Xilinx Shares Surge on Reports of $30 Billion AMD Takeover

Xilinx Inc.  (XLNX) – Get Report shares surged the most in nearly a year Friday following a report from the Wall Street Journal that the San Jose-based tech group could be bought by its chipmaking rival Advanced Micro Devices.  (AMD) – Get Report.

The Journal said the pair were in advanced merger talks that could value Xilinx at more than $30 billion, a 16% premium to the group’s closing price on Wall Street last night. Xilinx’s data-center chips have become much more valuable since the coronavirus pandemic triggered a surge in work-from-home dynamics that have pressured companies around the world to improve their technology and storage capabilities. 

AMD, meanwhile, has seen its share price rise nearly 90% so far this year, taking its market value past $100 billion, a move that gives the chipmaker substantial firepower — despite a small net cash position of just $1.1 billion — to absorb Xilinx in an all-stock deal.

“We believe Xilinx would be a good, high-quality target, providing AMD with another strong competitive product set against its archrival, Intel,” said KeyBanc Capital Markets analysts Weston Twigg and John Vinh. “Xilinx has substantially higher gross margins and operating margins, and the deal would likely be accretive for AMD, though the final price will be needed to calculate share dilution and EPS impact.”

“As for deal approval, trade war tensions add substantial risk; we think the deal could be approved, but it would likely take at least 1.5 years,” the pair added.  

Xilinx shares were marked 17% higher in pre-market trading, the biggest move since January 2019, to indicate an opening bell price of $124.00 each. AMD shares were marked 4.6% lower at $82.50 each.

AMD Is Said to Be in Talks to Buy Rival Chipmaker Xilinx

(Bloomberg) — Advanced Micro Devices Inc. is in advanced discussions to buy Xilinx Inc. in a takeover that could be valued at $30 billion, according to people familiar with the matter.

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The deal could come together as early as next week, though things remain in flux, the people said, asking not to be identified discussing a private deal. The Wall Street Journal first reported on the negotiations.

A combination with Xilinx would give AMD Chief Executive Officer Lisa Su more of the pieces needed to break Intel Corp.’s stranglehold on the profitable market for data-center computer components. It would follow moves by rival Nvidia Corp., which bought Mellanox Technologies Ltd. and aims to use its pending acquisition of Arm Ltd. to grab more of that business.

Acquiring Xilinx, which makes programmable chips for wireless networks, would also help AMD expand into a new market just as telecommunications carriers spend billions to build fifth-generation, or 5G, networks.

Xilinx, based in San Jose, California, makes field programmable gate arrays, or FPGAs. That kind of chip is unique because its function can be altered by software, even after it’s been installed in a piece of machinery. Xilinx’s chips have historically been used in telecommunications equipment, but under CEO Victor Peng the company is expanding into products targeted at data centers — where FPGAs can be used to accelerate workloads such as artificial intelligence. The other major supplier of advanced FPGAs is Intel, which acquired its market position through the purchase of Altera Corp. in 2015.

Representatives for AMD and Xilinx declined to comment.

Xilinx shares closed at $105.99 in New York on Thursday. That gives it a market capitalization of $25.9 billion, about a quarter of AMD’s value. Shares of Santa Clara, California-based AMD closed at $86.51. The stock has almost