AMD sells its factories

AMD has just announced that it’s German factories have been transferred under the control of a new entity, temporarily called The Foundry Company. This new company will be 44.4% owned by AMD and 55.6% by ATIC (Advanced Technology Investment Company), an Abu Dhabi sovereign wealth fund. While AMD’s stake is an exchange for the value of the German factories of the manufacturer, ATIC has invested $2.1bn in cash of which $1.4bn will be invested directly in the new entity and the rest going directly to AMD.

In addition ATIC will invest between $3.6bn and $6bn over the next 5 years in order to increase production capacity, part of which will be invested in one of the factories in Dresden and the rest going towards the construction of a new factory in the United States, in the state of New York. In addition to the $700 million that will be paid directly to AMD, the company will be discharged of debts of $1.2bn which will be transferred to The Foundry Company. What’s more, another Abu Dhabi sovereign wealth fund, Mubadala Development Company, will participate in a capital increase of AMD to the value of $314 million, which will take its stake in the company from 8.3% to 19.3%.

The operation is likely to be completed between now and the beginning of 2009, the time needed to process the necessary authorizations. AMD had been in urgent need of refinancing, something that is perhaps not as easy as all that, given the current climate. This operation would seem to be the solution to the excessive debt that the manufacturer has been carrying since the purchase of ATI in 2006 for $5.4bn of which $4.3 bn was in cash.