www.bnnbloomberg.ca/...-deal-ghosts-with-xilinx-bid-1.1506308
"...Wall Street is betting Su can pull off the latest deal. That’s a testament to the confidence investors and customers have in her ability to deliver quality products on time and her success in slashing debt. AMD shares slipped 3.9% on Friday, a relative thumbs-up given the company’s checkered deal history. That leaves the shares up more than 2,000% since Su was appointed CEO in late 2014.
“The deal would make sense, particularly if they were to use stock, which is likely the only way a deal could get done,” said Chris Caso, an analyst at Raymond James & Associates. “We think investors would see this as using their recently valuable stock currency to buy what’s generally considered to be Xilinx’s stable, recurring cash flow.”..
AMD’s soaring stock price and low interest rates give it new ways to pay for a $30 billion transaction. While Caso and other equity analysts expect the company to use a lot of stock, others are less sure.
The large run-up in AMD shares may make Xilinx’s management team and investors reluctant to sign off on a majority stock offer on concern there’s not much upside left in the equity, according to Fitch Ratings analyst Jason Pompei. He thinks a purchase will have to be comprised of mainly cash funded by debt.....
AMD’s target is highly profitable. Xilinx has a gross margin, the percentage of sales remaining after deducting costs, of 67%. That’s 20 percentage points more than AMD’s margin. In its most recent quarter, Xilinx generated $230 million of free cash flow, $78 million more than AMD, which has twice the revenue...."
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