Analog Devices' $21 Billion Deal

Analog Devices' $21 Billion Deal

over 3 years ago2 mins

Chipmaker Analog Devices announced plans to buy rival Maxim Integrated Products for $21 billion on Monday, and they just know they’re going to be friends forever 💞

What does this mean?

The merger – potentially one of the biggest this year – is an “all-stock” deal. That means Maxim’s shareholders will receive Analog’s shares – 0.63 for each Maxim share they hold – as payment. When all’s said and done, Analog’s existing shareholders will own about 69% of the combined company, and former Maxim investors will own the rest.

Source: Bloomberg
Source: Bloomberg

Both companies produce semiconductors used by almost every industry in the world 🌎 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. Maxim’s specialties in particular are up against stiff competition in the form of rival firm Texas Instruments – and the two companies might be hoping that they’ll be more formidable together than apart.

Source: The Wall Street Journal
Source: The Wall Street Journal

Why should I care?

Maxim’s stock rose 11% on Monday. That’s a long way short of the 22% increase that Analog’s offer implies the shares are worth, which might reflect the widespread concern that regulators will block the deal 🚫 Analog’s share price, meanwhile, fell 4%, likely because there’s a risk that the $275 million the companies are promising they’ll save won’t actually happen. Still, that drop might’ve been a lot bigger if Analog hadn’t raised its revenue forecast for this quarter, thanks to strong demand from customers in the industrial and communications industries.

The semiconductor industry’s seen plenty of deals in recent years, which is no real surprise when you consider the increasingly global scope of an industry that produces chips for every electrical item you can imagine 📱 And the trend now seems to be spreading to its industrial customers too: Swedish engineering giant Alfa Laval agreed on Monday to buy Finnish valve-maker Neles for $2 billion.

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