AMD’s $35 Billion Purchase Delayed At Last Moment – Company Remains Optimistic

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Chip designer Advanced Micro Devices, Inc's (AMD) bid to acquire Xilinx, Inc is on its way to secure regulatory approval by the end of the first quarter of next year according to a statement from both companies. AMD announced its intent to acquire Xilinx last year for a $35 billion price tag, and throughout the course of this year, both parties were optimistic about it not facing any hurdles for approval. However, the statement confirms earlier rumors that approval is unlikely before the end of this year, which both companies had expected and outlined to investors at the time of the deal's announcement in October 2020.

AMD's Briefly Worded Statement Shares Few Details For Xilinx Merger Approval Delay

The joint statement from AMD and Xilinx was briefly worded, and it maintained a positive outlook for the deal that will diversify the former's product portfolio. It outlined that while the merger failed to meet its expected closing for December 2021, progress is underway and the companies expect closing to now take place during the first quarter of next year.

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Specifically, according to AMD and Xilinx:

“We continue making good progress on the required regulatory approvals to close our transaction. While we had previously expected that we would secure all approvals by the end of 2021, we have not yet completed the process and we now expect the transaction to close in the first quarter of 2022. Our conversations with regulators continue to progress productively, and we expect to secure all required approvals.”

Through acquiring Xilinx, AMD hopes to expand its presence into the customizable chip products market. These are commonly referred to as field programmable gate arrays (FPGAs), and they allow users to accelerate certain tasks or run them entirely on the FPGA depending on the use case and the costs of introducing a new central processing unit (CPU) into the system. Xilinx and Intel are the main industry players, and through acquiring the former, AMD which has convincingly challenged the larger Intel in several markets over the years, will gain a strong foothold in yet another.

The Xilinx Spartan-3 FPGA is visible on a XCM-001-400 printed circuit board (PCB).

Today's statement follows a report from regulatory news services provider PaRR that surfaced earlier this month which claimed that officials in China were still evaluating the Xilinx merger. AMD's statement seems to hint at this, as the company mentions that regulatory "conversations" are productively moving forward, with approval from all fronts still in sight.

The deal entered the second stage of regulatory scrutiny by the Chinese State Administration for Market Regulation (SAMR) in July this year, when the body was investigating market share for the new entity. This review can also enter the third phase of investigations, and should this happen, then it is still to close by AMD and Xilinx's updated timeline as the process can take an additional two months. Regulatory bodies in the United States, European Union and the United Kingdom have not raised any potential anticompetitive concerns from the acquisition.

In a chat this March, Dr. Su had also shared the potential for the deal to give her company a strong foothold in the telecommunications sector which is currently at the center of a shift to fifth generation (5G) cellular connectivity. She explained that:

Yes. The telco market is a very interesting SAM opportunity for us. I mean you would say that we really haven't had that as a key market for us in the past. I think the strength of the portfolio, I think, overall, does say that this should be a key market segment for us in the future. I think the addition of Xilinx as well, because of their very strong presence in the comms infrastructure market, I think it's good news. It adds sort of relevance to both the CPU and the FPGA solutions together. I think we view this as a key opportunity for us to continue to get the EPYC capabilities over a larger range of customers. So a key opportunity for us. Yes, we're looking forward to more engagement in the telco space and certainly with the Xilinx acquisition, having more exposure to the 5G and other end markets that we currently don't have a lot of exposure to.

The $35 billion payment from AMD to Xilinx will be made completely in stock, with 1.7 AMD shares for each Xilinx share. Soon after the deal was announced, several Wall Street analysts had cast doubt on its approval by Xilinx's board. AMD's regulatory filings for the proposal revealed that it had projected to earn $22 billion in revenue by 2025.

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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