Targeting commercial and mobile computing segments and the rapidly-growing consumer electronics marketplace, microprocessor and embedded IC maker Advanced Micro Devices Inc. (AMD), Sunnyvale CA, and graphics chip and products manufacturer ATI Technologies Inc., Markham ON, plan to join forces in a transaction valued at US$5.4-billion.
AMD will acquire all of the outstanding common shares of ATI for a combination of US$4.2-billion in cash and 57 million shares of AMD common stock. Based upon the closing price of AMD common stock on July 21, of US$18.26 a share, the consideration for each outstanding share of ATI common stock would be US$20.47, comprised of US$16.40 of cash and 0.2229 shares of AMD common stock.
AMD says it anticipates financing the cash portion of the transaction with a combination of cash and new debt. It has obtained a US$2.5-billion term loan commitment from Morgan Stanley Senior Funding Inc. which, together with combined existing cash, cash equivalents, and short term investments balances of approximately US$3.0-billion, provides full funding for the transaction.
According to AMD, the new company will be able to fulfill increasing demands for more integrated solutions in key market segments and to continue to develop discrete products that enable customers to choose the combination of technologies that best serves their needs.
In 2008 and after, AMD says it plans to move beyond current technological configurations to transform processing technologies with silicon-specific platforms that integrate microprocessors and graphics processors to address the growing need for general-purpose, media-centric, data-centric and graphic-centric platforms.
Customers will be able to create their own unique products and solutions within an open-innovation ecosystem free from artificial barriers to customer success, AMD says.
“ATI shares our passion and complements our strengths: technology leadership and customer centric innovation,” AMD Chairman and CEO Hector Ruiz says. “Bringing these two great companies together will allow us to transcend what we have accomplished as individual businesses and reinvent our industry as the technology leader and partner of choice.”
“We believe AMD and ATI will drive growth and innovation for the entire industry, enabling our partners to create differentiated solutions and empowering our customers to choose what is best for them,” he adds.
“This combination means accelerated growth for ATI, and broader horizons for our employees,” ATI President and CEO Dave Orton says. “All of our product lines will benefit. Joining with AMD will enable us to innovate aggressively on the PC platform, and continue to invest significantly in our consumer business to stay in front of our markets.”
ATI has received an opinion from its financial advisors that the transaction from a financial point of view is fair to its shareholders. The transaction has been unanimously approved by the board of directors of each company. The transaction is subject to ATI shareholder approval, Canadian court supervision of a plan of arrangement, and other regulatory approvals including merger notification filings in the US, Canada and other jurisdictions, as well as customary closing conditions.
If the transaction does not close, ATI has agreed to pay AMD a termination fee of US$162.0-million. The transaction is expected to be completed in the fourth quarter of 2006.
AMD says it expects that the transaction will be slightly accretive to earnings in 2007, and meaningfully accretive in 2008, before the inclusion of ATI acquisition–related charges, based upon AMD’s plans to deliver more integrated and advanced platform solutions and improve its position in commercial clients, mobile computing, gaming, media and emerging markets.
AMD says it expects to reduce operating expenses by US$75-million for the combined company by the end of 2007.
