While this coronavirus situation has had the effect of strongly discouraging major buyouts during this time, there are a few noteworthy exceptions to this trend. One of the larger semiconductor chip makers, Analog Devices (NASDAQ: ADI), is considering buyout out a rival chipmaker, Maxim Integrated. The deal is expected to be worth as much as $20 billion according to anonymous sources familiar with the matter, and an official announcement is expected to be announced sometime this week.
The Wall Street Journal went on to report that the two companies are in talks for an all-stock deal that could reach up to $20 billion. The two companies, now under one corporate umbrella, would carry a market cap of around $70 billion if the deal goes through. While both Analog and Maxim have talked in the past about going through with a potential merger, this time it could be for real. However, things are still uncertain at this point, with neither company having confirmed whether the deal has been approved or not.
Major acquisitions in the chip sector have been a consistent theme over the past few years, with major multi-billion-dollar buyouts being quite common. While the coronavirus has effectively halted almost all major acquisitions, depressed stock prices have helped make already attractive buyout targets that much more appealing to buyers. That seems to be partially the case now with Analog and Maxim, which, if all goes smoothly, would become the largest acquisition so far in 2020. Overall, however, Global merger volume has declined by at least 50% around the world so far this year in terms of dollar amounts in comparison to 2019.
Considering the size of both companies, as well as the political nature of semiconductor manufacturing, this deal will likely require both approvals from U.S. as well as Chinese regulators. However, many large semiconductor deals have been thwarted in the past by either side. Back in 2018, Qualcomm ended up giving up on a $44 billion takeover deal for NXP after failing to win Chinese approval for well over two years. The Trump administration has also been reticent about Chinese-related buyout deals as well. However, that was well before the coronavirus pandemic broke out, so it’s anyone’s guess as to whether this particular deal will end up facing major regulatory roadblocks.
Shares of Analog Devices are up around half a percent in pre-market trading at the time of writing, with the stock likely to jump significantly more on Monday as the markets react to the news. Despite seeing a significant dip in April, Analog had seen its stock recover and surge well past where it was back in January 2020 before this pandemic took place.
Analog Devices Company Profile
Analog Devices is a leading analog, mixed signal, and digital signal processing chipmaker. The firm has a significant market share lead in converter chips, which are used to translate analog signals to digital and vice versa. The company serves tens of thousands of customers, and more than half of its chip sales are made to industrial and automotive end markets. Analog Devices’ chips are also incorporated into wireless infrastructure equipment. – Warrior Trading News
