Analog Devices, Inc. (NASDAQ: ADI) has agreed to buy fellow communications semiconductor developer Maxim Integrated Products, Inc. (NASDAQ: MXIM). The all-stock deal is worth $21 billion, which values the resulting combined company at more than $68 billion. The companies expect the transaction to close in the summer of 2021, subject to the usual closing conditions.
The agreement calls for Maxim stockholders to receive 0.630 of a share of ADI common stock for each share of Maxim common stock they hold at the deal’s close. Current ADI stockholders will own approximately 69% of the combined company, while Maxim stockholders owning the rest. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. Two Maxim directors will join ADI’s Board of Directors, including Maxim President and CEO Tunç Doluca.
ADI sees Maxim’s position in the automotive and data center markets as complementary to ADI’s broad industrial, communications, and digital healthcare product portfolio. Similarly, Maxim’s applications-focused power management products should complement ADI’s broad market products. Maxim’s product lines include such devices for optical transceivers as laser drivers, transimpedance amplifiers, limiting amplifiers, clock and data recovery (CDR) circuits, serializers, and deserializers. The optical module ICs support Ethernet and SONET/SDH as well as SFF/SFP, SFP+, and QSFP+ standards. Maxim’s device line is particularly deep in PON applications, helped by the 2010 acquisition of Phyworks (see "Maxim acquires optical transceiver chip maker Phyworks").
“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,” commented 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.”
ADI sees the combined company as enjoying expected revenues of $8.2 billion (based on FY19 reported financials for ADI and trailing 12 months ending September 28, 2019 for Maxim) and free cash flow of $2.7 billion on a pro forma basis. The company also expects the deal to be accretive to free cash flow at closing and adjusted EPS in 18 months post-close, with $275 million of cost synergies achieved by the end of the second year. These synergies will derive primarily from lower operating expenses and cost of goods sold, ADI predicts. Additional cost synergies from manufacturing optimization could be realized by the end of the third year after closing.
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