AMD acquires ATI for $5.4 billion

A designer, manufacturer and marketer of industry-standard digital integrated circuits (ICs), Advanced Micro Devices Inc (AMD), said on Monday it would acquire top graphics chip maker ATI Technologies Inc. for $ 5.4 billion in cash and stock to expand its product mix and grow market share as it battles Intel Corp.

Under terms sanctioned unanimously by both companies' boards of directors, Sunnyvale California-based AMD will pay $ 4.2 billion in cash and 57 million AMD shares to take possession of all of ATI's outstanding stock, according to a news release.

The No. 2 supplier of computer processors, AMD said it would pay $ 20.47 for each ATI share. That marks a 24% premium over graphics chip maker's closing stock price of $ 16.56 on NASDAQ on Friday. The stock added another 7% to $ 17.68 in after-hours trading amid media reports of the expected deal.

The consideration for each outstanding share of Markham, Ontario-based ATI comprises $ 16.40 in cash and 0.2229 shares of AMD common stock, the companies said. AMD said it expects to finance the cash portion of the transaction with a combination of cash and new debt.

AMD, which has been disbursing billions to add factory capacity, so it can better compete with Intel Corp., will assume $ 2.5 billion in debt from Morgan Stanley Senior Funding, together with combined existing cash, cash equivalents, and short-term investment balances of about $ 3 billion, to help fund the purchase.

An acquirement of ATI “would make AMD a bigger player with a more diversified portfolio," said Nathan Brookwood, an analyst with research firm Insight 64. It "would certainly put AMD on a more equal footing relative to Intel," he added.