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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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RE: if this goes through...
By Torched on 7/22/2006 8:50:23 AM , Rating: 3
Everyone needs to hold on for just a sec. Most everyone's comments are assuming AMD will let ATI keep its brand name... If the chipsets are rebranded to AMD how will you feel about nvidia's position then??? It will no longer have any major competition from a 3rd party vendor. AMD could then sell any part of the acquisition it felt like... i.e. crossfire. They may even just dump the tech all together and consolidate the industry to SLI. It would not be that hard for them to tack on the sli to the ati chipset. Besides... can anyone see an AMD branded video card? Its not like Intel sells stand alone video cards. This is why I see AMD dumping the video card to another third party and keeping what it needs for just chipsets and physics.

RE: if this goes through...
By TheDoc9 on 7/22/2006 11:38:57 AM , Rating: 1
exactly. This is probably the situation, I was going to mention it myself If I hadn't seen it.

What will most likely happen, NVIDIA will be the *only major player for graphics now. ATI will simply be disolved. The Nforce will probably all but disapear all together, only NVIDIA's GPU's (in the form of add-in cards and for notebooks) will continue to be produced.

In many ways this is a good move for AMD. BAD for the graphics competition for NVIDIA.

RE: if this goes through...
By Ard on 7/24/2006 2:15:37 AM , Rating: 2
That is not likely to happen as this is being labeled as an acquisition, not a merger. In an acquisition, both companies retain their identity. There's also the issue regarding the fact that ATI brings in a good chunk of money with their graphics division, money that AMD isn't going to just throw away. What is more likely to happen is that ATI will become a wholly owned subsidiary of AMD and still produce GPUs, while producing a solid chipset platform that AMD can label as their own.

RE: if this goes through...
By rushfan2006 on 7/24/2006 3:07:54 PM , Rating: 2
Exactly. I think some folks are getting a little carried away with their scenarios -- making more drama out of it than what is likely the truth. Its billed as an acquisition. Chances are ATI will me become "a subsidiary of AMD, inc."....

RE: if this goes through...
By Torched on 7/24/2006 10:39:42 PM , Rating: 2
First off, this is a takeover. Be certain that Dave Orton and crew are now answering to Hector and Dirk now. What you say will happen in the short term but once the whole of ATI is under the AMD corporate umbrella, there will be no more need for the ATI brand name. Everything will be AMD.
Once again, in the long term, AMD will be able to spin off any division it wants to. It will own all the IP ATI has now and be able to licence the tech to Nvidia if it so chooses. On the other hand, if AMD wanted to keep Nvidia a close partner, they could easily dump Crossfire and keep everyone happy.
All this is great speculation but the greatest, and probably the entire reason for the take-over, is that AMD wanted a GPU to be integrated on die. You can take this to the bank. When this happens you can kiss the decrete graphics industry goodbye. Don't be mistaken that Intel will be left out either. I think they will come to market with a CPU-GPU quicker than AMD-ATI will.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke
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