LONDON, UK / ACCESSWIRE / July 28, 2016 / Active Wall St. blog coverage looks at the headline from Analog Devices Inc. (NASDAQ: ADI) as it entered into a definitive agreement with Linear Technology Corp. (NASDAQ: LLTC) on July 26, 2016 to acquire the latter in a cash-and-stock for $14.8 billion. Analog Devices, which is aiming to reinforce its leadership in analog and power semiconductor market, agreed to pay Linear Technology $60 per share, 24% more than its closing price on July 25, 2016. The deal is expected to come through in the first half of 2017. The deal comes just after SoftBank Group Corp.'s $32 billion acquisition of British chip designer ARM Holdings announced on July 18, 2016. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Analog Devices is Apple Inc.'s pet
Founded in 1965 in Norwood, Massachusetts, Analog Devices' biggest customers is Apple Inc. Earlier in 2014, Analog Devices acquired Hittite Microwave Corp. for $2 billion. Analog chips help smart-phones in managing radio signals. The purchase of Linear Technology will give the firm access to the market for chips that control power in devices. Though the cost of a single chip is less than $1, it yields high profit margins as the production is done in factories that were paid off years ago.
Eyeing to close in the gap with market leader
Analog Devices is looking to close in the gap with market leader Texas Instruments Inc., the largest producer of the semiconductors that perform basic tasks in electronics. Texas Instruments' move to acquire National Semiconductor Corp., an updating production firm has helped reduce manufacturing cost and develop more products.
Analog Devices estimates the combined firm has the potential to generate $5 billion in sales annually and a valuation of about $30 billion.
"The combination brings together two of the strongest business and technology franchises in the semiconductor industry," Vincent Roche, Analog Devices' president and CEO was quoted as saying in a press release.
Meanwhile, Linear Technology's executive chairman and co-founder Bob Swanson said, "Together, Linear Technology and Analog Devices will advance the technology and deliver innovative analog solutions to our customers worldwide. We are committed to working with the ADI team for a smooth transition."
The firm plans to fund the transaction with about 58 million new shares, approximately $7.3 billion of new debt and cash. Analog is confident of achieving about $150 million in annualised cost savings in less than two years of closing the deal. In 2015, Broadcom Ltd. was born after Avago Technologies Inc. acquired Broadcom Corp. for $37 billion.
Market Reaction
On July 27, 2016, Analog Devices' shares closed on a 52-week high at $ 63.33 up by 0.73%, with a total volume of 14.96 million shares. The company's shares have advanced 16.26% since the beginning of the year.
Linear Technology's stock closed at $59.23. Linear Technology shares have surged 41.58% year to date.
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