Abu Dhabi Fund Said to Be Exploring Sale of Globalfoundries
Ian King
Alex Sherman
Jonathan Browning
jonny_browning
November 24, 2015 — 10:27 AM EST
Updated on November 24, 2015 — 12:32 PM EST
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Mubadala considering disposal of all or parts of chipmaker
Transaction may value the business at up to $20 billion
Abu Dhabi’s investment arm is considering a sale of all or part of chipmaker Globalfoundries Inc. as the emirate explores asset disposals amid a slump in crude oil, people familiar with the matter said.
Sovereign fund Mubadala Development Co. has held early talks with potential acquirers, the people said, asking not to be identified as the information is private. No final decision has been made and discussions could still fall apart, the people said. A transaction could value the business at $15 billion to $20 billion, the people said.
Globalfoundries is one of the largest contract manufacturers of semiconductors, competing with market leader Taiwan Semiconductor Manufacturing Co. for orders from companies such as Apple Inc. and Qualcomm Inc. The company was created when Mubadala bought the manufacturing facilities of Advanced Micro Devices Inc. in 2009 and combined those with its acquisition of Singapore’s Chartered Semiconductor Manufacturing Ltd. the following year.
“Globalfoundries has grown significantly, with fabs on three continents and world-class technology and businesses,” Mubadala spokesman Brian Lott said in an e-mailed statement. “We continue to be committed to this industry and to growing Globalfoundries, to meet customers’ leading-edge technology requirements and providing them with world-class service.”
Lott declined to comment on any plans to sell Globalfoundries. A Globalfoundries spokeswoman also declined to comment.
Abu Dhabi is reviewing state-owned companies, including Mubadala, for potential asset sales, as the slump in crude oil pressures the emirate’s finances, people familiar with the matter said last month. The emirate had a long-term plan to build a chip factory there to diversify its economy away from a dependence on oil.
The company’s also been investing. In October, Globalfoundries acquired International Business Machines Corp.’s chip unit, with IBM paying them $1.5 billion to take the unprofitable business off its hands. The same month, Mubadala formed a joint venture with Trafigura Beheer BV to take a 50 percent stake in three Spanish mines.
Growing Competition
Deals in the semiconductor industry have surged this year as rising costs of production and design push companies to combine. Led by Avago Technologies Ltd.’s deal to buy Broadcom Corp., a cash-and-stock offer valued at $37 billion when it was announced in May, the value of mergers and acquisitions this year has surged 261 percent in the industry, according to data compiled by Bloomberg.
Globalfoundries inherited a plan from AMD to establish a plant in upstate New York which it completed, adding to facilities in Dresden, Germany and Singapore. It made Sanjay Jha - former head of Motorola Mobility - chief executive officer in 2014 to pull together its diverse operations.
TSMC had a growing 60 percent slice of the $42 billion outsourced chip-production industry last year, according to market researcher IHS. Globalfoundries was No. 2, at 11 percent, just ahead of United Microelectronics Corp. The companies are also increasingly competing with Samsung Electronics Co., the world’s second largest overall chipmaker, which is trying to expand into business supplying parts for its own mobile devices and doing contract manufacturing for Apple.
Mubadala GE Capital Ltd., the joint venture between Mubadala Development and General Electric Co., agreed to sell $3.6 billion of corporate and real estate loans held by the joint venture to Apollo Global Management LLC’s MidCap Finco in September.
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