14 DAY TRIAL // Advanced Micro Devices is reported to plan reducing its stake in the manufacturing company into which it spun off in October, in an attempt to compensate for the financial crisis. This announcement comes only a few days after the company lowered revenue previsions for the fourth quarter of the year. During the recent few months, AMD's shares have been on a downward route, dropping from around $7 in June to $2.10 today.
The action announced by AMD involves the Abu Dhabi-based Mubadala Development and the Advanced Technology Investment Company (ATIC). AMD and ATIC both have equal voting rights in the newly formed Foundry Company. As the October agreement stipulates, ATIC owned 55.6 percent of the new entity.
According to the chip maker, AMD's share will be lowered to around 34.2 percent, while ATIC will own almost 65.8 percent of the Foundry Company's fully converted common stock. “Changing economic times” would be the reason for a change in the terms of the initial agreement, commented an AMD representative.
Among the changes is an agreement stipulating that Mubadala is set to purchase 58 million shares of AMD's common stock “at a revised purchase price per share equal to the lower of the average closing price per share of AMD's common stock on the NYSE during the 20 trading days immediately prior to and including December 12, 2008 or the average closing price per share of AMD's common stock on the NYSE during the 20 trading days immediately prior to the closing date of the transaction”.
An additional 5 million warrants to purchase AMD stock will be issued by AMD to Mubadala, for a total of 35 million warrants. According to the chip maker, “All other material economic terms of the transaction agreements remain unchanged. ATIC will still invest $2.1 billion to purchase its stake in the Foundry Company, of which it will invest $1.4 billion directly in the new entity and will pay $700 million to AMD”.