AMD and ATI will join forces in a transaction valued at approximately $5.4 billion. The combination will create a processing powerhouse by bringing AMDs technology leadership in microprocessors together with ATIs strengths in graphics, chipsets and consumer electronics. The result: A new and more formidable company, determined to drive growth, innovation and choice for its customers, particularly in the commercial and mobile computing segments and in the rapidly growing consumer electronics market. Combining technologies, people and complementary strengths, AMD plans to deliver in 2007 customer-centric platforms for the benefit of customers who want to collaborate in the development of differentiated solutions.
AMDs acquisition of ATI will position the new company to deliver innovations that fulfill the increasing demand for more integrated solutions in key market segments while also continuing to develop best-of-breed discrete products that empower customers to choose the combination of technologies that best serves their needs. In 2008 and beyond, AMD aims 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 performance.
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 21, 2006. All outstanding options and RSUs of ATI will be assumed. Based upon the closing price of AMD common stock on July 21 of $18.26 a share, the consideration for each outstanding share of ATI common stock would be $20.47, 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 Inc., which, together with combined existing cash, cash equivalents and short-term investments balances of approximately $3.0 billion, provides full funding for the transaction.
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 was 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 U.S., Canada and other jurisdictions, as well as customary closing conditions. In the event that the transaction does not close, ATI has agreed to pay AMD a termination fee of $162 million under circumstances specified in the acquisition agreement. The transaction is expected to be completed in the fourth quarter of 2006.
ATI shares our passion and complements our strengths: technology leadership and customer centric innovation, said AMD chairman/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/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 Microsofts Platforms & Services division. Were excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further.
AMD expects that the transaction will be slightly accretive to earnings in 2007, and meaningfully accretive in 2008, before the inclusion of ATI acquisitionrelated charges, based upon AMDs plans to deliver more integrated and advanced platform solutions and thereby improve its position in commercial clients, mobile computing, gaming, media and emerging markets. AMD anticipates that it will reduce operating expenses by approximately $75 million for the combined company by the end of 2007.
The combined company would have achieved approximately $7.3 billion in total consolidated sales during the last four quarters with a workforce of approximately 15,000 employees. Headquartered in Sunnyvale, California, the company will maintain sales, design and manufacturing centers worldwide and major business centers in Silicon Valley, Austin, Texas and Markham, Ontario: all valued centers of innovation for the combined company. AMDs current executive team will be complemented by the addition of ATI president/ceo Dave Orton, who will serve as an evp of the ATI business division, reporting to the AMD office of the ceo, comprised of chairman/ceo Ruiz and president/coo Dirk Meyer. In addition, under the terms of the acquisition agreement, two ATI directors will join AMDs board of directors upon closing of the transaction.
Advanced Micro Devices (www.amd.com) is a leading global provider of innovative microprocessor solutions for computing, communications and consumer electronics markets. Founded in 1969, AMD is dedicated to delivering superior computing solutions based on customer needs that empower users worldwide.
ATI Technologies Inc. (www.ati.com) is a world leader in the design and manufacture of innovative 3D graphics, PC platform technologies and digital media silicon solutions. An industry pioneer since 1985, ATI is one of the foremost graphics processor unit (GPU) provider and is dedicated to deliver leading-edge performance solutions for the full range of PC and Mac desktop and notebook platforms, workstation, set-top and digital television, game console and handheld device markets. With fiscal 2005 revenues of $2.2 billion, ATI has approximately 4,000 employees in the Americas, Europe and Asia.