In what is the biggest deal in the United States so far this year, chipmaker Analog Devices Inc has decided to acquire rival Maxim Integrated Products Inc for around $21 billion, with an aim to boost its market share in automotive and 5G chipmaking.
Following the acquisition, ADI will have a combined enterprise value of about $68 billion. It will enable it to compete with larger rivals including Texas Instruments.
In an interview, ADI’s CEO Vincent Roche stated, the combined engineering teams would help the resulting company design more specialized, higher-margin chips for customers such as automakers.
“If you’re doing commodities, you’re at the mercy of the heavy hammer of the procurement folks,” said Roche. “But our game is about getting there first, getting out on the edge and making a real impact at the application level for our customers.”
ADI had approached Maxim in the middle of April when the shares of both companies had started to recover from the coronavirus induced pandemic, said a source. Over the course of the last three months, the deal was negotiated through virtual meetings.
In a joint statement the companies said, the deal added Maxim’s strength in automotive and data center markets to ADI’s broad industrial, communications and digital healthcare segments.
Norwood, Massachusetts-based Analog Devices provides sensors, data converters, amplifiers and other signal processing products to a wide spectrum of industries ranging from healthcare, instrumentation, transportation and portable consumer devices.
San Jose, California-based Maxim designs and manufactures analog chips that are used in cars, manufacturing, energy, communications, healthcare and connected devices.
The deal values Maxim at $78.43 per share, which amounts to a premium of about 22% based on its Friday closing; Maxim’s shares closed up 8.1% at $69.29 on Friday. Analog shares closed down 5.8% at $117.25.
As part of the deal, Maxim’s stockholders will receive 0.630 of Analog stock for each share they own, said the companies in a statement.
The deal is expected to add to adjusted earnings of the combined entity in about 18 months following the close, with $275 million in cost savings by the end of year two, said the companies.
The deal will be subject to regulatory approval from Europe, China and the United States. Both companies believe they do not need to make many divestitures given the limited overlap of their businesses, said sources familiar with the deal.