Confirmed: AMD To Acquire ATI

Officials from computer processor manufacturer Advanced Micro Devices (AMD) have confirmed rumors that the company will acquire graphics chip maker ATI Technologies in a cash and stock deal worth $5.4 billion. The company indicated that the acquisition had been made in order to increase its presence in the commercial and mobile computing segments, as well as the consumer electronics market. The company now plans to market “customer-centric platforms” in 2007 using integrated technologies from both companies. Under the terms of the transaction, AMD will acquire all of the outstanding common shares of ATI for a combination of $4.2 billion in cash and 57 million shares of AMD common stock, based on the number of shares of ATI common stock outstanding on July 21st, 2006. AMD will pay $20.47 per share for each share of ATI, marking a 24 percent premium over ATI's closing stock price of $16.56 on Nasdaq on Friday. The consideration for each outstanding share of ATI is comprised of $16.40 of cash and 0.2229 shares of AMD common stock. AMD anticipates it will finance the cash portion of the transaction with a combination of cash and new debt. AMD has obtained a $2.5 billion term loan commitment from Morgan Stanley Senior Funding which, together with combined existing cash, cash equivalents and short term investments balances of approximately $3.0 billion, provides the funding for the transaction. Although rumored since May of this year analysts had questioned the financial and strategic wisdom of AMD acquiring ATI outright. Additionally, the move could have important repercussions for the games industry, with the question of continued ATI support for Intel chipsets currently unclear. The ramifications for ATI rival NVidia’s support for AMD chipsets is also now in question. The acquisition though is not expected to have any effect on the use of ATI technology in the Xbox 360 and Wii – both of which use IBM PowerPC processors. “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.” “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.”