AMD and ATI in US$5.4bn merger

24 Jul 2006

One of Intel’s fiercest rivals AMD has confirmed this afternoon that it is to merge with ATI in a transaction valued at around US$5.4bn. The merger will result in a formidable chip company that will combine AMD’s microprocessor technologies with ATI’s strengths in graphics.

Under the terms of the transaction, AMD will acquire all of the outstanding common shares of ATI for a combination of $4.2bn in cash and 57 million shares of AMD common stock, based on the number of shares of ATI common stock outstanding on 21 July.

AMD says it will finance the cash portion of the transaction with a combination of cash and new debt. AMD has obtained a US$2.5bn 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$3bn, provides full funding for the transaction.

ATI said it has received an opinion from its financial advisors that the transaction from a financial point of view is fair to its shareholders. The transaction was unanimously approved by the board of directors of each company.

“ATI shares our passion and complements our strengths: technology leadership and customer-centric innovation,” said AMD chairman and CEO Hector Ruiz.

“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,” Ruiz said.

If the transaction, which is subject to ATI shareholder approval, fails to close, ATIO has agreed to pay AMD a termination fee of US$162m.

The transaction is expected to be completed by the fourth quarter of this year.

“This combination means accelerated growth for ATI and broader horizons for our employees,” said Dave Orton, president and CEO of ATI. “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.”

“Windows Vista will deliver incredible advances in the user experience as a result of advancements in graphics integration and performance,” said Jim Allchin, co-president of Microsoft’s platforms and services division. “We’re excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further.”

By John Kennedy