AMD in $35 Billion All-Stock Acquisition of Xilinxby Dr. Ian Cutress on October 27, 2020 6:53 AM EST
After a couple of weeks of rumor, as well as a couple of years of hearsay, AMD has gone feet first into a full acquisition of FPGA manufacturer Xilinx. The deal involves an all-stock transaction, leveraging AMD’s sizeable share price in order to enable an equivalent $143 per Xilinx share – current AMD stockholders will still own 74% of the combined company, while Xilinx stockholders will own 26%. The combined $135 billion entity will total 13000 engineers, and expand AMD’s total addressable market to $110 Billion. It is believed that the key reasons for the acquisition lie in Xilinx’s adaptive computing solutions for the data center market.
AMD CEO Dr. Lisa Su
“Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world. This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company. The Xilinx team is one of the strongest in the industry and we are thrilled to welcome them to the AMD family. By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent and scale to define the future of high performance computing.”
Xilinx CEO Victor Peng
“We are excited to join the AMD family. Our shared cultures of innovation, excellence and collaboration make this an ideal combination. Together, we will lead the new era of high performance and adaptive computing. Our leading FPGAs, Adaptive SoCs, accelerator and SmartNIC solutions enable innovation from the cloud, to the edge and end devices. We empower our customers to deploy differentiated platforms to market faster, and with optimal efficiency and performance. Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets.”
As part of the acquisition, Victor Peng will join AMD as president responsible for the Xilinx business, and at least two Xilinx directors will join the AMD Board of Directors upon closing.
Part of the enablement of the acquisition is AMD leveraging its market capitalization of ~$100 billion, and a lot of the industry will draw parallels of Intel’s acquisition of FPGA-manufacturer Altera in December 2015 for $16.7 billion. The high-performance FPGA markets, as well as SmartNICs, adaptive SoCs, and other controllable logic, reside naturally in the data center markets more than most other markets. With AMD’s recent growth in the enterprise space with its Zen-based EPYC processor lines, a natural evolution one might conclude would be synergizing high-performance compute with adaptable logic under one roof, which is precisely the conclusion that Intel also came to several years ago. AMD reported last quarter that it had broken above the 10% market share in Enterprise with its EPYC product lines, and today’s earnings call is also expected to see growth. AMD is already reporting revenue up +56% year on year company-wide, with +116% in the Enterprise, Embedded, and Semi-Custom markets.
The press release states that AMD expects to save $300m in synergistic operational efficiencies within 18 months of closing, due to streamlining shared infrastructure. The deal has been unanimously approved by both sets of directors, and is subject to approval of both sets of shareholders. The transaction is expected to close by the end of Calendar Year 2021.
AMD shares are currently down 5% before the market opens. A conference call will be held at 8am ET to discuss AMD’s Third Quarter Financial results and acquisition plans.
AMD's key product lines includes its Zen based processor lines such as Ryzen and EPYC, its Graphics division for Radeon and Radeon Instinct, and its semi-custom and embedded division which has been developing the latest generation of console processors for both Sony and Microsoft.
Xilinx recently entered the market with its Versal Alveo Adaptive SoCs, built as combination programmable logic plus hardened compute logic and specialized co-processors and accelerators. Its FPGA families include Spartan, Zynq, Artix, Kintex, Virtex, and Virtex Ultrascale, used in a wide variety of commercial, embedded, and enterprise markets, including the hardware used to design processors of the future.
Source: Press Release
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Hxx - Tuesday, October 27, 2020 - link>You seem to be confused, for the investors stock = cash. For the company stock = ownership
so stock = investment not short term cash withdrawals. For a company stock = additional risk which they need to mitigate for the current investors
Endymio - Wednesday, October 28, 2020 - linkErr, stock swap deals result in dilution, which makes it both more difficult and more costly for corporations to raise cash. AMD's debt is low at the moment, so this may not be troublesome, but if they do get in a cash pinch in next several years, this deal very well may come back to bite them.
Hxx - Tuesday, October 27, 2020 - linkso stock transactions are stock for assets. The only cash being spent (there is no such thing as stock being spent) is on legal fees, transaction related fees, etc and those are nominal compared to the actual transaction. so in this case, AMD acquires all assets of said company in exchange for issuing stock to said company stockholders.
Irata - Tuesday, October 27, 2020 - linkHow is it costing AMD cash ? Xilinx shares are being converted to AMD shares. This means overall more shares but the company value is also increased. It does not cost AMD (the company) a single cent.
Spunjji - Wednesday, October 28, 2020 - link"stock = cash at time"
Makaveli - Tuesday, October 27, 2020 - link"Your RGB gaming computer parts are safe."
lmao dude i'm dying thanks for that.
Hifihedgehog - Tuesday, October 27, 2020 - linkCalm down. Xilinx is a financially sound investment. Even if AMD does not themselves leverage Xilinx technologies in the next five years, it is very much a profitable business. Their stock (excluding 2019) has been in an upswing for five years now with about 200% gains.
Hifihedgehog - Tuesday, October 27, 2020 - linkhttps://www.google.com/search?q=xilinx+stock
Spunjji - Wednesday, October 28, 2020 - linkNice! So, a company in a not-dissimilar position to AMD themselves. Seems sensible.
Arsenica - Tuesday, October 27, 2020 - linkXilinx will benefit greatly of the current 5G push as their FPGAs are heavily used by network equipment (thanks to 3GPP standards and their "Long Term Evolution") and because their main competitor is late in delivering their 10nm-class offerings.
Their Engineers would also benefit AMD's other business in the mid term as they have the expertise AMD requires to stop outsourcing chipset design to third parties.