AMD announces plan to acquire ATI for cash, stock

Here’s the press release:


– $5.4 Billion Acquisition Will Drive Growth, Innovation and Choice –

– AMD and ATI to Hold Joint Executive Conference Call
Today at 8:00 a.m. EDT –

NEW YORK-July 24, 2006-AMD (NYSE: AMD) and ATI (TSX: ATY,
NASDAQ: ATYT) today announced plans to join forces in a transaction
valued at approximately $5.4 billion. The combination will create a
processing powerhouse by bringing AMD’s technology leadership in
microprocessors together with ATI’s strengths in graphics, chipsets and
consumer electronics. The result: A new and more formidable company,
determined to drive growth, innovation and choice for its customers,
particularly in the commercial and mobile computing segments and in the
rapidly-growing consumer electronics market. Combining technologies,
people, and complementary strengths, AMD plans to deliver in 2007
customer-centric platforms for the benefit of customers who want to
collaborate in the development of differentiated solutions.

AMD’s acquisition of ATI will position the new company to deliver
innovations that fulfill the increasing demand for more integrated
solutions in key market segments while
also continuing to develop “best-of-breed” discrete products that
empower customers to choose the combination of technologies that best
serves their needs. In 2008 and beyond, AMD aims to move beyond current
technological configurations to transform processing technologies, with
silicon-specific platforms that integrate microprocessors and graphics
processors to address the growing need for general-purpose,
media-centric, data-centric and graphic-centric performance. Thus, the
combined company intends to empower its customers to create their own
unique products and solutions within an open-innovation ecosystem free
from artificial barriers to customer success.

“ATI shares our passion and complements our strengths:
technology leadership and customer centric innovation,” said AMD
Chairman and CEO Hector Ruiz. “Bringing these two great companies
together will allow us to transcend what we have accomplished as
individual businesses and reinvent our industry as the technology leader
and partner of choice. We believe AMD and ATI will drive growth and
innovation for the entire industry, enabling our partners to create
differentiated solutions and empowering our customers to choose what is
best for them.”

“This combination means accelerated growth for ATI, and broader
horizons for our employees,” said Dave Orton, President and CEO of ATI.
“All of our product lines will benefit. Joining with AMD will enable us
to innovate aggressively on the PC platform, and continue to invest
significantly in our consumer business to stay in front of our markets.”

“Windows Vista will deliver incredible advances in the user
experience as a result of advancements in graphics integration and
performance,” said Jim Allchin, Co-President of Microsoft’s Platforms &
Services Division. “We’re excited by the potential of what AMD and ATI
can deliver together to enhance the Windows Vista experience for our
customers even further.”

Under the terms of the transaction, AMD will acquire all of the
outstanding common shares of ATI for a combination of $4.2 billion in
cash and 57 million shares of AMD common stock, based on the number of
shares of ATI common stock outstanding on July 21, 2006. All outstanding
options and RSUs of ATI will be assumed. Based upon the closing price of
AMD common stock on July 21, 2006 of $18.26 a share, the consideration
for each outstanding share of ATI common stock would be $20.47,
comprised of $16.40 of cash and 0.2229 shares of AMD common stock.

AMD anticipates it will finance the cash portion of the
transaction with a combination of cash and new debt. AMD has obtained a
$2.5 billion term loan commitment from Morgan Stanley Senior Funding,
Inc. which, together with combined existing cash, cash equivalents,
and short term investments balances of approximately $3.0 billion,
provides full funding for the transaction.

ATI has received an opinion from its financial advisors that the
transaction from a financial point of view is fair to its shareholders.
The transaction was unanimously approved by the board of directors of
each company. The transaction is subject to ATI shareholder approval,
Canadian court supervision of a Plan of Arrangement, and other
regulatory approvals including merger notification filings in the United
States, Canada and other jurisdictions, as well as customary closing
conditions. In the event that the transaction does not close, ATI has
agreed to pay AMD a termination fee of $162.0 million under
circumstances specified in the acquisition agreement. The transaction is
expected to be completed in the fourth quarter of 2006.

A Compelling Financial Opportunity

AMD expects that the transaction will be slightly accretive to
earnings in 2007, and meaningfully accretive in 2008, before the
inclusion of ATI acquisition-related charges, based upon AMD’s plans to
deliver more integrated and advanced platform solutions and thereby
improve its position in commercial clients, mobile computing, gaming,
media and emerging markets. AMD anticipates that it will reduce
operating expenses by approximately $75 million for the combined company
by the end of 2007.

The combined company would have achieved approximately $7.3
billion in total consolidated sales during the last four quarters with
a workforce of approximately 15,000 employees. Headquartered in
Sunnyvale, California, the company will maintain sales, design and
manufacturing centers worldwide and major business centers in Silicon
Valley, Austin, Texas and Markham, Ontario – all valued centers of
innovation for the combined company. AMD’s current executive team will
be complemented by the addition of ATI President and CEO Dave Orton.
Orton will serve as an executive vice president of the ATI business
division, reporting to the AMD Office of the CEO, comprised of Chairman
and CEO Hector Ruiz and President and Chief Operating Officer Dirk
Meyer. In addition, under the terms of the acquisition agreement, two
ATI directors will join AMD’s board of directors upon closing of the

The collective roster of AMD and ATI’s strong customer
relationships represents a “who’s who” of the computing and consumer
electronics industries. Drawing upon a shared culture of
customer-centric innovation and engineering excellence, the combined
will be well positioned to meet customer demand for more innovative
solutions, system-level engineering and faster time-to-market.

More on this story as it develops.

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