Acquisition trend in semiconductor industry continues with Analog Devices’ purchase of Linear Technology

With acquisitions continuing to keep the semiconductor industry afloat, Analog Devices Inc. is set to purchase Linear Technology Corp. in a cash and stock deal worth $14.8 billion. The deal has been approved from both ends but may not be finalized until the end of the first half of 2017 or even later. If successful, the deal will create a company with about $5 billion of anticipated annual revenues, making Analog Devices the second-highest-ranked analog IC vendor after Texas Instruments. 

As Electronic Products previously reported, semiconductor industry consolidation has sprung out of the Internet of Things era’s increased demand for embedded chips and sensors. Increasingly costly acquisitions have led to such partnerships often being a necessity for companies to survive as the industry shifts.

Together, Analog and Linear Technology will form a strong competitor in several analog and power products including data converters, amplifiers, and interface and conditioning ICs and RF. Analog Devices revealed that the acquisition would even take its addressable annual market from $8 billion to $14 billion.

“Our shared focus on engineering excellence and 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,” said Vincent Roche, CEO of Analog Devices.

While Avago’s purchase of Broadcom for $37 billion represents the most expensive instance of industry consolidation, the $14.8 billion deal is still considerably high, being about $2 billion less than Intel’s $16.7 billion acquisition of Altera.

Analog Devices plans to fund the purchase by issuing 58 million new shares of its common stock and $7.3 billion of new long-term debt, with the remaining amount coming from balance sheet cash. While 2016 opened with slow semiconductor sales, the mid-year records were not much different, showing sluggish growth. “One area of potential recovery could be developments in industry supply fundamentals, including constrained capital spending (coupled with recent record consolidation),” writes Falan Ying, director of Industry Statistics and Economic Policy at the Semiconductor Industry Association (SIA).

Source: EETimes Europe, Electronic Products, SIA 1, SIA 2