Analog Devices Inc. ADI recently priced two sets of unsecured senior notes offering totaling $1.250 billion. The $850 million principal amount of senior notes, due 2025, carry an interest rate of 3.90%. Meanwhile, the remaining notes worth $400 million and due 2045 carry 5.30% interest rate.
Analog Devices stated that about $378 million of the transaction proceeds would be used to redeem the $375 million senior unsecured notes, carrying a coupon rate of 3.00%, and set to mature on Dec 18, 2015. The remaining would be used for general corporate purposes, share repurchases, acquisitions, dividend payments and capital expenses.
J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, and Morgan Stanley & Co. LLC will be acting as joint book-running managers for the offering. The co-managers of the offering are Deutsche Bank Securities Inc., Wells Fargo Securities, LLC, and BNY Mellon Capital Markets, LLC.
Analog Devices is a leading supplier of analog and DSP integrated circuits. In the recently concluded fourth-quarter fiscal 2015, the company spent $125.6 million cash to pay dividends and repurchased $111.7 million shares.
Exiting the quarter, Analog Devices had cash and short-term investments of approximately $3.03 billion, down from $3.09 billion in the prior quarter. Long-term debt was $498.5 million. During the quarter, the net debt position moved up slightly.
We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving its growth prospects. The senior notes offering will bring down the company’s cost of capital, in our view, thus strengthening the balance sheet and supporting growth.
Currently, Analog has a Zacks Rank #3 (Hold). Some stocks that have been performing well are Stamps.com Inc. STMP, Travelport Worldwide Limited TVPT and Maxlinear Inc. MXL. All these stocks carry a Zacks Rank #1 (Strong Buy).
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