Acquisitions

Proposed Acquisition of Linear Technology Corporation

On July 26, 2016, the Company entered into the Merger Agreement to acquire Linear. Under the terms of the agreement, Linear stockholders will receive, for each outstanding share of Linear common stock, $46.00 in cash and 0.2321 of a share of the Company’s common stock at the closing. Based on the number of outstanding shares of Linear common stock as of July 26, 2016 and the Company's 5-day volume weighted average price as of July 21, 2016, the value of the total consideration to be paid by the Company is estimated to be approximately $14.8 billion, to be funded with the issuance of approximately 58.0 million new shares of the Company’s common stock and approximately $11.6 billion of new short- and long-term indebtedness.

On October 18, 2016, Linear stockholders approved the Merger Agreement. As of October 29, 2016 the Company had received antitrust clearance in the United States and Germany. Subsequently, the Company also received antitrust clearances in Japan and Israel. The Company currently expects the transaction to be completed by the end of the second quarter of fiscal 2017, subject to receipt of the remaining required regulatory clearances and the satisfaction or waiver of the other conditions contained in the Merger Agreement. The Merger Agreement includes termination rights for both the Company and Linear. Under certain circumstances, including if the proposed merger is terminated due to a failure to obtain the required regulatory clearances, the Company may be required to pay Linear a termination fee of $700.0 million.

In connection with the planned acquisition, the Company has obtained bridge financing commitments and has entered into a term loan facility. See Note 16, Debt, of these Notes to Consolidated Financial Statements for further information on these financing commitments. These sources of financing together with the issuance of the new shares of the Company's common stock are expected to be sufficient to finance the acquisition. As a result of the planned acquisition, the Company has temporarily suspended its share repurchase program. See Note 3, Stock-Based Compensation and Shareholders' Equity of these Notes to Consolidated Financial Statements for further information on the Company's stock repurchases. During fiscal 2016, the Company incurred approximately $12.2 million of transaction-related costs recorded within Selling, Marketing, General and Administrative expenses in the Company's Consolidated Statement of Income.

Hittite Microwave Corporation

On July 22, 2014, the Company completed its acquisition of Hittite, a company that designed and developed high performance integrated circuits, modules, subsystems and instrumentation for radio frequency, microwave and millimeterwave applications. The total consideration paid to acquire Hittite was approximately $2.4 billion, financed through a combination of existing cash on hand and a 90-day term loan facility of $2.0 billion. The Hittite Acquisition is expected to expand the Company’s technology position in high performance signal processing solutions and drive growth in key markets. The Company completed the Hittite Acquisition through a cash tender offer (the Offer) by BBAC Corp., a wholly-owned subsidiary of the Company, for all of the outstanding shares of common stock, par value $0.01 per share, of Hittite at a purchase price of $78.00 per share, net to the seller in cash, without interest, less any applicable withholding taxes. After completion of the Offer, BBAC Corp. merged with and into Hittite, with Hittite continuing as the surviving corporation and a wholly-owned subsidiary of the Company. The results of operations of Hittite from July 22, 2014 (the Hittite Acquisition Date) are included in the Company’s consolidated statements of income for fiscal 2015 and fiscal 2014. The amount of revenue and earnings attributable to Hittite included in the Company's consolidated statements of income for fiscal 2014 was immaterial.

The Hittite Acquisition date fair value of the consideration transferred in the Hittite Acquisition consisted of the following:



(in thousands)
Cash consideration	$2,424,446
Fair value of replacement share-based awards	6,541
Total estimated purchase price	$	2,430,987

Hittite Replacement Awards — In connection with the Hittite Acquisition, the Company issued equity awards to certain Hittite employees in replacement of Hittite equity awards that were canceled at closing. The replacement awards consisted of approximately 0.7 million restricted stock units with a weighted average grant date fair value of $48.20. The grant-date fair value of the restricted stock units represents the value of the Company’s common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting. The terms and the intrinsic value of these awards were substantially the same as the canceled Hittite awards. The $6.5 million noted in the table above represents the portion of the fair value of the replacement awards associated with services rendered through the Hittite Acquisition Date and have been included as a component of the total estimated purchase price.

During fiscal 2015, the Company completed the acquisition accounting for the Hittite Acquisition. The following is a summary of the amounts recognized in the accounting for the Hittite Acquisition:



(in thousands)
Cash and cash equivalents	$	480,742
Marketable securities	28,008
Accounts receivable (a)	36,991
Inventories	115,377
Prepaid expenses and other assets	24,088
Property, plant and equipment	50,726
Deferred tax assets	2,242
Intangible assets (Note 2f)	666,400
Goodwill (Note 2f)	1,355,972
Total assets	$	2,760,546
Assumed liabilities	52,876
Deferred tax liabilities	276,683
Total estimated purchase price	$	2,430,987

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(a)	The fair value of accounts receivable was $37.0 million, with the gross contractual amount being $37.3 million, of which the Company estimates that $0.3 million is uncollectible.

Of the $666.4 million of acquired intangible assets, $0.9 million was recorded as in-process research and development (IPR&D) assets at estimated fair value on the Hittite Acquisition Date. The IPR&D assets acquired were capitalized until the technology was commercially available for their intended uses and are now being amortized over their estimated useful lives. The amortizable intangible assets acquired consisted of the following, which are being amortized on a straight-line basis over their estimated useful lives.



	Fair Value (in thousands)		Weighted Average Useful Lives (in Years)
Technology-based	$	15,100	4
Backlog	25,500		1
Customer relationships	624,900		9
Total amortizable intangible assets	$	665,500	9

The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new markets, future technologies that have yet to be determined and Hittite’s assembled workforce. Future technologies do not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business.

There were no significant contingencies assumed as part of the Hittite Acquisition.

The Company recognized $50.9 million of transaction-related costs, including legal, accounting, severance, debt financing, interest and other related fees, of which approximately $9.7 million and $41.2 million were expensed in fiscal 2015 and fiscal 2014, respectively. Approximately $9.7 million of these costs are included in the consolidated statements of income in operating expenses within SMG&A expenses for fiscal 2015. Approximately $33.3 million of these costs are included in the consolidated statements of income in operating expenses within SMG&A expenses for fiscal 2014, and approximately $7.9 million of these costs are included in the consolidated statements of income within nonoperating expenses for fiscal 2014.

The following unaudited pro forma consolidated financial information presents the Company's combined results of operations after giving effect to the Hittite Acquisition and assumes that the Hittite Acquisition, which closed on July 22, 2014, was completed on November 4, 2012 (the first day of the Company’s fiscal 2013). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, transaction-related costs, a step-up in the value of acquired inventory and property, plant and equipment, and interest expense for the debt incurred to fund the Hittite Acquisition, together with the consequential tax effects. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Hittite Acquisition actually taken place on November 4, 2012. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Hittite Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Hittite Acquisition.



(thousands, except per share data)
	2014
Revenue	$	3,075,468
Net income	$	778,049
Basic net income per common share	$	2.48
Diluted net income per common share	$	2.44

Other Acquisitions

The Company has not provided pro forma results of operations for any other acquisitions completed in fiscal years 2016, 2015 or 2014 herein as they were not material to the Company on either an individual or an aggregate basis. The Company included the results of operations of each acquisition in its consolidated statement of income from the date of each acquisition.