Yesterday, the boards of AMD and ATI approved a merger whereby AMD will acquire the Canadian graphics card maker for $5.4 billion, reports Arstechnica, ZDNet, C/Net and TG Daily.
Not long after the news of the possible acquisition became public, Ars took a look at the technologies and finances involved in a marriage of the CPU and GPU makers. From AMD’s perspective, the deal makes sense because it would address a weak spot in the company’s lineup: the lack of a complete CPU and chipset solution like Intel has.
As of the close of trading on Friday, ATI had a market cap of $4.2 billion, while AMD has an $8.84 billion market cap. AMD’s latest 8-K filing, dated July 20, 2006 indicates that it has $2.53 billion in cash on hand, making a combined cash and stock acquisition feasible. It’s a combination cash and stock deal, where AMD will pay ATI shareholders the equivalent of $20.47 per share—$16.40 of that will be cash, the rest AMD stock.
The deal also gives AMD an entry into the cell phone and digital TV markets, as ATI makes chips for those products.
Intel has pulled ATI’s chipset license, meaning that there will be no more ATI chipsets for Intel processors after the end of the year.
Another possible bump in the postacquisition road would be AMD’s relationship with NVIDIA, says Arstechnica. NVIDIA could be driven into some sort of strategic partnership with Intel to counter a combined AMD and ATI. AMD will need to convince NVIDIA that it will be treated evenly and given the same access to technical information necessary to continue supporting and competing on the AMD platform.
The acquisition will be completed during 4Q 2006 if the deal is approved by ATI shareholders.
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