In light of the global semiconductor industry since 2015 and tide, plus 2016 years into a new round of acquisitions, signs of semiconductor industry to mature, it can be said clearly but also again. Many acquiring rival, semi conductor industry or along the industrial chain to obtain cost advantages, and to provide a wide range of product portfolio, in response to market demands and challenges, the wave of the whole and the latest example of fell in analogy to the chip industry, (Analog Devices; ADI) for Linear Technology acquisition.
Over the past 12 months, analog chip market witnessed the 2 most important acquisition, it is a manufacturing Semiconductor (ON Semiconductor) bid $2.4 billion for a national Semiconductor (Fairchild Semiconductor), the other is Mircochip $3.6 billion deal to buy the Atmel. In fact, at the end of 2015, when, with ti (Texas Instruments) at the same time offer rob close Maxim Integrated, but failed due to failed to finalize purchase price, Maxim Integrated still does not exclude the foreign supplier option, but first the DE lately, but lightning to nearly 3 into at a premium price tag, the successful acquisition of Linear Technology.
The root According to industry insiders, actually Linear and originally had no intention of selling, but the boy's price is too attract shareholders of a company, the management team in no position to block this pile marriage. True, that a merger would make the DE bono has more solid resources to cope with the competition leading analog wafer ti, and, with the scale of Linear combined, and with various acquisition quickly after semiconductor revenue scale, about $5 billion Annual revenue. However, why the, agreed to pay the Linear such a high premium to buy?
From the operating rate of gross margin, profit and cash flow and financial structure, from the DE bono consideration so that a listed company, Linear Technology can immediately lift the profit figures. In the 2015 fiscal year, the gross profit margin on Linear is as high as 76%, and 66% gross margin of DE bono, once the integration, Linear, and will, is expected to optimize its capacity utilization, and further improve profitability. Expect the two companies merged the gross margin of 69%, compared to 58% gross margin in the analog chip leading ti is higher than that of a piece.
Again from camp profit rate, the Linear and the DE bono 19 ~ spend revenue accounted for about 20% of spending on research and development, as a company and according to the German's estimate, the two companies merged is expected to generate $150 million over the next 18 months the cost of synergy. According to the 2015 fiscal year, according to the Linear camp profit rate is about 46%, and the interest rate is only 30% of Germany's camp, the two sides after the merger of anticipated cost synergies will be expected to further improve the company's overall sales profit rate to 38%, were also relatively Yu Deyi camp of 33% profit rate is high.
Value to note is that Linear Technology over the past few years since the sound high profitability, also on behalf of the company contributed quite a high level of cash flow. For the 2015 fiscal year, Linear free cash flow (free cash flow) accounted for about 36% of the overall revenue, by contrast, a boy's free cash flow, which accounts for only about 28% of the revenue level and, although must raise $7.3 billion acquisition of Linear, but the two companies merged can obviously improve profitability, even with a contribution of free cash flow accounted 31% level.
Linear not only can improve the profitability of two company merged with the free cash flow, but also can become a in the borrowed $7.3 billion to pay deal, are the best bargaining chip. Therefore, from the financial side, the nearly 3, and, even if the premium has also thought still bargain deal.
Though, with Linear Technology with analog chips, but the product portfolio less repetition, and in the supply of similar terminal market at the same time, from the combination of complementary products cost synergies, manufacturing efficiencies and revenue synergy, perhaps all the DE bono, timely acquire high premium price tag, do not hesitate to shake Linear shareholders gain favour. Notably, Apple (Apple) is one of the key customers of DE bono, and with the Linear, acquisition, can also reduce the DE bono previously for Apple is highly dependent on of the business, it is also, in the intelligent mobile phone market growth is slowing down another way out.
