Semiconductor company Analog Devices announced the completion of its acquisition of Maxim Integrated Products, a move envisioned to strengthen Analog Devices’ analog semiconductor market performance by fusing two prominent players in the analog chip industry. The deal closed in late August for over $20 billion and is expected to enable ADI to expand its automotive and industrial product lines, at a time when automakers have raised prices due to a global chip shortage.
Analog Devices President and CEO Vincent Roche called the acquisition of Maxim a “tremendous milestone," adding “with more than 10,000 engineers and the increased breadth and depth of our best-in-class technologies, we are well-positioned to develop even more complete, cutting-edge solutions for our customers. Together, we will drive the next waves of analog semiconductor innovation, while engineering a healthier, safer and more sustainable future for all.”
In August, Analog reported a trailing twelve-month revenue exceeding $9 billion and a free cash flow of over $3 billion on a pro forma basis. Under the acquisition agreement, Maxim stockholders received 0.63 of a share of Analog Devices common stock for each share of Maxim common stock now that Maxim stock will no longer be traded on NASDAQ.
More recently, ADI updated its capital allocation priorities and accelerated the accretion timeline following the completed acquisition of Maxim in August. The acquisition is expected to be accretive to adjusted earnings in 12 months after closing, which is six months ahead of the original schedule. The acquisition is expected to be neutral to adjusted earnings in the fiscal year 2022. According to ADI, the accelerated timing is due to its more robust, strong business outlook, its commitment to repurchase shares through an Accelerated Share Repurchase and consistent buybacks and the realization of over 40 percent of phase I cost synergies. Additional efficiencies from infrastructure optimization begin in fiscal 2024 with revenue cross-selling opportunities in fiscal 2025 and beyond.
“[Analog Devices] has demonstrated a track record of operational excellence, strong cash flow generation and disciplined capital investments, including our recent acquisition of Maxim Integrated, that provides the foundation for an attractive capital allocation framework,” said Roche. “Our financial strength positions us to substantially invest in our business while returning 100% of free cash flow to shareholders through dividends and share repurchases. The decision to approve our accelerated share repurchase program and increase our total share repurchase authorization reflects our confidence in our future business performance and commitment to provide meaningful return to shareholders.”
As a result of the acquisition, Analog Devices now has a market value of over $61 billion. That amid a market marked by a global chip shortage impacting a variety of industries that rely on electronics, most notably the automotive sector, which is seeing auto prices soaring. In addition, Analog now offers over 50,000 products and has a customer base numbering 125,000.