Print 45 comment(s) - last by Alpha4.. on Feb 26 at 5:56 PM

Khaldoun Khalifah Al Mubarak, CEO of Mubadala
Provides cash infusion to trim debt

Shareholders of Advanced Micro Devices have approved the financial transactions necessary for the formation of "The Foundry Company" at a second special vote in Austin, Texas. This allows AMD to spin off its fabs into a joint venture with the Advanced Technology Investment Company (ATIC), wholly owned by the Emirate of Abu Dhabi.
At the first special meeting on February 10, only 42% of AMD's shares were presented. This shook investor confidence in AMD's ability to close the deal, leading to a sharp drop in AMD's stock price. AMD has been criticized for not allowing enough time for shareholders to prepare and submit their votes.

There were a total of 608,725,020 outstanding shares of AMD stock on January 15, the date of record to denote those shareholders who were eligible to vote. Of that total, only 305,951,749 shares were actually registered to vote by proxy or present at this second special meeting. This means that only 50.26% of outstanding stock was actually presented, barely passing the required majority to form a quorum.

The final results were 289,045,519 shares in favor, 7,269,962 shares against, and 9,636,268 shares abstaining. 94.47% of shares presented voted in favor, but the low turnout means that only 47.48% of all outstanding shares were actually voted in favor of the deal, which is expected to close by March 2, 2009.

The approved transactions include the issue and sale of 58 million shares of AMD's common stock to West Coast Hitech (WCH), a Cayman Island based holding company. It is a wholly owned subsidiary of Mubadala Development, a sovereign wealth fund owned by the government of Abu Dhabi. WCH currently owns 8.05% of AMD due to an earlier investment. Due to rules set out by the Securities and Exchange Commission, this meant that the acquisition of the additional shares required a special vote by shareholders, which have now allowed WCH to own 16.05% of AMD when the deal closes.

A separate but related agreement sells WCH warrants to purchase an additional 35 million shares. If exercised, WCH will own 142 million shares, accounting for 19.9% of AMD on a fully diluted basis, including outstanding stock options and restricted stock units.

A point of contention was raised by an angry shareholder at the meeting, who pointed out that AMD's board of directors approved a $3,000,000 transaction bonus to Hector Ruiz, AMD's Executive Chairman.

Ruiz, who has been heavily criticized for his poor management of AMD after the departure of the legendary Jerry Sanders, will become the Chairman of The Foundry Company. His base salary will be $1,150,000 per year, but he will also be eligible for a targeted annual bonus opportunity of 200% of his base salary, with a maximum annual bonus opportunity at 400% of his base salary.

The Foundry Company will assume ownership of all AMD's fabs, in an effort to lower AMD's debt burden. The new firm will seek to compete against other foundries such as UMC (United Microelectronics Corporation), Chartered Semiconductor, and TSMC (Taiwan Semiconductor Manufacturing Company), which currently produces AMD's graphics chips.

AMD will contribute its fabs, manufacturing employees, intellectual property rights, and other related assets to the new joint venture, which will then assume $1.2 billion in debt from AMD. ATIC will invest $2.1 billion to purchase its ownership stake in The Foundry Company, of which $700 million will go directly to AMD. The other $1.4 billion will provide capital funding.

AMD and ATIC will each own 50% of the voting shares, entitling each to elect four directors of The Foundry Company. AMD will own 34.2%, with the remaining 65.8% owned by ATIC, which may see its ownership increase over time based on future capital infusions of up to $6 billion.

The details of the entire deal can be found in AMD's 433 page proxy statement here.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: Ruiz's Salary
By SunAngel on 2/18/2009 10:12:11 PM , Rating: 0
I mentioned this before and i'll mention it again, Ruiz was not all that bad. Fighting the giant and having to compete in a crappy economy is what made things seems worse than they were. Yes, Ruiz took some gambles and they did not pay-off, yet, had they did he would have been regarded as hero for the small guy.

Intel (Noyce) faced the same predicament when IBM made them license out the technology to increase supply. They were getting whooped at memory chip sales. Had it not been for IBM, Intel would be dead today. However, luckily for Intel, no one saw the potential in AMD and thus Intel ruled the PC market.

RE: Ruiz's Salary
By Pryde on 2/18/2009 10:43:42 PM , Rating: 5
During the early days of producing Micro Processors problems could stop production for weeks. This disrupted the processors getting to customers. To reduce the risk of supply troubles, IBM insisted that multiple manufacturers produce the chips.

If it was not for Intel letting AMD produce there chips under the second-source agreement with IBM, then AMD would have died producing memory chips. AMD first in house x86 CPU was not produced until 1996.

RE: Ruiz's Salary
By SunAngel on 2/18/09, Rating: 0
RE: Ruiz's Salary
By sweetsauce on 2/19/2009 10:41:37 AM , Rating: 3
Had AMD won the bid, guess who we be rooting for today.
I got a better what/if scenario for you. What if my aunt was born with a penis? Then she'd be my uncle. About as relevant as your what/if scenario for AMD.

RE: Ruiz's Salary
By SunAngel on 2/19/09, Rating: 0
RE: Ruiz's Salary
By kbehrens on 2/18/2009 10:45:26 PM , Rating: 3
Buying ATI was a stupid move. Yeah, it had a bunch of positives for the future, but it dilutes their core focus and sunk them in a virtual mountain of debt. Now they have to spin off their foundry business just to stay afloat? Not good.

RE: Ruiz's Salary
By Targon on 2/19/2009 8:28:07 AM , Rating: 3
A big issue that AMD could not anticipate was what happened to the global economic problems that have been causing no end to problems. The ATI purchase has even been a GOOD thing, because the Radeon 4870 really is doing well. Yes, there was increased debt, but AMD would be having even greater problems without the income from the graphics division.

In addition to this, the work that AMD has done with process technology improvements can be applied to the graphics division, which WILL help the graphics division even more going forward. When AMD moves to that 32nm process, do you really think that NVIDIA will get there before AMD does? AMD will get a nice boost there as well.

AMD spun off their fab business to help how things look on paper, but in general, the key was to get funding. Unlike the financial and auto industries, you are not seeing AMD and Intel crying to the federal government for a bailout, because they ARE able to survive this economic climate.

RE: Ruiz's Salary
By phazers on 2/19/2009 12:12:08 PM , Rating: 3
Yes, there was increased debt, but AMD would be having even greater problems without the income from the graphics division.

To date, AMD's ATI division has made a profit in only one quarter - Q3 of last year. Last quarter it lost $10. Q3 it made $50M. The $50M didn't even cover the debt on the loan.

So your reasoning is akin to that of a guy who buys a Lexus to get into the pizza delivery business. Yeah, he made a profit one week, but ultimately got repo'ed because he couldn't make the loan payments.

“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads
Related Articles

Most Popular ArticlesAre you ready for this ? HyperDrive Aircraft
September 24, 2016, 9:29 AM
Leaked – Samsung S8 is a Dream and a Dream 2
September 25, 2016, 8:00 AM
Inspiron Laptops & 2-in-1 PCs
September 25, 2016, 9:00 AM
Snapchat’s New Sunglasses are a Spectacle – No Pun Intended
September 24, 2016, 9:02 AM
Walmart may get "Robot Shopping Carts?"
September 17, 2016, 6:01 AM

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki