in the creation of a semiconductor chip manufacturing entity worth $68 billion in market cap and enable competing in a better manner with bigger chipmakers such as Texas Instruments.
While the merger is expected to increase the strength of Maxim in data and automobile markets, Analog’s strength is anticipated to increase in the communications, industrial, and digital healthcare sectors.
Analog Devices offers sensors, data converters, signal processing components, and amplifiers to a variety of industries ranging from transportation and healthcare to mobile consumer gadgets and instrumentation. Maxim designs and manufactures analog chips that are employed in the automotive, energy, manufacturing, communications, and healthcare sector.
Two Maxim directors, including CEO Tunc Doluca, will become a member of the Analog Devices board.
Commenting on the acquisition, Analog Devices CEO Vince Roach said: “The skills that we have are becoming increasingly scarce. Now we have 10,000 engineers to point at a $60 billion opportunity. It brings us more scope.”
Roach is confident of closing the deal within a year. Notably, earlier this year, despite the trade tensions between the US and China, Nvidia Corp. received approval from the US regulatory authorities for its acquisition of Mellanox Technologies Ltd., which has its headquarters in the Asian country.
The takeover deal is expected to keep the stock of Analog Devices and Maxim bullish in the short-term.
The price chart of Analog Devices indicates solid support at 115 levels. The stochastic oscillator is in the bullish region. Additionally, the stock is also trading above its 50-day moving average. Therefore, we are anticipating the stock to remain bullish in the days ahead.
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