A week ago, when we first heard the news about late-stage talks between California-based chipmakers AMD and Xilinx, headlines touted a $30 billion megadeal, the latest in a massive wave of consolidation across the semiconductor industry that’s occuring amid unprecedented trade disruption caused by President Trump’s campaign against Huawei, a major customer for the world’s largest chipmakers, including American giants like Qualcomm.
Investors responded positively when the $30 billion pricetag first hit, but now that we have some more clarity on the deal, Bloomberg is reporting that AMD has agreed to a pricetag of $35 billion all in stock, with no debt added to the combined company’s balance sheet.
Xilinx investors will get 1.7234 AMD shares for each Xilinx stock they own. That values Xilinx at about $143 a share, 25% more than the closing price on Monday and 35% above the price before news of a possible deal was reported earlier in October. The company’s shares were up 11% in premarket trade.
AMD shares took a hit on news of the higher pricetag, though shareholders will own 74% of the combined company once the deal is completed.
AMD said in a statement that it expects to achieve “operational efficiencies” of $300 million within 18 months of closing the transaction.
The “combination will create the industry’s leading high performance computing company,” the companies said in the statement, adding that the deal is expected to close by the end of 2021.
Notably, the deal is a major win for Lisa Su, the CEO of AMD, who will lead the combined venture, with Xilinx President and CEO Victor Peng joining on as AMD president responsible for strategic growth and ‘strategic growth initiatives’ tied to the Xilinx business.
Incidentally, the deal is also a major coup for Morgan Stanley’s technology practice.