AMD is considering a $5.6-billion takeover bid for graphics chip co-processor maker ATI Technologies.

The rumor appeared late May but nobody paid too much attention because they considered it impossible.

Now, the board is ready to buy it and they sent messengers to Ontario to convince ATI to sign.

The speculations and rumors made ATI’s shares to rise with 39 cents which now make ATI value $4.1 billion.

I was about to post the article when a colleague gave me a call that changed the day: ATI was bought by AMD for $5.4 billion. This sum consists of $4.2B in cash and $57M shares of AMD common stock (valued at a little over $18 USD per share as of July 21, 2006).

Some of the money were obtained by AMD from Morgan Stanley Senior Funding which lent $2.5B to AMD. The rest of the money will come from combined existing cash, cash equivalents, and short term investments balances of approximately $3.0 billion.

The combined company would have achieved approximately $7.3 billion1 in total consolidated sales during the last four quarters with a workforce of approximately 15,000 employees. Headquartered in Sunnyvale, California, the company will maintain sales, design and manufacturing centers worldwide and major business centers in Silicon Valley, Austin, Texas and Markham, Ontario - all valued centers of innovation for the combined company.

AMD’s current executive team will be complemented by the addition of ATI President and CEO Dave Orton. Orton will serve as an executive vice president of the ATI business division, reporting to the AMD Office of the CEO, comprised of Chairman and CEO Hector Ruiz and President and Chief Operating Officer Dirk Meyer. In addition, under the terms of the acquisition agreement, two ATI directors will join AMD’s board of directors upon closing of the transaction.

But it’s not over. For the deal to close, several steps must be completed. The deal must go through ATI shareholder approval, Canadian court supervision of a Plan of Arrangement, and other regulatory approvals including merger notification filings in the United States, Canada and other jurisdictions, as well as customary closing conditions.

But if the transaction fails to take place, ATI has agreed to pay AMD a termination fee of $162.0 million under circumstances specified in the acquisition agreement.

The deal will be completed in the fourth quarter of 2006.

And here are some statements:

“ATI shares our passion and complements our strengths: technology leadership and customer centric innovation,” said AMD Chairman and CEO Hector Ruiz. “Bringing these two great companies together will allow us to transcend what we have accomplished as individual businesses and reinvent our industry as the technology leader and partner of choice. We believe AMD and ATI will drive growth and innovation for the entire industry, enabling our partners to create differentiated solutions and empowering our customers to choose what is best for them.”

“This combination means accelerated growth for ATI, and broader horizons for our employees,” said Dave Orton, President and CEO of ATI. “All of our product lines will benefit. Joining with AMD will enable us to innovate aggressively on the PC platform, and continue to invest significantly in our consumer business to stay in front of our markets.”

“Windows Vista will deliver incredible advances in the user experience as a result of advancements in graphics integration and performance,” said Jim Allchin, Co-President of Microsoft’s Platforms & Services Division. “We’re excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further.”