AMD (AMD) and the Advanced Technology Investment Company (ATIC) of Abu Dhabi have announced the creation of a U.S.-headquartered, leading-edge semiconductor manufacturing company to address growing demand for independent, leading-edge foundry production capabilities. The new global company, to be temporarily called “The Foundry Company”, will serve this need by combining advanced process technology, industry-leading manufacturing facilities and aggressive plans to expand its global capacity footprint. At the same time, the Mubadala Development Company will increase its current investment in AMD to 19.3 percent on a fully diluted basis.
AMD will contribute to The Foundry Company its manufacturing facilities, including two fabrication facilities in Dresden, Germany, as well as related assets and intellectual property rights. ATIC will invest US$2.1 billion to purchase its stake in The Foundry Company, of which it will invest US$1.4 billion directly in the new entity and the remainder will be paid to AMD to purchase additional shares in The Foundry Company. The Foundry Company will also assume approximately US$1.2 billion of AMD’s existing debt. ATIC has committed additional equity funding to The Foundry Company of a minimum of US$3.6 billion and up to US$6.0 billion over the next five years to fund the expansion of The Foundry Company’s chip-making capacity beyond the manufacturing facilities initially contributed by AMD. These funds will be used by The Foundry Company to (i) proceed with capacity expansion at its fabs in Dresden, Germany, including an upgrade of one of its fabs to a state-of-the-art facility, and (ii) begin construction on a new state-of-the-art facility in Saratoga County, New York, subject to the transfer of previously-approved New York State incentives. The New York facility is expected to create more than 1,400 direct jobs, and, through its operation, to generate an additional 5,000 jobs in the region. Once operational, the New York facility will be the only independently-managed, leading-edge semiconductor manufacturing foundry in the United States.
Global demand for independent foundry manufacturing is growing because leading semiconductor companies are exiting manufacturing, as the cost and complexity increases and capital and research and development costs have become too high. In addition, the world’s requirements for devices that use more advanced semiconductors continue to grow, and the IBM technology alliance, to which The Foundry Company will belong, creates an increasingly larger foundation for semiconductor innovation.
The Board of Directors of The Foundry Company will be equally divided between representatives of AMD and ATIC. AMD will own 44.4 percent and ATIC will own 55.6 percent of The Foundry Company’s fully-converted common stock upon its formation.
Doug Grose will relinquish his current role as AMD’s senior vice president of manufacturing operations to become chief executive officer of The Foundry Company. Hector Ruiz will relinquish his current role as AMD’s executive chairman and chairman of the board to become chairman of The Foundry Company. To augment its announced leadership, the new company plans an aggressive recruitment strategy to round out a world-class semiconductor manufacturing leadership team.
ATIC is an investment company formed by the government of Abu Dhabi to invest in advanced technology opportunities that require patient capital and long-term time horizons to achieve economic returns while also increasing the economic diversification of Abu Dhabi. While it enhances its capabilities specific to the transaction, ATIC will enter into a 12-month agreement with Mubadala to project manage ATIC’s interest in The Foundry Company.
As a result of the transactions, AMD will strengthen its financial position and focus on the design and development of innovative computing and graphics solutions. AMD will improve its liquidity through The Foundry Company’s assumption of approximately US$1.2 billion in debt, ATIC’s US$700 million payment to AMD for ownership interests in The Foundry Company and Mubadala’s US$314 million paid to AMD for 58 million newly issued AMD shares and warrants for 30 million additional shares.
Mubadala, an existing 8.1 percent AMD shareholder, will increase its stake to 19.3 percent of outstanding AMD shares on a fully diluted basis. This will be accomplished through the purchase for US$314 million of 58 million newly issued AMD shares and warrants for 30 million additional shares. Mubadala will also have the right to appoint a designee to AMD’s board of directors.
The Foundry Company will join the IBM joint development alliance for both silicon-on-insulator (SOI) and bulk silicon through the 22nm generation. The alliance consists of a group of leading semiconductor companies collaborating on next generation silicon technologies.
Upon closing of the transaction, The Foundry Company will commence operations with approximately 3,000 employees who will transition into the new company from AMD facilities in Silicon Valley, New York, Dresden, and Austin. The new company’s principal headquarters will be in Silicon Valley and its research and development and manufacturing leadership teams and ecosystems will be based in New York, Dresden, and Austin. After the upgrade and expansion in Dresden and the build-out of the New York facility, The Foundry Company envisions expanding its global manufacturing footprint over time, if commercially justified, to also include new fabrication facilities in Abu Dhabi.
The transaction is expected to close at the beginning of 2009 following satisfaction of conditions such as approvals from regulators, transfer of previously-confirmed New York incentives to The Foundry Company, and the approval of AMD stockholders for the issuance of common stock and warrants to Mubadala. Prior to closing, AMD, ATIC and Mubadala will file a joint voluntary notice of the transaction for review by the Committee on Foreign Investment in the United States (CFIUS), a government inter-agency committee chaired by the Secretary of the Treasury.
Upon closing, The Foundry Company will:
· Have a total enterprise value of US$5.0 billion, consisting of AMD's contribution of manufacturing assets and intellectual property (including its fabrication facilities in Dresden), intellectual capital and employees valued together at US$2.4 billion; ATIC's contribution of US$1.4 billion in new capital; and US$1.2 billion of debt assumed by The Foundry Company from AMD;
· Be consolidated with AMD for purposes of financial reporting;
· Have a board of directors whose membership is equally divided between representatives of AMD and ATIC;
· Have only AMD and ATIC as stockholders, each of which at the closing will have equal voting rights;
· Be owned 44.4 percent by AMD and 55.6 percent by ATIC on a fully converted to common basis. ATIC’s economic ownership will increase over time based on the differences in securities held by AMD and ATIC, and depending on whether AMD elects to invest proportionately with ATIC in future capital infusions to support The Foundry Company’s growth;
· Have its principal headquarters in Silicon Valley, and its research and development and manufacturing leadership teams and ecosystems in New York, Dresden, and Austin;
· Have an exclusive supply agreement with limited exceptions to manufacture AMD processors and to manufacture, where competitive, certain percentages of other AMD semiconductor products;
· Begin construction of the Fab 4X manufacturing facility in New York in the middle of 2009, directly employing more than 1,400 workers in Upstate New York when the facility is in full operation;
· Expect to increase capacity through completing the 300mm conversion of a second state-of-the-art facility in Dresden in 2009;
· Join the IBM technology development alliance for both SOI and bulk silicon technology, greatly expanding the addressable market of The Foundry Company;
· After the upgrade and expansion in Dresden and the build-out of the New York facility, The Foundry Company envisions expanding its global manufacturing footprint over time, if commercially justified, to also include new fabrication facilities in Abu Dhabi; and
· Announce its permanent corporate name and identity.
Upon closing, AMD will:
· Have equal voting rights with ATIC in The Foundry Company;
· Own 44.4 percent of The Foundry Company on a fully converted to common basis;
· Improve its liquidity through The Foundry Company’s assumption of approximately US$1.2 billion of AMD’s debt, ATIC’s US$700 million payment to AMD for ownership interests in The Foundry Company and Mubadala’s purchase for US$314 million of 58 million newly issued AMD shares and warrants for 30 million additional shares;
· Tightly focus on the design and development of the next generation of innovation based on the fusion of computing and graphics processing;
· Elect a Mubadala designee as a member of its board of directors;
· Excluding its consolidation of The Foundry Company for financial reporting purposes, improve its net cash position by US$2.1 billion, through The Foundry Company’s assumption of approximately US$1.1 billion in debt (net of approximately US$100 million cash transferred by AMD to The Foundry Company) and cash payments from ATIC and Mubadala aggregating US$1.0 billion;
· Have the option, but not any requirement, to provide additional capital funding to The Foundry Company in response to future capital calls; and
· Have an exclusive supply agreement with The Foundry Company, with limited exceptions, to manufacture AMD processors and to manufacture, where competitive, certain percentages of other AMD semiconductor products.
Upon closing, ATIC will:
· Have equal voting rights with AMD in The Foundry Company;
· Own 55.6 percent of The Foundry Company on a fully converted to common basis;
· Invest an initial US$2.1 billion, of which US$1.4 billion will be invested directly in the new company and US$700 million will be paid directly to AMD;
· Commit a minimum of US$3.6 billion and up to US$6.0 billion in additional funds over the next five years for the upgrade and expansion of fabrication facilities in Dresden and construction of a new facility in Upstate New York.
Upon closing, Mubadala will:
· Purchase for an aggregate of US$314 million 58 million newly issued AMD shares and warrants for 30 million additional shares, giving it a total stake in AMD of 19.3 percent on a fully diluted basis; and
· Have a right to designate a representative for election as a member of the board of directors of AMD.
Advanced Micro DevicesThe Advanced Technology Investment CompanyThe Foundry CompanyMubadala Development Company
