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Analog Devices to acquire Linear Technology

Analog Devices to acquire Linear Technology

Business news |
By Graham Prophet



The move is suggestive of a resurgence of M&A (mergers & acquisitions) activity similar to that which took place in 2014/2015. While the economies of scale in analogue semiconductors are not as compelling as in logic – production being characterised by many disparate product lines and the necessity of maintaining multiple distinct process technologies – companies nevertheless see value in consolidation. The market appears to agree, as it marked the stock of both companies up in the hours following the announcement of the takeover.

 

ADI had previously been rumoured to have made initial explorations around a bid for Maxim Integrated.

 

The ADI/Linear deal has been unanimously approved by the boards of directors of both companies but may take until the end of the first half of 2017 to close. It is subject to regulatory approvals in various jurisdictions, the approval of Linear Technology’s shareholders, and other customary closing conditions.

Assuming the deal goes through it will produce a company with approximately $5 billion of anticipated annual revenues – the two companies had $4 billion of analog IC revenue in 2015 – and will lift Analog Devices into second ranked analog IC vendor behind Texas Instruments, according to IC Insights.

Top ten vendors of analog ICs ranked by 2015 sales revenue. Source: IC Insights.

The combined company will be a strong competitor and leader in a range of analog and power products including data converters, power management ICs, amplifiers, interface and conditioning ICs and RF and microwave products. Analog Devices described the acquisition as “high complementary” adding that it would take Analog Devices’ addressable annual market from $8 billion to $14 billion.

 

ADI also has a significant processor/logic business activity, with its lines of digital signal processors (Sharc, Blackfin) and ‘analogue microcontrollers’ – devices with MCU cores plus analogue signal processing elements.

 

“Our shared focus on engineering excellence and our highly complementary portfolios of industry-leading products will enable us to solve our customers’ biggest and most complex challenges at the intersection of the physical and digital worlds,” said Vincent Roche, CEO of Analog Devices, in statement. Roche will carry on as CEO of the enlarged Analog Devices and David Zinsner, CFO of Analog Devices will also stay in post.

The Linear Technology name will be used as brand for Analog Devices power management products.

Analog Devices plans to fund the acquisition by issuing 58 million new shares of Analog Devices common stock, and $7.3 billion of new long-term debt with the remainder coming from balance sheet cash. As a ‘cash and stock’ transaction, Linear Technology shareholders will receive $46.00 per share in cash and 0.2321 of a share of Analog Devices common stock for each share of Linear Technology common stock they hold at the closing of the transaction.

Linear Technology was formed in 1981 by Robert Swanson and Bob Dobkin who left National Semiconductor to do so. A published quote from Swanson reads, “For 35 years, Linear Technology has had great success by growing its business organically. However, this combination of Linear Technology and Analog Devices has the potential to create a combination where one plus one truly exceeds two. As a result, the Linear Technology Board concluded that this is a compelling transaction that delivers substantial value to our shareholders, and the opportunity for additional upside through stock in the combined company. Analog Devices is a highly respected company. By combining our complementary areas of technology strength, we have an excellent opportunity to reinforce our leadership across the analog and power semiconductor markets….”

Related links

www.analog.com

www.linear.com

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