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Reports claim a $5.6B deal is about to close on an unprecedented merger

According to a report in The Globe and Mail, the board of directors at AMD has allegedly approved the takeover of Canadian graphics firm ATI Technologies. The report claims that the information was released by an investment banker that was part of the discussions. According to other sources, AMD executives were also seen at ATI's headquarters in Markham, Ontario. The report indicated that AMD is considering a $5.6 billion takeover bid for ATI.

Speculation and rumors have run rampant over the last several months about the possible merger between AMD and ATI, but no concrete details have been revealed. According to reports on ATI's share prices, the company's shares have been trading at double the usual volume today. Analysts said that AMD would be making an offer of 20 to 40 percent premium to ATI's current share price. ATI shares traded at $16.12 on the NASDAQ today during after hours, which is up 39 cents from yesterday's closing.

Reuters has also picked up on the story, claiming that "Some analysts have questioned the rationale for an AMD-ATI merger, and others were surprised that the speculation received no attention from analysts during AMD's earnings conference call on Thursday."  DailyTech had punched in for question during the investor conference call on Thursday, but a moderator would not respond.

According to Eric Gomberg, an analyst for investment bank Thomas Weisel Partners, "there has been considerable industry speculation that AMD may pursue an acquisition of ATI Technologies, although such an outcome is by no means certain." Gomberg's comment came in earlier this week, but word circulating around investment bankers who are aware of the talks between ATI and AMD surfaced just several hours ago.

Recent reports indicated that Intel roadmaps no longer included ATI chipsets. Although Intel had been producing motherboards using ATI logic, upcoming boards like those that support Core 2 processors are void of any chipset from ATI. Interestingly, ATI and Intel had agreed to several cross-licensing programs that allowed them to take advantage of some of each other's technologies. Several analysts however, indicated that the merger between AMD and ATI to be "out of strategy for AMD and out of focus. Stupidity is no barrier to tech mergers."

A report in the Wall Street Journal confirms the talks between AMD and ATI (subscription required) today. Although the deal is not final, the report said that representatives from both companies declined to comment.

AMD has previously indicated that it would embrace embedded processor technologies for its Torrenza platform -- some of which would include math and physics co-processors.  However, the company has recently exited all non-x86 processor design.

Update 07/24/2006: AMD and ATI jointly announced the confirmation of the $5.4B merger today (July 24, 2006)

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By inthell on 7/22/2006 12:46:53 AM , Rating: 1
good news and good for AMD...damn thats a lot of cash

By Furen on 7/22/2006 12:54:16 AM , Rating: 2
Good news for ATI. ATI is currently valued at 4.2B, if I remember correctly. A 5.6B AMD acquisition would mean a close to 35% appreciation in stock price.

By masher2 on 7/22/2006 1:12:34 PM , Rating: 2
> "A 5.6B AMD acquisition would mean a close to 35% appreciation in stock price. "

It doesn't work that way. The acquiring company typically pays most or all the purchase price in stock issuance or options, which dilutes the share price. Even if they pay in cash, the shareprice doesn't neccesarily depends on the market's view of the acquisition itself. It can rise or fall.

The acquired company, now, is a different story. It's being purchased in toto and, for a publicly traded company, the only was for that to happen is to pay a premium above the market price. So the share price rises, at least slightly so.

By Furen on 7/22/2006 3:08:34 PM , Rating: 2
I am referring to ATI, of course. And yes, I meant that AMD will pay close to 35% premium on its current price. I doubt it'll be a cash-only acquisition, since AMD does not have so much cash but I suppose 3-4B in loans could take care of that (LOL). When I said "A 5.6B AMD acquisition would mean a close to 35% appreciation in stock price" I meant that AMD would acquire it for 5.6B and that would be a 35% premium on ATI's current market cap. I'm fairly certain that AMD's stock will go down a bit as a result of this.

By masher2 on 7/22/2006 3:44:11 PM , Rating: 2
> "I am referring to ATI, of course"

My apologies then; you are correct.

"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov
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