| Filed by Analog Devices, Inc. pursuant to Rule 425 under the Securities Act of 1933 and deemed to be filed pursuant to Rule 14a-12 under the Securities Exchange Act Subject Company: Linear Technology Corporation Filer’s SEC File No.: 001-7819 Date: July 26, 2016
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Analog Devices and Linear Technology to Combine Creating the Premier Analog Technology Company
Combined Enterprise Value of Over $30 Billion
July 26, 2016
Filed by Analog Devices, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed to be filed pursuant to Rule 14a-12
under the Securities and Exchange Act
Subject Company: Linear Technology Corporation
Filer’s SEC File No.: 001-7819
Date: July 26, 2016
Filed by Analog Devices, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed to be filed pursuant to Rule 14a-12
under the Securities and Exchange Act
Subject Company: Linear Technology Corporation
Filer’s SEC File No.: 001-7819
Date: July 26, 2016
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Forward Looking Statements
This presentation contains forward-looking statements, which address a variety of subjects including, for example, the expected timetable for closing of the transaction between Analog Devices, Inc. (“Analog Devices”) and Linear Technology Corporation (“Linear Technology”), the expected benefits and synergies of the transaction, including the effect of the transaction on Analog Devices’ revenues, non-GAAP earnings, free cash flow, capital returns and expected growth rates of the combined companies, Analog Devices’ expected product offerings, product development, marketing position and technical advances resulting from the transaction, the availability of debt financing for the transaction,
Analog Devices’ timing and ability to repay the debt and Analog Devices’ guidance for its third quarter of fiscal 2016. Statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. Such statements are based on our current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the ability to satisfy the conditions to closing of the proposed transaction, on the expected timing or at all; the ability to obtain required regulatory approvals for the proposed transaction, on the expected timing or at all, including the potential for regulatory authorities to require divestitures in connection with the proposed transaction; the occurrence of any event that could give rise to the termination of the merger agreement; the risk of stockholder litigation relating to the proposed transaction, including resulting expense or delay; higher than expected or unexpected costs associated with or relating to the transaction; the risk that expected benefits, synergies and growth prospects of the transaction may not be achieved in a timely manner, or at all; the risk that Linear Technology’s business may not be successfully integrated with Analog Devices’ following the closing; the risk that Analog Devices and Linear Technology will be unable to retain and hire key personnel; and the risk that disruption from the transaction may adversely affect Linear Technology’s or Analog Devices’ business and relationships with their customers, suppliers or employees. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to both Analog Devices’ and Linear
Technology’s filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in each of Analog Devices’ and
Linear Technology’s most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.
GAAP Reconciliation—This presentation includes non-GAAP financial measures that have been adjusted in order to provide investors with useful information regarding our results of operations and business trends. Reconciliations of these non-GAAP measures to their most directly 1 comparable GAAP measures and supplemental cash flow measures can be found in the Appendices.
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Important Additional Information Will Be Filed With The SEC
In connection with the proposed transaction, Analog Devices and Linear Technology intend to file relevant information with the SEC, including a registration statement of
Analog Devices on Form S-4 (the “registration statement”) that will include a prospectus of Analog Devices and a proxy statement of Linear Technology (the “proxy statement/prospectus”). INVESTORS AND SECURITY HOLDERS OF LINEAR TECHNOLOGY ARE URGED TO CAREFULLY READ THE ENTIRE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ANALOG DEVICES, LINEAR TECHNOLOGY AND THE PROPOSED TRANSACTION. A definitive proxy statement/prospectus will be sent to Linear Technology’s shareholders. The registration statement, proxy statement/prospectus and other documents filed by Analog Devices with the SEC may be obtained free of charge at Analog Devices’ website at www.analog.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from Analog Devices by requesting them by mail at Analog Devices, Inc., One Technology Way, P.O. Box 9106, Norwood, MA 02062-9106, Attention: Investor Relations, or by telephone at (781) 461-3282. The documents filed by Linear Technology with the SEC may be obtained free of charge at Linear Technology’s website at www.linear.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from Linear Technology by requesting them by mail at Linear Technology Corporation, 1630 McCarthy Blvd., Milpitas, CA, 95035-7417, Attention: Investor Relations, or by telephone at (408) 432-2407.
Participants in the Solicitation
Linear Technology, Analog Devices and certain of their directors, executive officers and employees may be deemed participants in the solicitation of proxies from Linear Technology shareholders in connection with the proposed transaction. Information regarding the persons who may be deemed to be participants in the solicitation of Linear Technology shareholders in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement/prospectus when it is filed with the SEC. Information about the directors and executive officers of Analog Devices and their ownership of Analog Devices’ common stock is set forth in the definitive proxy statement for the Analog Devices’ 2016 annual meeting of shareholders, as previously filed with the SEC on January 28, 2016. Information about the directors and executive officers of Linear Technology and their ownership of Linear Technology common stock is set forth in the definitive proxy statement for Linear Technology’s 2015 annual meeting of shareholders, as previously filed with the SEC on September 17, 2015. Free copies of these documents may be obtained as described in the paragraphs above.
Non-Solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
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Compelling Strategic and Financial Benefits
Creates the vator Global High- vator vator
Highly Complementary Leading Positions & Performance Analog Industry Businesses Commitment to Customers Leader
Combination creates the global high- Highly complementary product Combined company will be a leader performance analog industry leader portfolios create the industry’s most across all major high-performance across data converters, power comprehensive suite of high- analog product categories* with a management, amplifiers, interface, and performance analog offerings and shared commitment to providing RF and microwave products expand ADI’s TAM to $14 billion from customers with the highest levels of $8 billion* innovation, service, and support
Accelerates vator Innovation and vator vator
Accretive to non-GAAP EPS
Revenue Growth Opportunities in Best-in-Class Financial Model and Free Cash Flow
Attractive Markets
Unique combination of engineering Value of innovation and engineering Expected to be immediately accretive excellence and domain expertise excellence reflected in best-in-class to non-GAAP EPS and FCF accelerates innovation and revenue financial model, non-GAAP margins, $150 million expected annualized run-growth opportunities in the industrial, and free cash flow rate synergies within 18 months post automotive, and communications close infrastructure markets
* Data based on Gartner reports and company estimates based on FY15 data
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Combined Company Snapshot
Years of Experience
Headquarters
Key End Markets
Key Innovation Platforms
FY15 Financial Metrics
Revenue
Gross Margin
Operating Margin
FCF
Combines the Two Premier High-Performance Analog Franchises
* Based on FY15 financial information for Analog Devices and Linear Technology as of 10/31/15 and 6/30/15 fiscal year-end, respectively. Analog Devices’ and the combined company’s pro forma gross margin and operating margin are presented on a non-GAAP basis. See Appendices for reconciliations. Free Cash Flow is defined as cash provided by/used in operating activities less capital expenditures. Analog Devices’ and the combined company’s pro forma
4 free cash flow exclude one-time payment of $224M in Q4 of fiscal 2015 relating to conversion of Analog Devices’ Irish pension plan. See Appendices for calculation of free cash flow.
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Linear Technology – A Premier Analog Industry Innovator
Premier power management analog franchise
Targets hard to solve, high-value problems
Product portfolio consists of leading positions in attractive power management and amplifier markets – accounting for approx. 75% of 2015 revenues
Highlights
Focused on attractive, long life cycle applications, with industrial, automotive, and communications infrastructure accounting for approx. 90% of FY15 revenue
Broad range of growth drivers, including micro modules, battery management solutions for HEVs, software configurable power management, energy harvesting, and wireless networks
End-Markets Technologies* Geographies*
PC / Consumer Clocks / Timing 5%
Interface APAC 12% Power 9% 16% Management
FY15 Revenue 59%
Converters Americas Infrastructure 11% 41%
$1.5 Billion 18% Japan
Industrial 17% 50%
Amplifiers
Automotive 16% EMEA 20% 26%
35-year track record of providing highly-differentiated, high-performance analog solutions
5 * Data based on Gartner reports and Linear Technology reports
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Strong Strategic Fit Creates Premier Analog Innovation Partner
? Analog industry is transforming to Leading Technologies meet growing customer need for system-level solutions
Converters Power RF / Microwave High Performance MEMS &
? Analog Devices becomes the leading Linear Sensors system-level solutions provider at the intersection of the physical and digital Target Markets worlds
Industrial Automotive Comms Infrastructure
• Analog Devices’ and Linear
Technology’s complementary product portfolios create premier customer innovation partner across key target markets to drive innovation and revenue growth
Combined Company Uniquely Positioned to Drive New Era of Analog Growth
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Combined Company will be a High-Performance Analog Industry
Leader…
Industry Rank #1
Linear
#2
#2
Rev enue
ADI
Combined #1
#2
Converter Power Management Amplifiers Interface RF / Microwave
Broad and Highly Complementary Portfolio of Leading Long Lifecycle, High-Value Products
Data based on Gartner reports and company estimates based on FY15 data
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… Almost Doubling its Addressable Market
2015 TAM for Industrial, Communications Infrastructure, and Automotive
$14 billion
~2X TAM
Power Management $6 billion
$8 billion
Clocks / Timing $1 billion
Interface $1 billion
Amps $3 billion
ADC / DAC $3 billion
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Analog Devices’ TAM Expands to $14 Billion from $8 Billion
Data based on Gartner reports
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…With Complementary Capabilities Across the Highest-Value Applications
Core Capability ADI Linear Tech
Industrial Infrastructure Automotive Consumer
Aerospace & 4G LTE and 5G Portable ADAS
Defense Wireless Devices
Macro & Small
Instrumentation Audio Prosumer A/V
Cell Base Station
Healthcare Optical Infotainment
Factory
Networking HEV
Automation
Algorithms / Power / Energy Wireless Mesh
IoT Sensor MCU
Software Harvesting Network
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Transaction Expected to Achieve Immediate Scale and Margin
Expansion…
Outlook
Value of innovation drives
Revenue* ~$3.5 billion ~$5 billion
industry leading non-GAAP gross and operating margins
Gross Margin* 66% 69% • $150 million expected annualized run-rate synergies within 18 months post close
Operating Margin* 34% 38%
Strong anticipated cash flow generation to facilitate rapid FCF Margin* 28% 31% deleveraging
Combination Creates Best-in-Class Financial Profile
* Based on FY15 financial information for Analog Devices and Linear Technology as of 10/31/15 and 6/30/15 fiscal year-end, respectively. Analog Devices’ and the combined company’s pro forma gross margin and operating margin are presented on a non-GAAP basis. See Appendices for reconciliation. Analog Devices’ and the combined company’s pro forma free cash flow margin exclude one-time payment of $224M in Q4 of fiscal 2015 relating to conversion of Analog Devices’ Irish pension plan. See Appendices for calculation of free cash flow margin.
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…With Best-in-Class Free Cash Flow Profile
Free Cash Flow (TTM)* FCF Margin (TTM)*
Excluding synergies Excluding synergies
$1.7 billion
34% 31% 28% 28%
22% 22% 22%
$1.0 billion
17% 14%
Significant FCF generation enables quick debt reduction and enhances future shareholder returns
* Data presented on trailing twelve month basis ending April 30, 2016 publicly reported information and FactSet. Analog Devices’ free cash flow and the combined company’s pro forma free cash flow and free cash flow margin
11 exclude one-time payment of $224M in Q4 of fiscal 2015 relating to conversion of Analog Devices’ Irish pension plan. See Appendices for calculation of free cash flow and free cash flow margin.
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Expected Financial Transformation Timeline
Closing Income Statement Balance Sheet
Phase I Op-ex Synergies Rapid Debt Pay Down
Op-ex Synergies Approach Target Net Phase II
Manufacturing Optimization Leverage
Achieve Target Net Phase III Revenue Cross-Sell Leverage
2020
Expected to be Immediately Accretive to ADI’s non-GAAP EPS and Free Cash Flow; Places ADI on Solid Trajectory to Achieve $5 non-GAAP EPS by end of 2020
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Capital Structure Optimized to Maximize Flexibility and Value Creation
Total Consideration $14.8 billion / Total Consideration per share of $60
$46.00 per share in cash
Transaction
0.2321 of a new ADI share per Linear Technology share
Consideration
On closing, approximately 16% of Analog Devices’ common shares will be held by Linear Technology shareholders on a fully-diluted basis
Expected to be approximately 58 million Analog Devices’ shares, approximately $7.3 billion of
Sources of new debt, and the remainder from the companies’ combined balance sheet cash
Financing
Existing revolving credit facility expected to increase to $1 billion
Pro Forma
Gross debt of $9.0 billion, cash of $750 million and net debt of $8.2 billion
Capitalization at
Projected LTM net debt / adjusted EBITDA of 3.8x at closing and 3.6x including synergies
Closing
ADI expected to maintain dividend policy
Capital Allocation • Rapid deleveraging will enhance future flexibility – will suspend share buybacks until target Policy leverage of 2.0x net debt/EBITDA is achieved
ADI is committed to maintaining its strong investment grade rating
Approval by Linear Technology shareholders required
Approval Process &
Subject to regulatory clearance and other customary closing conditions
Closing
Estimated deal close by end of the first half of calendar year 2017
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Analog Devices Strategy Timeline:
Well-Positioned for a Future of Growth and Capital Returns
Growth & Capital Capital Returns & Returns Portfolio Management
Portfolio Management
Growth
1965 to 2000 2001 to 2007 2008 to 2015 Future*
Revenue grew from million in 1979 to $2.6 in 2000 • Divest PC power • Acquire Hittite / divest • Acquire Linear
$100 billion
and audio, DSL, MEMS microphone Technology
Established the leading data converter and high-performance and baseband Capitalize on growth
Focus on high-value
amplifier franchises businesses opportunities in B2B
B2B applications
Balanced capital
Return $4+ billion to allocation policy, shareholders accretive M&A
* Not drawn to scale.
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Analog Devices and Linear Technology—Strategically and Financially Compelling for all Stakeholders
Unmatched breadth and diversity of offerings
Combination drives significant innovation and accelerates product development
Customers
Enables greater levels of system collaboration and solution development
Unparalleled commitment to customer support
Complementary world-class engineering-centric cultures
Employees • Increased product portfolio scale provides opportunities for greater levels of innovation and professional growth
Offers best-in-class financial model and strengthens business profile
Shareholders • Expected to be immediately accretive to non-GAAP EPS and Free Cash Flow
$150 million expected annualized run-rate synergies within 18 months post close
Analog Devices and Linear Technology – Redefining the Future of the Analog Industry
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Analog Devices and Linear Technology to Combine Creating the Premier Analog Technology Company
Combined Enterprise Value of Over $30 Billion
July 26, 2016
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Appendix I – Reconciliation from GAAP to Non-GAAP and Pro Forma Combined Company Earnings Measures
(in thousands)
Analog Linear Pro Forma
Devices Technology FY15 FY15 FY15
GAAP Gross Margin $2,259,262 $1,119,412 $3,378,674 Gross Margin % 66% 76% 69% Acquisition-related Expenses 7,199—7,199 Stock-Based Compensation Expense 113—113 Non-GAAP Gross Margin $2,266,574 $1,119,412 $3,385,986 Gross Margin % 66% 76% 69%
GAAP Operating Income/Margin $830,841 $682,699 $1,513,540 Percent of Revenue 24% 46% 31% Other Operating Expense-pension 223,672—223,672 Acquisition-related Expenses 96,937—96,937 Acquisition-related Transaction Costs 10,016—10,016 Stock-Based Compensation Expense 4,277—4,277 Non-GAAP Operating Income/margin $1,165,743 $682,699 $1,848,442 Percent of Revenue 34% 46% 38%
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Appendix II – Analog Devices Supplemental Cash Flow Measures
(in thousands)
FY15
Net cash provided by operating activities $907,798 Non-GAAP adjustments: Pension conversion payments 223,672 Adjusted cash flows from operations $1,131,470 Capital expenditures (153,960) Adjusted free cash flow $977,510 Percent of Revenue 28%
TTM 4/30/16
Trailing twelve months operating cash flow $935,022 Non-GAAP adjustments: Pension conversion payments 223,672 Adjusted cash flows from operations 1,158,694 Capital expenditures (129,616) Adjusted free cash flow $1,029,078 Percent of Revenue 30%
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Appendix III – Combined Company Pro Forma Supplemental Cash Flow Measures
(in thousands)
TTM 4/30/16
Trailing twelve months operating cash flow $1,606,530 Non-GAAP adjustments: Pension conversion payments 223,672 Adjusted cash flows from operations 1,830,202 Capital expenditures (172,318) Adjusted free cash flow $1,657,884 Percent of revenue 34%