AMD Confirms $35B Purchase Of Xilinx, Reports Beat-And-Raise Q3

Advanced Micro Devices, Inc. AMD announced Tuesday before the market open a deal to acquire programmable chipmaker Xilinx, Inc. XLNX, confirming ongoing M&A speculation surrounding the companies.

AMD also reported better-than-expected third-quarter results and revised its fiscal year 2020 revenue guidance higher. 

The AMD-Xilinx Deal Terms: Santa Clara, California-based AMD said it has entered into an agreement to buy Xilinx in an all-stock transaction valued at $35 billion.

Under the agreement, Xilinx shareholders will receive a fixed exchange ratio of 1.7234 AMD shares for each Xilinx share they hold.

This represents a per-share deal value of $143 per share, about 25% higher than the $114.55 at which Xilinx shares closed Monday.

With the pre-M&A speculation Xilinx stock price of $105.99 on Oct. 8 as a starting point, the deal value represents a 35% premium.

After the deal closes, AMD shareholders will own about 74% of the combined company and Xilinx shareholders will own the remaining 26%.

The boards of both companies have approved the transaction. The closure of the transaction is contingent on approval by AMD and Xilinx shareholders, certain regulatory approvals and other customary closing conditions.

The transaction is expected to close by the end of calendar year 2021.

The combined enterprise value of the company after the closing is estimated at $135 billion.

The AMD-Xilinx Deal Synergies: AMD said it expects the deal to immediately add to its margins, EPS and free cash flow, while also helping deliver industry-leading growth.

The chipmaker expects to achieve operational efficiencies of approximately $300 million within 18 months of closing the transaction.

AMD CEO Lisa Su will be the CEO of the combined company, while Xilinx CEO Victor Peng will join AMD as its president responsible for the Xilinx business and strategic growth initiatives.

"Together, the combined company will capitalize on opportunities spanning some of the industry's most important growth segments from the data center to gaming, PCs, communications, automotive, industrial, aerospace and defense," AMD said in a press release. 

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AMD's Q3 Results: AMD reported third-quarter non-GAAP EPS of 41 cents per share, up 128% year-over-year and 128% quarter-over-quarter.

Revenue jumped 56% year-over-year to $2.801 billion. Quarter-over-quarter, the growth totals 45%.

The top- and bottom-line results handily beat expectations that called for non-GAAP EPS of 35 cents per share and revenue of $1.8 billion.

BofA analyst Vivek Arya had predicted a modest beat for the quarter.

AMD attributed the revenue outperformance to higher revenues in the Enterprise and Semicustom and Computing & Graphics segments.

The former generated revenue of $1.13 billion, more than double last year's figure, as semi-custom product sales and EPYC processor sales increased sharply.

The non-GAAP gross margin expanded 1 percentage point year-over-year to 44%. The margin received a shot in the arm from EPYC and Ryzen processor sales, the company said.

For the fourth quarter, AMD said it expects revenue to amount to about $3 billion, plus or minus $100 million, up 41% year-over-year and 7% sequentially.

The year-over-year growth will come from the ramp of new Ryzen, EPYC and semi-custom products and growing customer momentum, AMD said.

The company raised its 2020 revenue growth guidance from 32% to about 41%.

The consensus estimates call for fourth-quarter revenue of $2.62 billion and full-year revenue growth of 32.5%.

AMD, XLNX Price Action: In premarket trading, AMD shares were slipping 0.41% to $81.89, while Xilinx shares were rallying 13.27% to $129.75. 

Related Link: 4 Semiconductor Ideas Ahead Of Q3 Earnings

Photo courtesy of AMD.