AMD-Xilinx Merger Details Hint at Stronger Chip Supply Moving Forward
Advanced Micro Devices is officially acquiring Xilinx, and the terms of the deal are here. What are the terms and what can investors expect?
Jun. 30 2021, Published 10:55 a.m. ET
The semiconductor industry is backed up like a traffic jam. Now, U.K. regulators have approved the Advanced Micro Devices (AMD) acquisition of Xilinx, which means that things could start moving quicker for global tech.
The details of the merger between these chip companies have come to light, from the financial terms to the closing date and more.
AMD-Xilinx merger means big things for global chip supply
In April, AMD (NASDAQ:AMD) and Xilinx (NASDAQ:XLNX) shareholders voted to approve the merger. Now, U.K. regulators from the CMA (Competition and Markets Authority) have officially approved the deal—and much sooner than expected.
The U.K. and the European Union have been particularly stringent on anti-competition laws, so this is a big win for the tech industry. AMD didn't expect CMA approval until the end of 2021, which means that they're about half a year ahead of their plans.
The merger means that AMD and Xilinx will be able to ramp up their production. Tech companies and consumers will have an easier time acquiring their goods. Right now, hundreds of industries in the manufacturing sector are impacted by the global chip shortage.
Terms for AMD's acquisition of Xilinx
The AMD-Xilinx transaction is going through in an all-stock deal worth $35 billion. That's an aggregate total for the combined entity, but AMD carries the majority of that weight.
Since AMD and Xilinx are both public companies, they will be combining the stock under the AMD ticker. For every one share of Xilinx stock that an investor owns, they'll get 1.7234 AMD stock. This leaves AMD shareholders with a 74 percent stake in the merged company, with Xilinx shareholders claiming the remaining 26 percent.
Closing date for the merger between AMD and Xilinx
The AMD-Xilinx merger proposal held a provisional deadline of June 30. The deal has officially been solidified, and the transition will happen soon.
AMD stock looks like a force to be reckoned with
Up 3.84 percent so far on June 30, AMD stock shows strength amid investor confidence. The company first announced its plans to acquire Xilinx in October 2020. The shares have remained in the green over the course of that time despite intermittent volatility. AMD stock is up 15 percent over the last month and could reach a projected target price of $110, which is much higher than the current $93 share value.
Investors are also continuing to dip into Xilinx stock despite the shift. Some traders might want to be on the Xilinx side of the transition to avoid heavy stock dilution on AMD stock. However, if analysts have anything to say about it, the future growth potential could make that a moot point.
AMD's most recent earnings report shows a 93 percent revenue boost YoY and a 221 percent increase in EPS. Meanwhile, the latest earnings for Xilinx show a 13 percent YoY revenue increase and a 15 percent increase in EPS. Combining these two prosperous entities in an industry experiencing strong demand for the foreseeable future sounds like a good idea for semiconductor investors.
