Considerations For A Texas Instruments (TXN) / Maxim (MXIM) Deal - RBC

RBC Capital analyst, Amit Daryanani, reiterated his Outperform rating on Texas Instruments (NASDAQ: TXN) and offered his thoughts on a potential TXN/MXIM combination considering the run in Maxim Integrated Products' (NASDAQ: MXIM) stock price over the past month and the ADI/LLTC deal.

In short, the price for MXIM based on FCF yield analysis probably isn’t attractive enough for the financially disciplined TXN.

There are 5 things to consider:

1) TXN likely views MXIM's EPS/FCF at least 15% lower given higher earnings tax rate when consolidated into TXN

2) MXIM offshore cash would be taxed (currently $2.2B on MXIM's balance sheet, 70% offshore)

3) While MXIM has an attractive power business, it’s skewed to consumer, making it less desirable for TXN in our view

4) TXN is focused on deals that add to non-tech exposure

5) MXIM represents a 30%+ premium to NSM valuations in 2011.

No change to the price target of $80.

For an analyst ratings summary and ratings history on Texas Instruments click here. For more ratings news on Texas Instruments click here.

Shares of Texas Instruments closed at $69.90 yesterday.

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