AMD’s acquisition of Xilinx in an all-stock transaction valued at $35 billion promises to raise the stakes in the second-ranked CPU maker’s competition with Intel Corp.

Intel bought Xilinx competitor Altera for $16.7 billion in 2015. Xilinx and Altera are the world’s largest field programmable gate array (FPGA) makers. Taiwan Semiconductor Manufacturing Co. (TSMC) supplies chips made with advanced process technology to both Xilinx and Altera.

AMD said its combination with Xilinx will create the industry’s leading high-performance computing company, expanding product offerings and customers in growth markets where Xilinx is an established leader.

acquisition of Xilinx marks the next leg in our journey,” AMD CEO Lisa Su said in a statement. “By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent and scale to define the future of high performance computing.”

The acquisition brings together complementary product portfolios and customers, according to AMD. It would be one of the largest buyouts in the chip industry in recent years, coming at the same time as Nvidia’s planned acquisition of ARM for $40 billion appears to have stalled.

Chip acquisitions last year were primarily driven by companies looking to increase their presence in industrial IoT, robotics, self-driving vehicles and driver-assist automation, according to industry watcher IC Insights.

AMD will offer among the industry’s strongest portfolios of high performance processor technologies, combining CPUs, GPUs, FPGAs, adaptive SoCs for cloud, edge and end devices. Together, the combined company will aim for growth segments from data centers to gaming, PCs, communications, automotive, industrial, aerospace and defense.

“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,” Xilinx CEO Victor Peng said in the statement.

Under 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. Post-closing, AMD stockholders will own approximately 74 percent of the combined company on a fully diluted basis, while Xilinx stockholders will own approximately 26 percent.

AMD expects to achieve operational efficiencies of approximately $300 million within 18 months of closing the transaction, primarily based on improvements in costs of goods sold and shared resources.

The transaction, unanimously approved by the AMD and Xilinx boards, is subject to approval by AMD and Xilinx shareholders, regulatory oversight and other customary closing conditions. Until the expected closing of the transaction by the end of calendar year 2021, the companies remain separate and independent.

Su will lead as CEO of the combined company while Peng joins AMD as president responsible for the Xilinx business. At least two Xilinx directors will join the AMD board upon closing.

Credit Suisse and DBO Partners are acting as financial advisors to AMD while Latham & Watkins LLP is serving as its legal advisor. Morgan Stanley is the lead financial advisor to Xilinx.

By: DocMemory
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