8-KLeadership ChangesMaterial AgreementsSecurities & Listing+2

ADVANCED MICRO DEVICES INC 8-K Report, Material Agreement (Oct 10, 2008)

Filed October 10, 2008For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) announced a significant strategic transaction on October 10, 2008, through the filing of an 8-K report. The company entered into a Master Transaction Agreement with Advanced Technology Investment Company LLC (Oyster), an entity wholly owned by the Government of Abu Dhabi, and West Coast Hitech L.P. (Pearl). This agreement establishes a new semiconductor manufacturing joint venture, 'The Foundry Company,' to be based in the Cayman Islands. AMD will contribute its manufacturing assets, including certain German fabs and related intellectual property, to this new entity, in exchange for securities in The Foundry Company. Oyster will inject approximately $1.4 billion in cash into the joint venture, receiving Foundry Company securities and transferring $0.7 billion back to AMD for specific Foundry Company shares. Additionally, Pearl will invest approximately $314 million in AMD, acquiring 58 million shares of AMD's common stock and warrants to purchase an additional 30 million shares. This transaction aims to separate AMD's manufacturing operations into a distinct entity, potentially improving focus and financial flexibility. The Foundry Company will be jointly owned by AMD (44.4%) and Oyster (55.6%) on a fully converted basis, with Oyster becoming the majority shareholder. Oyster has also committed to significant future funding for The Foundry Company, a minimum of $3.6 billion and up to $6.0 billion over five years, which will influence AMD's proportional ownership over time. The Wafer Supply Agreement mandates that AMD will purchase its microprocessor unit (MPU) requirements from The Foundry Company, and a significant portion of its graphics processor unit (GPU) requirements once specific process nodes are established. The agreement also includes provisions for the departure of Dr. Hector de J. Ruiz from his role at AMD to serve as non-voting Chairman of The Foundry Company Board, with a substantial compensation package.

Key Highlights

  • 1AMD forms a semiconductor manufacturing joint venture, 'The Foundry Company,' with Advanced Technology Investment Company LLC (Oyster), wholly owned by the Government of Abu Dhabi.
  • 2Oyster will contribute approximately $1.4 billion in cash to the joint venture and has committed to significant future funding of $3.6 billion to $6.0 billion over five years.
  • 3AMD will contribute its manufacturing assets, including German fabs (Fab 30/38 and Fab 36) and related IP, to The Foundry Company in exchange for securities.
  • 4West Coast Hitech L.P. (Pearl) will invest approximately $314 million in AMD by purchasing 58 million common shares and warrants for 30 million shares.
  • 5Following the transaction, The Foundry Company will be 44.4% owned by AMD and 55.6% by Oyster on a fully converted basis.
  • 6AMD will be obligated to purchase all of its MPU product requirements and a significant portion of its GPU product requirements from The Foundry Company.
  • 7Dr. Hector de J. Ruiz will transition to serve as the non-voting Chairman of The Foundry Company Board, effective upon closing.

Frequently Asked Questions

The primary purpose of this transaction is to establish a semiconductor manufacturing joint venture, The Foundry Company, separating AMD's manufacturing operations from its design business. This aims to improve financial flexibility, reduce capital expenditure burden on AMD, and allow each entity to focus on its core competencies.

Oyster, an entity wholly owned by the Government of Abu Dhabi, is a key partner. They are contributing approximately $1.4 billion in cash upfront and have committed to providing substantial future funding of at least $3.6 billion and up to $6.0 billion over the next five years for the operations and development of The Foundry Company.

Under the Wafer Supply Agreement, AMD is required to purchase all of its microprocessor unit (MPU) product requirements from The Foundry Company. Additionally, AMD will purchase specified percentages of its graphics processor unit (GPU) requirements from The Foundry Company once it reaches certain technological milestones.

Pearl's investment of approximately $314 million provides AMD with immediate capital infusion. The purchase of 58 million common shares and warrants for an additional 30 million shares by Pearl strengthens AMD's balance sheet and indicates confidence from an investor in AMD's strategy and future prospects.

Dr. Hector de J. Ruiz will transition from his role within AMD to become the non-voting Chairman of the Foundry Company Board, effective upon the closing of the transactions. He will have a specific employment agreement with The Foundry Company detailing his compensation and responsibilities.