The last few years are years of consolidation. Intel made quite a few acquisitions, including AI startup Nervana in 2016, MobileEye 2017, another AI startup Habana in 2019, and, most recently, Moovit in 2020.
Nvidia announced plans to acquire ARM, a move questioned by many chip manufacturers and regulatory agencies, and now AMD has announced plans to acquire Xilinx.
Our analysis piece from less than two weeks ago seems to be right on the spot.
Just until recently, AMD was smaller than Xilinx, but good execution and market confidence got AMD to a market valuation almost three times bigger than FPGA giant Xilinx. As we mentioned before, Xilinx has a great play in accelerators and data center market, adaptive computing market, FPGA programmable silicon solutions, 5G infrastructure, wireless and wired, and number two in automotive cameras. All that wealth will go to AMD once the acquisition closes and a combined team of 13,000 talented engineers and over $2.7 billion of annual R&D investment.
AMD has a lot to gain but paid a pretty penny
AMD's' total addressable market grows to $110 billion, and the acquisition should have an immediately accretive effect on AMD margins, cash flow, and EPS.
AMD is making an all-stock transaction with a combined enterprise value of approximately $135 billion.
The acquisition brings together two industry leaders with complementary product portfolios and customers. AMD will offer the industry’s strongest portfolio of high-performance processor technologies, combining CPUs, GPUs, FPGAs, Adaptive SoCs, and deep software expertise to enable leadership computing platforms for cloud, edge, and end devices.
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.
“Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world”, AMD President and CEO Dr. Lisa Su said. “This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company. The Xilinx team is one of the strongest in the industry and we are thrilled to welcome them to the AMD family. 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.”
“We are excited to join the AMD family. Our shared cultures of innovation, excellence and collaboration make this an ideal combination. Together, we will lead the new era of high performance and adaptive computing”, said Victor Peng, Xilinx president and CEO. “Our leading FPGAs, Adaptive SoCs, accelerator and SmartNIC solutions enable innovation from the cloud, to the edge and end devices. We empower our customers to deploy differentiated platforms to market faster, and with optimal efficiency and performance. 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.”
Under the terms of 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. Based on the exchange ratio, this represents approximately $143 per share of Xilinx common stock. Post-closing, current AMD stockholders will own approximately 74 percent of the combined company on a fully diluted basis, while Xilinx stockholders will own approximately 26 percent.
Lisa remains CEO of AMD and Victor Peng President of Xilinx BU and strategic growth initiatives
Dr. Lisa Su will lead the combined company as CEO. Xilinx President and CEO Victor Peng, will join AMD as president responsible for the Xilinx business and strategic growth initiatives, effective upon closing the transaction. Besides, at least two Xilinx directors will join the AMD Board of Directors upon closing.
The two companies have worked closely together in the past, and the CEO of Xilinx Victor Peng confirmed to us back in 2018 that Xilinx helped AMD in HBM 2 implementation and spoke very highly of AMD and Lisa. Victor comes from a SGI, ATI to AMD background, and always paid close attention to what the previous employer wanted to achieve. The transaction is currently expected to close by the end of the calendar year 2021. Until close, the parties remain separate, independent companies.
Future brings more consolidation
Nuvia might be next, a startup that already raised $240 million Series B Funding and $53 million in Series A. It is already being targeted by many for the acquisition with a probable valuation in billions.
Wall Street has the money, stocks are mostly on the rise in 2020, and many players want to take advantage of the moment and expand and get critical IP at the right moment.