Analog Devices to buy chipmaker peer Linear for $14.8 billion

By Liana B. Baker

(Reuters) – Analog Devices Inc said on Tuesday it would buy fellow chipmaker Linear Technology Corp for about $14.8 billion, the latest deal in a wave of consolidation that has swept the semiconductor industry in the past two years.

By buying Linear, Analog is aiming to boost its profitability and increase its share in the fragmented market for analog chips, which process signals such as sound, light and temperature and convert them into digital signals. The chips are central to smart phones and devices connected to the internet.

“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,” Analog Chief Executive Vincent Roche said in a statement.

Linear was viewed as one of the most attractive sales targets in semiconductors because of its high margins and engineering talent. Analysts have long identified Linear as being coveted by Analog or Texas Instruments Inc .

Analog said it would offer $46.00 per share in cash and 0.2321 a share for each Linear share. The stock and cash mix roughly values the company at $60 a share, which represents a 24 percent premium to Linear’s closing share price on Monday.

The companies, which both make power management chips, data converters and amplifiers that are used in almost all electronic products, said the deal values the combined business at about $30 billion.

Analog’s last significant acquisition was Hittite Microwave Corp, which it bought for more than $2 billion in 2014.

Linear’s stock closed up nearly 29 percent at $62.49, its highest since 2001. The deal, which was first reported by Bloomberg, creates a company with combined revenue of $5 billion. Analog’s shares rose to a 52-week high.

The deal is expected to immediately add to Analog’s adjusted earnings per share and free cash flow.

Founded in 1965 by two MIT graduates, Analog competes with Maxim Integrated Products Inc and Texas Instruments.

Credit Suisse Group AG advised Analog Devices while JP Morgan Chase & Co and Bank of America provided financing. Qatalyst Partners advised Linear Technology.

The legal advisers for Analog were Wachtell, Lipton, Rosen & Katz and Wilmer Cutler Pickering Hale and Dorr. Jones Day advised Linear.

(Additional reporting by Arunima Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Jeffrey Hodgson)