Hittite Microwave Corp. (HITT) leapt 28.63 percent to $77.90 per share on Monday (2:56PM EDT) after announcing that it agreed to be acquired by rival Analog Devices, Inc. (ADI) for $78 per share in cash. The $2.45 billion deal would boost Analog’s radio frequency and signal conversion chip offerings. The price tag reflects a 29 percent premium over HITT’s June 6 closing value of $60.56 per share.
Both companies held a positive attitude towards the future of the agreement. Analog Devices, the Norwood, Mass.-based company, believed the definitive deal would help it grow in the industrial and communications infrastructure markets.
“Our combined capabilities will enable us to bring more complete solutions to our customers and address more of the industrial, communication infrastructure, and automotive markets,” said Analog Devices CEO Vincent Roche in a statement. “We welcome the very talented Hittite team, as we together leverage our strong product portfolios and customer relationships to create greater value for our stakeholders.”
Rick D. Hess, CEO of Hittite, added, “I look forward to joining Analog Devices and I am confident our combined efforts will accelerate the course of innovation throughout cellular and microwave communications infrastructure, automotive, industrial instrumentation, aerospace and defense.”
The definitive agreement was followed by an update of HITT’s Q3 earnings guidance. The company provided EPS guidance of $0.60 to $0.64 for the period, compared to the Thomson Reuters consensus EPS estimate of $0.60. The company’s revenue growth has increased slightly by 4.3 percent since the year-earlier quarter, which outpaced the industry average of 3.2 percent.
In addition to revenue growth, the stock of HITT displays a positive performance in multiple areas, such as its largely solid financial position with reasonable debt levels, good cash flow from operations, an increasing in stock price, and expanding profit margins.
The company also maintains a quick ratio of 23.00, which clearly demonstrates the ability to cover short-term cash needs. During Q2 fiscal 2014, the company has a 16.54 percent year-over-year increase in net operating cash flow, which is up to $27.21 million. The firm also exceeds the industry average cash flow growth rate of 3.91 percent.
Hittite, the Chelmsford, Mass.-based company, manufactures integrated circuits, modules, and subsystems for radio frequency microwave and millimeter wave applications. The company’s chips are used in cellular, optical, and satellite communications, in medical imaging and in defense electronics.
Credit Suisse acted as financial adviser to Analog Devices, and Hittite received financial advice from Deutsche Bank.
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