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

Filed December 8, 2008For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) has filed an 8-K report detailing an amendment to a Master Transaction Agreement with Advanced Technology Investment Company LLC (ATIC) and West Coast Hitech L.P. (WCH), originally established on December 5, 2008. The amendment significantly alters the terms of the initial agreement, particularly concerning the sale of AMD's common stock and warrants to WCH, as well as the enterprise valuation and capital call multiples for The Foundry Company. These changes suggest a renegotiation of the financial structure of their partnership, likely in response to prevailing market conditions at the time. The most significant adjustments include a revised purchase price mechanism for WCH's acquisition of AMD shares and warrants, a reduction in the enterprise value multiplier for manufacturing assets contributed to The Foundry Company, and a lower valuation multiple for future capital calls. Following the closing of these transactions, AMD and ATIC will be the sole shareholders of The Foundry Company, with AMD holding a 34.2% stake and ATIC (through Oyster) holding 65.8% on a fully converted basis, both having equal voting rights.

Key Highlights

  • 1AMD amended its Master Transaction Agreement with ATIC and WCH on December 5, 2008.
  • 2WCH will purchase 58,000,000 shares of AMD common stock and 35,000,000 warrants.
  • 3The purchase price for WCH's stake is tied to the average closing prices of AMD stock in the 20 trading days prior to December 12, 2008, or the closing date.
  • 4The enterprise value of assets contributed to The Foundry Company has been reduced from 1.13x to 0.85x of net book value.
  • 5Future capital calls for The Foundry Company will be valued at a reduced multiple of 0.9x, down from 1.1x.
  • 6Post-closing, The Foundry Company will be owned by AMD (34.2%) and ATIC (65.8%) on a fully converted basis, with equal voting rights.
  • 7The company announced these amendments via a press release on December 8, 2008.

Frequently Asked Questions

The agreement revises the purchase price calculation for West Coast Hitech L.P.'s (WCH) acquisition of AMD shares and warrants, lowers the enterprise value multiplier for assets contributed to The Foundry Company from 1.13x to 0.85x of net book value, and reduces the net asset valuation multiple for future capital calls from 1.1x to 0.9x.

Following the closing, The Foundry Company will be owned by Advanced Micro Devices, Inc. (AMD) and Advanced Technology Investment Company LLC (ATIC) as the sole shareholders. AMD will hold 34.2% and ATIC will hold 65.8% on a fully converted basis, with both parties having equal voting rights.

The purchase price for WCH's acquisition of 58,000,000 shares of AMD common stock and 35,000,000 warrants is based on the lower of two averages: the average closing prices of AMD's common stock over the 20 trading days immediately prior to and including December 12, 2008, or the average closing prices over the 20 trading days immediately prior to the actual closing date of the transaction.

While the filing doesn't explicitly state the reasons for the amendment, such adjustments often occur due to changing market conditions, a need to re-evaluate asset valuations, or to secure more favorable terms. For investors, these changes indicate a potential impact on AMD's financial position, dilution from new share/warrant issuances, and the revised valuation of its foundry assets. The reduced multiples might suggest a more conservative valuation environment or specific challenges related to the foundry business at that time.