AMD, Saudi company tie up to manufacture semi-conducters

AMD and the Advanced Technology Investment Company (ATIC) of Abu Dhabi Wednesday announced the creation of a U.S.-headquartered, semiconductor manufacturing company. At the same time, the Mubadala Development Company will increase its current investment in AMD to 19.3 percent on a fully diluted basis.

A press release informs that 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 (Rs. 101.8 billion) to purchase its stake in The Foundry Company, of which it will invest $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 $1.2 billion of AMD's existing debt. ATIC has committed additional equity funding to The Foundry Company of a minimum of $3.6 billion and up to $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 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 to begin construction on a new facility in Saratoga County, New York, subject to the transfer of previously-approved New York State incentives.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.

The release further claims that as a result of the transactions, AMD will strengthen its financial position and improve its liquidity through The Foundry Company's assumption of approximately $1.2 billion in debt, ATIC's $700 million payment to AMD for ownership interests in The Foundry Company and Mubadala's $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 $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.

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.