LLTC Acquisition Dilemma

26 Jul 2016 22:56

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Readers of my blog might remember my June purchase of Linear Technologies (LLTC) for 100 shares @ $44. Today Analog Devices (ADI) announced a $14.8B buyout of LLTC with a combination of cash and stock.

The combined deal will pay LLTC $46 cash and 0.2321 ADI share for each of LLTC. Luckily this holding is an IRA account so taxes are not a concern. The big decision I have to make is do I sell or hold on for the acquisition?

This is a tough decision because I really planned on holding LLTC for many years to come while enjoying a potential dividend growth rate near 7% annually. If I sell where do I invest the money that will provide the right combination of yield and growth?

In March I did an analysis of both LLTC and ADI and while both were strong I thought LLTC was the better value play. But I also commented I wouldn't shy away from ADI if it was available at the right price. If I hold on for the acquisition I will get back my original investment plus an additional $200 (about a year and a half of LLTC dividends) and I get 23 shares of ADI (that is for all intents and purposes free stock) for a company I was willing to buy back in March.

Since there are no tax consequences for me this is a pretty tempting deal. I will look around to see if I can do better but one additional item I will factor in the new dividend from the 23 ADI shares that will pay me $38 annually.

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