AMD Acquires ATI, Plans New Kinds of Processors

Advanced Micro Devices confirmed weekend rumors Monday morning that it is buying graphics and chipset specialist ATI Technologies in a $5.4 billion cash and stock deal.

The Sunnyvale, Calif.-based AMD will acquire all the outstanding stock of ATI for $4.3 billion and 57 million shares of AMD common stock based on the July 21 closing price of $18.26 a share.

The acquisition combines the world’s number two chipmaker with the largest graphics chipmaker for laptops and notebooks. AMD expects to close the deal by the fourth quarter of this year.

“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,” AMD Chairman and CEO Hector Ruiz said in a statement.

AMD said it will finance part of the cash portion of the deal with a $2.5 billion term loan commitment from Morgan Stanley Senior Funding.

“This combination means accelerated growth for ATI and broader horizons for our employees,” Dave Orton, president and CEO of the Canadian-based ATI, said in a joint statement with AMD.

He added, “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.”

In its official announcement, AMD said it “aims to move beyond current technological configurations” with “platforms that integrate microprocessors and graphics processors to address the growing need for general-purpose, media-centric, data-centric, and graphics-centric performance.”

A final centric will be “customer-centric platforms [for] customers who want to collaborate in the development of differentiated solutions,” which the company plans to deliver in 2007.

Orton will serve as executive vice president of the ATI business division, reporting to Ruiz and AMD Chief Operating Officer Dirk Meyer. In addition, two ATI directors will join AMD’s board of directors.

“ATI shares our passion and complements our strengths: technology leadership and customer centric innovation,” Ruiz said. “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.”

While the deal has received approval of each company’s board of directors, the transaction still faces ATI shareholder approval, as well as customary closing conditions.

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