Discussion AMD Acquires Xilinx

[DisEnchantment]

AMD to Acquire Xilinx, Creating the Industry’s High Performance Computing Leader

Browse AMD’s company-wide and financial press releases.

ir.amd.com

Straight from the Horse's mouth

Strategic transaction strengthens AMD’s industry-leading technology portfolio —

• Expands AMD’s rapidly growing data center business
• Xilinx, the No. 1 provider of adaptive computing solutions, increases AMD TAM to $110 billion
• Immediately accretive to AMD margins, cash flow and EPS
• All stock transaction with combined enterprise value of approximately $135 billion

All stock. No Cash. Could not have been a better way to make use of that inflated market valuation.
Lots of people were questioning AMD why they are not capitalizing on their Market valuation. But this is it.

Management and Board of Directors
Dr. Lisa Su will lead the combined company as CEO. Xilinx President and CEO, Victor Peng, will join AMD as president responsible for the Xilinx business and strategic growth initiatives, effective upon closing of the transaction. In addition, at least two Xilinx directors will join the AMD Board of Directors upon closing.

They got decent advisors too.

Advisors
Credit Suisse and DBO Partners are acting as financial advisors to AMD and Latham & Watkins LLP is serving as its legal advisor. Morgan Stanley is acting as lead financial advisor to Xilinx. BofA Securities is also acting as a financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.

Ex AMD rejoins the family bringing Xilinx with him

“We are excited to join the AMD family. Our shared cultures of innovation, excellence and collaboration make this an ideal combination. Together, we will lead the new era of high performance and adaptive computing,” said Victor Peng, Xilinx president and CEO. “Our leading FPGAs, Adaptive SoCs, accelerator and SmartNIC solutions enable innovation from the cloud, to the edge and end devices. We empower our customers to deploy differentiated platforms to market faster, and with optimal efficiency and performance. Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets.”

 

[Antey]

Holly molly

 

[coercitiv]

Anandtech article - https://www.anandtech.com/show/16196/amd-in-35-billion-allstock-acquisition-of-xilinx

 

[DrMrLordX]

The mouse buys the lion? I guess that's what happens when you give the mouse a bunch of market valuation. Great hoogeldy moogeldy.

Things just got . . . complicated.

 

[misuspita]

Yeah, Volkswagen buys Porsche

Kind of, but same thing really.

 

[dzoni2k2]

AMD is 3x bigger than Xilinx so not really.

 

[Jimzz]

AMD is 3x bigger than Xilinx so not really.

Not in terms of revenue.
Market Cap is not a good way to look at a company. MC can be affected by things outside the control of a company and many are way over valued in MC, see Tesla for 1.
Xilinx also has a much better P/E ratio.

AMD is more flashy but Xilinx makes a lot of money without drawing attention. I also think AMD is overvalued right now so this is a good time to throw stock at growth areas since this will cost very little cash to make happen. Weather it pans out is debatable though IMO.

 

[misuspita]

Do you have some approx numbers of their income /market size / relevant stuff?

Thanks in advance

 

[dzoni2k2]

Not in terms of revenue.
Market Cap is not a good way to look at a company. MC can be affected by things outside the control of a company and many are way over valued in MC, see Tesla for 1.
Xilinx also has a much better P/E ratio.

AMD is more flashy but Xilinx makes a lot of money without drawing attention. I also think AMD is overvalued right now so this is a good time to throw stock at growth areas since this will cost very little cash to make happen. Weather it pans out is debatable though IMO.

Oh I agree with everything you wrote it's just not a mouse lion type of transaction.

 

[DrMrLordX]

Actually, according to some cursory searching, Xilinx only managed $3.09 billion in revenue in 2019 vs. AMD's reported revenue of $6.73 billion. I had thought Xilinx was bigger than that.

 

[rainy]

Actually, according to some cursory searching, Xilinx only managed $3.09 billion in revenue in 2019 vs. AMD's reported revenue of $6.73 billion. I had thought Xilinx was bigger than that.

AMD revenue is indeed much higher than Xilinx, however they had in 2019 793 M of net income vs 341 M.
https://www.macrotrends.net/stocks/charts/AMD/amd/net-income
https://www.macrotrends.net/stocks/charts/XLNX/xilinx/net-income

Btw, AMD posted a great Q3: https://www.globenewswire.com/news-...rts-Third-Quarter-2020-Financial-Results.html

 

[moinmoin]

That was faster than expected. Points to a well prepared mutual MA.

With Dan McNamara already at AMD there should be knowledge and experience both how to run the FPGA independently (as Intel does with Altera) but make better use of synergies which I expect to be easier to realize at AMD than it has been at Intel.

All stock. No Cash.

Doesn't that make it more of a merger than an acquisition?

Edit: From the announcement:

Post-closing, current AMD stockholders will own approximately 74 percent of the combined company on a fully diluted basis, while Xilinx stockholders will own approximately 26 percent. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

 

[DisEnchantment]

Doesn't that make it more of a merger than an acquisition?

Seems like it.

The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Xilinx CEO sounded pumped to join AMD, at least that is what he sounded like during today's call.

 

[ThatBuzzkiller]

I don't know if I would describe AMD's market valuation 'inflated' because they look like they have a very solid path to growth for several years ...

New semi-custom contracts, Intel's manufacturing group, performance leadership in both client and enterprise ...

 

[HurleyBird]

I don't know if I would describe AMD's market valuation 'inflated' because they look like they have a very solid path to growth for several years ...

New semi-custom contracts, Intel's manufacturing group, performance leadership in both client and enterprise ...

It looks less inflated now considering the Q3 results, for sure.

 

[amrnuke]

I don't know if I would describe AMD's market valuation 'inflated' because they look like they have a very solid path to growth for several years ...

New semi-custom contracts, Intel's manufacturing group, performance leadership in both client and enterprise ...

Taking a 4% bath today, but it's a reasonable bet to stick with AMD long-term after this merger given that we haven't even seen release or reviews of two potentially great products in the next month.

 

[moinmoin]

Taking a 4% bath today, but it's a reasonable bet to stick with AMD long-term after this merger given that we haven't even seen release or reviews of two potentially great products in the next month.

It's a pretty interesting timing for the announcement, right before great quarter results and a couple major launches (not only Ryzen 5000 and RDNA2, but also the consoles and Milan). If all those launches go well AMD's stock is bound to go up further, making the merger worth even more to the Xilinx shareholders.

 

[Hitman928]

It's a pretty interesting timing for the announcement, right before great quarter results and a couple major launches (not only Ryzen 5000 and RDNA2, but also the consoles and Milan). If all those launches go well AMD's stock is bound to go up further, making the merger worth even more to the Xilinx shareholders.

Yeah, it's actually a value transaction for Xilinx shareholders even by today's standards, they would be getting AMD shares at a decent discount based upon today's prices. Who knows what will happen in the future, but if AMD continues to grow, then it could be a really, really nice payday for Xilinx shareholders. They lose their dividend, but the dividend yield wasn't that great anyway so they'll probably have way more upfront returns than their dividend would pay over the next few years. Of course AMD's stock could crash and all of a sudden it would be a terrible deal, but I don't see a huge crash happening within the next 12 months, not without the whole market crashing along with it.

 

[Ajay]

Great for AMD's custom business, with more to offer (custom FPGA/ASIC chiplets). Great for server and HPC sales with more 'in house' component offerings and, hopefully, a better integrated hardware stack. Looks like good business plan, guess we'll see how it pans out over the next 5 years.

 

[kallisX]

 

[Asterox]

Excellent video, or why AMD acquiring Xilinx is a very good business move.

 

[moinmoin]

Their article mentioned in the video: https://www.servethehome.com/amd-to-acquire-xilinx-continuing-consolidation/

 

[moinmoin]

There has been extensive SEC fillings about Xilinx's internal communication regarding the merger (yes, it's called merger in some slides). Quite worth the read if you want some more insight:

https://www.reddit.com/r/AMD_Stock/comments/jlii6w

Most interesting is the long transcription of the event by Peng and Su:

https://sec.report/Document/0001104659-20-119683/

Apparently both have been in quarterly talks for cooperation since when Peng attended the Epyc launch event back in 2017, even before Peng moved up Xilinx's rank as CEO.

 

[Kedas]

How does this stock change work?
in the deal they get 1.7234 AMD shares for 1 Xilinx's share.

But now
Xilinx cost 181$ now
AMD cost 121$ now

So 181 / 1.7234 = 105$ for one AMD

Does that mean you can buy an AMD share for 105$ (instead of 121$) by buying an Xilinx stock now? There must be a catch otherwise everyone would be doing it I assume.

AMD to Acquire Xilinx, Creating the Industry’s High Performance Computing Leader

Browse AMD’s company-wide and financial press releases.

ir.amd.com

Under the terms of the agreement, Xilinx stockholders will receive a fixed exchange ratio of 1.7234 shares of AMD common stock for each share of Xilinx common stock they hold at the closing of the transaction.

The transaction is currently expected to close by the end of calendar year 2021. Until close, the parties remain separate, independent companies.

 

[scineram]

Well, China rejects the merger and then you’re catched.