Moody’s cuts Analog Devices debt to Baa1

Moody's Investors Service said it downgraded Analog Devices Inc.'s senior unsecured rating to Baa1 from A3 rating following the announcement that Analog received all approvals for its $15.2 billion acquisition of Linear Technology Corp. (unrated).

This concludes a review initiated July 26, 2016 when Moody's noted that Analog Devices' ratings would be downgraded following the receipt of regulatory approvals.

The outlook is stable.

Analog plans to fund the acquisition using roughly $4.1 billion of new equity, $5 billion of cash on hand from the combined companies and about $7.1 billion in debt financing.

“The acquisition will combine two of the most profitable analog semiconductor companies with complementary technologies, products, and capabilities, solidifying Analog's number two position in the high performance analog market, with an estimated 16% market share behind Texas Instruments, Inc. (A1 stable), with an estimated 26% market share,” Moody’s said in a news release.

“Linear will enhance Analog's product diversification where Analog is dominant in data converters and radio frequency, Linear is strong in power management.

“The combined entity will have highly differentiated products across similar end-markets in industrial, automotive, and telecom infrastructure, which have higher margins and are more stable and faster growing than the broad computer and consumer end markets,” the agency added.

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