With oil prices surging and US stock prices slumping, chip maker Advanced Micro Devices Inc's (AMD) sale of an 8.1 percent stake to the Abu Dhabi government's investment arm represents the latest plunge by a wealthy Middle Eastern nation into a troubled US corporation.
It also raises fresh questions about the appropriateness of Middle Eastern firms owning large chunks of US businesses that specialize in advanced technologies.
AMD, the world's No. 2 microprocessor maker, needs the US$622 million investment from the Mubadala Development Company to help lift the company out of a deep financial slump.
AMD has lost more than US$1.6 billion so far this year, and has just US$1.5 billion in cash on hand as it works to pay down US$5.3 billion in debt. The financial woes have caused AMD's stock to fall more than 35 percent since the start of the year, a slide that has wiped out nearly US$4 billion in shareholder wealth.
The infusion, announced on Friday, is a necessary jolt for AMD as it hunts for money to fund its counteroffensive against Intel Corp, the world's largest chip maker, and amid a huge spike in investments in US companies from Middle Eastern nations.
Middle Eastern investments in US companies has increased more than fivefold this year, leaping from US$4.5 billion on 32 deals last year to nearly US$25 billion on 42 deals so far this year, according to data compiled by Thomson Financial.
The money invested in the past two years is more than the entire total invested from 1990 to 2005, according to the latest Thomson data. During that period, US$24.8 billion in investments were made in 258 deals.
Oil-rich countries have been enriched further in recent months by a run-up in the price of a barrel of oil, which has been hovering in the US$90 range while many US stocks continue to suffer from the housing and lending morass that's led some banks to absorb billions of dollars in losses.
The biggest deal so far this year involving Middle Eastern firms was General Electric Co's US$11.6 billion sale of its plastics division, completed in August, to petrochemicals manufacturer Saudi Basic Industries Corp, a public company based in Riyadh that is 70 percent owned by the Saudi Arabian government.
Firms based in the United Arab Emirates, a federation of seven oil-rich states, have invested nearly US$10 billion in real estate, financial, power generation and other types of companies in the US.
Earlier this year, Mubadala bought a 7.5 percent stake in the management operations of private-equity firm Carlyle Group for US$1.35 billion, and this week unveiled a partnership with military contractor Northrop Grumman Corp to collaborate on aerospace and aviation technologies.
The deal with AMD makes the Abu Dhabi government-run investment fund AMD's third-largest shareholder, according to AMD's latest regulatory filings, a development that AMD vows will not trigger a review by the US government because it's a minority investment and Mubadala will not get a board seat.
However, some experts doubt that claim, citing the sensitivity of AMD's technology, which besides being used widely in consumer personal computers and corporate servers is also used in Defense Department computers and other government machinery.
John Reynolds, an attorney at Wiley, Rein & Fielding in Washington, said the transaction could face scrutiny by Committee on Foreign Investment in the US, or CFIUS, a 12-member panel headed by the Treasury Department, because the US government is very interested in acquisitions by government-run investment funds, known as sovereign wealth funds, such as Mubadala.
China, Saudi Arabia and other Middle Eastern and Asian countries have set up such funds, which control an estimated US$2.5 trillion in assets.
In addition, if AMD has government contracts for classified work, interest from CFIUS and Congress "is apt to be considerable, even if the investment is non-controlling," Reynolds said.
Generally, passive investments of less than 10 percent of a company's shares do not trigger review by CFIUS. But that is not a hard-and-fast rule, Reynolds said, and an ownership stake below 10 percent is not automatically shielded from review.
AMD shares slid US$0.06 to US$12.64 in Friday trading.
To many, Tatu City on the outskirts of Nairobi looks like a success. The first city entirely built by a private company to be operational in east Africa, with about 25,000 people living and working there, it accounts for about two-thirds of all foreign investment in Kenya. Its low-tax status has attracted more than 100 businesses including Heineken, coffee brand Dormans, and the biggest call-center and cold-chain transport firms in the region. However, to some local politicians, Tatu City has looked more like a target for extortion. A parade of governors have demanded land worth millions of dollars in exchange
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue jumped 48 percent last month, underscoring how electronics firms scrambled to acquire essential components before global tariffs took effect. The main chipmaker for Apple Inc and Nvidia Corp reported monthly sales of NT$349.6 billion (US$11.6 billion). That compares with the average analysts’ estimate for a 38 percent rise in second-quarter revenue. US President Donald Trump’s trade war is prompting economists to retool GDP forecasts worldwide, casting doubt over the outlook for everything from iPhone demand to computing and datacenter construction. However, TSMC — a barometer for global tech spending given its central role in the
An Indonesian animated movie is smashing regional box office records and could be set for wider success as it prepares to open beyond the Southeast Asian archipelago’s silver screens. Jumbo — a film based on the adventures of main character, Don, a large orphaned Indonesian boy facing bullying at school — last month became the highest-grossing Southeast Asian animated film, raking in more than US$8 million. Released at the end of March to coincide with the Eid holidays after the Islamic fasting month of Ramadan, the movie has hit 8 million ticket sales, the third-highest in Indonesian cinema history, Film
RSS