Analog Devices to Acquire Maxim Integrated for $20.9B
In a major move for the power electronics sector this week, semiconductor giant Analog Devices announced its intention to acquire integrated circuit supplier Maxim Integrated for $20.9 billion.
The merger, according to ADI, will create a combined company worth over $68 billion. Analog Devices' announcement stated that the acquisition boosts the company’s market position with an $8.2 billion product portfolio. The merger is expected to yield $275 million in cost synergies over two years after closing.
Maxim carries a dominant position in the analog and mixed-signal IC design and manufacturing space, as well, especially in the automotive and data center markets. B2B sales account for around 72% of the company’s revenue. Per Q3 2020 financials, Maxim Integrated’s top-earning end markets are industrial (30% of revenue), automotive (28%), communication and data center (24%), and consumer (18%).
ADI’s announcement explained that Maxim’s power management applications will add to its growing portfolio of products across markets. Together, the combined companies will serve more than 125,000 customers. The merger will also bring together more than 10,000 engineers and $1.5 billion in R&D investments.
Precursing some of the strategic themes underlying the Maxim acquisition, ADI President and CEO Vincent Roche said in last year's annual report that one of the company’s 2020 priorities is to tackle the increased demand for analog technology in timing with the rise of edge computing. He cited wireless communications, automotive, industrial and healthcare markets as key focus areas.
With the Maxim merger, Analog Devices will be able to broaden its footprint in these markets, expanding sales of analog and mixed-signal integrated circuits, power management systems, radio frequency products, and digital processors and sensors.
Image courtesy of Analog Devices.
In the announcement, Roche touted Maxim’s signal processing and power management portfolio, together with its history of design innovation.
“As market dynamics continuously evolve, this combination will provide us with enhanced breadth of engineering capabilities, depth of domain expertise, and diversity of offerings in our B2B markets. And we expect this transaction to deliver significant value to shareholders through synergies and accretion,” he said in a conference call on July 13.
In the call, Maxim Integrated President and CEO Tunç Doluca reiterated the deal’s value for customers, employees, and shareholders, stating that the acquisition will “strengthen an already robust analog portfolio that will ultimately improve the combined company's competitive position within a great industry.”
“Our complementary offerings and engineering capabilities will deliver the analog and mixed-signal solutions and services that many of our customers are increasingly demanding,” Doluca said.
Image courtesy of Maxim Integrated.
Maxim Integrated has been the subject of potential mergers in the past. In October 2015, Texas Instruments — a key competitor to Analog Devices — was reportedly considering acquiring Maxim Integrated. At the time, Bloomberg reported that Analog Devices was also interested in acquiring Maxim. However, both companies pulled out of the bid because neither party could agree on a deal price, Bloomberg later reported in early 2016.
ADI went on to acquire analog integrated circuit provider Linear Technology Corporation in March 2016 for $14.8 billion. Earlier, in July 2014, ADI acquired Hittite Microwave Corporation in a $2 billion deal to expand its portfolio of RF, microwave and millimeter-wave products.
The ADI-Maxim Integrated transaction is expected to close in summer 2021, pending regulatory approval.
After the announcement on Monday, Analog Devices (NASDAQ: ADI) stock slipped by 5.8%, while Maxim Integrated (NASDAQ: MXIM) increased by 8.1%.