Advanced Micro Sells Stake to Abu Dhabi's Mubadala

Nov. 16 (Bloomberg) -- Advanced Micro Devices Inc., the world's second-largest maker of computer microprocessors, sold an 8.1 percent stake to an investment company owned by the Abu Dhabi government for $622 million.

Mubadala Development Co. paid $12.70 a share for the 49 million new shares, Advanced Micro said in a statement today. The company filed documents with regulators yesterday in the U.S. to sell as much as $700 million in new stock.

Middle Eastern funds such as Mubadala are snapping up stocks around the globe as governments in the region invest the windfall revenue from surging oil prices. So-called sovereign wealth funds, through which governments buy equities and other assets, will grow to $7.9 trillion by 2011 from $1.9 trillion now, Merrill Lynch & Co. economists wrote in a report last month.

Spending on a new plant, a $5.4 billion acquisition and competition with the semiconductor industry's richest company have hurt Advanced Micro's finances. Advanced Micro posted more than $2 billion in net losses in the past four quarters and analysts estimate it won't return to profit until 2009 as it struggles to keep pace with Intel Corp.

The chipmaker will use the proceeds for general corporate purposes. The Sunnyvale, California-based company said it received $608 million in proceeds after reimbursing Mubadala for about $14.6 million of expenses.

Advanced Micro shares fell 2 cents to $12.68 at 10:43 a.m. in New York Stock Exchange composite trading. The stock had declined 38 percent this year before today, giving the company a market value of $7.04 billion.

Overseas Funds

Sovereign wealth funds, usually formed using surplus currency reserves, are seeking investments that deliver higher returns than investing in U.S. Treasuries. China, with reserves of $1.33 trillion, is the largest such investor, followed by Japan, with $907.3 billion, Merrill said in an Oct. 12 report.

The funds provide an additional slate of investors for private-equity and hedge funds, as well as for companies.

Mubadala agreed in September to buy a 7.5 percent stake in Carlyle Group, the Washington-based private-equity firm with $76 billion in assets, for $1.35 billion. Mubadala's investments also include stakes in Ferrari SpA and Swiss aircraft maintenance company SR Technics.

Dubai International Capital LLC is buying a 9.9 percent stake in New York-based hedge fund Och-Ziff Capital Management Group LLC for $1.26 billion. The firm, an arm of the Dubai government, has spent more than $10 billion since 2004 buying stakes in companies including India's ICICI Bank Ltd., European Aeronautic, Defence & Space Co. and HSBC Holdings Plc.

Abu Dhabi is the capital of the United Arab Emirates and owner of almost 10 percent of the world's oil reserves. Neighboring Qatar in September bought 20 percent of London Stock Exchange Group Plc.

Ruiz's Challenge

Analysts say Chief Executive Officer Hector Ruiz won't deliver a profit until the first quarter of 2009, according to a Bloomberg survey. Ruiz obtained graphics chips through the purchase of ATI Technologies Inc., Advanced Micro's biggest acquisition, and said he wants plants that can supply at least 30 percent of the processor market.

Advanced Micro had a 23.5 percent market share in the third quarter, little changed from a year earlier. Santa Clara, California-based Intel has the rest.

Advanced Micro ended the third quarter with $1.53 billion in cash and marketable securities, a drop of $66 million from the previous period. Some $118 million of that total is in the form of shares of former affiliate Spansion Inc.

In the third quarter, Advanced sold a $1.48 billion convertible bond. It used the proceeds and $200 million in cash to repay a $1.7 billion loan used to fund the ATI acquisition.

The company has $1.9 billion of bonds due for repayment in 2012 and a further $2.2 billion due in 2015. It had total liabilities of $8.5 billion at the end of the third quarter.