Analog Devices is negotiating an all-stock takeover of Maxim Integrated for around $20 billion, the Wall Street Journal reported. Although an agreement has not been finalized, the publication states the firms could make a tie-up announcement this week.
In addition to being one of the year’s biggest mergers, the sale would represent Analog Devices’ biggest purchase to date.
Analog Devices-Maxim Acquisition Details
If the chipmakers’ proposed combination goes through, Analog Devices will pay a 17 percent premium to snap up Maxim. The perspective takeover would also give the latter company’s shareholders a 30 percent stake in the acquiring concern, which would be worth $70 billion post-merger. Though it is unclear when the current deal came together, the two manufacturers have considered merging since 2015.
The Wall Street Journal offered a possible motive for the competing firms’ desire to join forces. Together, the two brands would have the catalogs, expertise, and resources to challenge Texas Instruments, the analog component market leader. As of this writing, the Dallas-based company has a $119.79 billion market capitalization compared to Analog Device’s $45.86 billion and Maxim’s $17.08 billion.
It is also worth noting both chipmakers took significant financial hits due to the coronavirus pandemic earlier this year. By combing forces, Analog Devices and Maxim would position themselves to handle future market headwinds better. The rival businesses could also raise their prices post-merger to reflect the consolidation of the analog semiconductor sector.
Possible Regulatory Obstacles
Provided takeover discussions between Analog Devices and Maxim succeed, the firms would have to overcome major regulatory hurdles.
Because of their geographically diffuse client lists, the corporations would need the approval of market watchdogs in China, the European Union, and the United States. Given current geopolitical conditions, gaining the asset of all three world powers could prove difficult.
Over a year ago, Infineon Technologies announced its intention to acquire Cypress Semiconductor for $9.78 billion. However, the Committee on Foreign Investment in the United States (CFIUS) slowed things down by initiating a review because Infineon derives a third of its revenue from selling components to Chinese firms. Ultimately, the deal went through, but CFIUS unraveled another major chip industry tie-up in recent years.
In 2018, the government agency blocked Broadcom’s $117 billion bid to acquire Qualcomm. CFIUS rejected the transaction on grounds it would hurt the Snapdragon processor company, and therefore U.S. technological leadership. That same year, Qualcomm abandoned its efforts to purchase NXP Semiconductors for $44 billion because it could not secure the consent of Chinese regulators.
As trade tensions between China and the United States have increased again recently, Analog Devices and Maxim’s perspective merger is unlikely to proceed smoothly.