Analog Devices agreed on Tuesday to acquire the Linear Technology Corporation for $14.8 billion, accelerating the already brisk consolidation within the semiconductor sector.

Analog Devices intends to buy Linear Technology, of Milpitas, Calif., for about $60 a share in cash and stock, according to a statement issued by the companies. Linear Technology’s shareholders would own about 16 percent of the combined company after the deal closes.

“This combination of Linear Technology and Analog Devices has the potential to create a combination where one plus one truly exceeds two,” said Bob Swanson, executive chairman and co-founder of Linear Technology. Both companies provide technology for the industrial, automotive and communications industries.

Analog chips are useful for transmitting information from the physical world, like sound or light, into the digital world of computing. Cars, streetlights and home sensors are just a few of the devices that need them to function.

While the spread of computing should be good news for chip makers, the industry is also hobbled by higher costs and pricing pressure. It is expensive to put ever more transistors on ever smaller chips, and competitors, particularly those from Asia, have driven down profit margins.

A result has been several big consolidations over the last few years, as chip makers look for new markets, new product combinations and advantages of scale.

Just last week, SoftBank unveiled a plan to acquire ARM Holdings, the British semiconductor designer, for $32 billion. In May 2015, Avago Technologies signed a deal to acquire Broadcom for almost $40 billion. Before that, NXP Semiconductors purchased Freescale Semiconductor for about $12 billion.

Analog plans to fund the deal by issuing about 58 million new shares of stock and taking on $7.3 billion in new long-term debt. The Norwood, Mass., company is also using cash from its balance sheet.

Linear Technology shareholders will receive $46 a share in cash plus 0.2321 of a share of Analog Devices for each share of Linear Technology.

The transaction is expected to close in the first half of next year, depending on the necessary regulatory approvals. Vincent Roche, president and chief executive of Analog Devices, will continue in those roles for the combined company.

Credit Suisse advised Analog Devices, while Qatalyst Partners provided financial advice to Linear Technology. Wachtell, Lipton, Rosen & Katz and WilmerHale gave legal advice to Analog Devices. Jones Day was the legal adviser to Linear Technology.

By: DocMemory
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