Why Analog Devices Is Buying Maxim In A Deal Valued At Over $68 Billion

By Amit Chowdhry ● July 16, 2020
  • Analog Devices recently announced a definitive agreement under which ADI is going to acquire Maxim in an all-stock transaction at a deal valued at over $68 billion

Analog Devices (ADI) recently announced that it entered a definitive agreement under which ADI is going to acquire Maxim in an all-stock transaction that values the combined enterprise at over $68 billion. The deal — which was unanimously approved by the Boards of Directors of both companies — is expected to strengthen ADI as an analog semiconductor leader with increased breadth and scale across multiple attractive end markets.

As part of the agreement, Maxim stockholders will receive 0.630 of a share of ADI common stock for each share of Maxim common stock they hold at the closing of the transaction. And upon closing, current ADI stockholders will own approximately 69% of the combined company while Maxim stockholders will own approximately 31%. And the transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Upon closing of the deal, two Maxim directors will join ADI’s Board of Directors, including Maxim President and CEO Tunç Doluca.

The combination of the companies will strengthen ADI’s analog semiconductor leadership position with expected revenue of $8.2 billion and free cash flow of $2.7 billion on a pro forma basis. And Maxim’s strength in the automotive and data center markets, combined with ADI’s strength across the broad industrial, communications, and digital healthcare markets are highly complementary and aligned with key secular growth trends.

The combining of the technologies from both companies will enhance ADI’s depth of domain expertise and engineering capabilities from DC to 100 gigahertz, nanowatts to kilowatts and sensor to cloud with over 50,000 products. And this will enable the combined company to offer more complete solutions, serve more than 125,000 customers and capture a larger share of a $60 billion total addressable market.

The combination of the companies bring together similar cultures focused on talent, innovation, and engineering excellence with over 10,000 engineers and approximately $1.5 billion in annual research and development investment.

The transaction is expected to be accretive to adjusted EPS in 18 months subsequent to closing with $275 million of cost synergies by the end of year two, driven primarily by lower operating expenses and cost of goods sold. And additional cost synergies from manufacturing optimization are expected to be realized by the end of year three subsequent to closing.

The deal is expected to close in the summer of 2021, subject to the satisfaction of customary closing conditions, including receipt of U.S. and certain non-U.S. regulatory approvals, and approval by stockholders of both companies.

Morgan Stanley served as lead financial advisor to ADI. And BofA Securities also served as a financial advisor. Wachtell, Lipton, Rosen & Katz served as legal counsel. J.P. Morgan served as exclusive financial advisor to Maxim, and Weil, Gotshal & Manges LLP served as legal counsel.

Key Quotes:

“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. 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.”

— Vincent Roche, President and CEO of ADI

“For over three decades, we have based Maxim on one simple premise – to continually innovate and develop high-performance semiconductor products that empower our customers to invent. I am excited for this next chapter as we continue to push the boundaries of what’s possible, together with ADI. Both companies have strong engineering and technology know-how and innovative cultures. Working together, we will create a stronger leader, delivering outstanding benefits to our customers, employees and shareholders.”

— Tunç Doluca, President and CEO of Maxim Integrated