What happened

Shares of Maxim Integrated Products (NASDAQ:MXIM) jumped on Monday after the semiconductor company reported preliminary fourth-quarter results and announced that it had agreed to be acquired by Analog Devices (NASDAQ:ADI) in an all-stock deal. Shares of Maxim were up about 11% at 12:35 p.m. EDT, while shares of Analog Devices were down 4%.

So what

Maxim announced that it expects to report revenue of $545 million for its fiscal fourth quarter, compared to previous guidance calling for revenue between $480 million and $540 million. The company cited a strong performance from its manufacturing operations for the revenue beat.

A notepad drawing of a fish eating a smaller fish.

Image source: Getty Images.

Along with the preliminary results, Maxim and Analog Devices announced a deal that will combine the two companies. Analog will acquire Maxim in an all-stock deal, with Maxim shareholders set to receive 0.63 shares of Analog for each share of Maxim they own. Once the deal closes, current Analog shareholders will own 69% of the combined company, with current Maxim shareholders owning the rest.

On a pro forma basis, the combined company will have annual revenue of $8.2 billion and annual free cash flow of $2.7 billion. The deal is expected to boost adjusted earnings per share 18 months after closing, and the companies expect to achieve $275 million of cost synergies by the end of the second year. Additional cost savings related to manufacturing optimizations are expected by the end of year three. The deal is expected to close in the summer of 2021.

Now what

The combined company will offer more than 50,000 products and serve over 125,000 customers, with a total addressable market of roughly $60 billion. Maxim's presence in the automotive and data-center markets will combine with Analog's presence in the industrial, communications, and digital healthcare markets.

Including Monday's rally, shares of Maxim are up about 4% from the beginning of the year.