Question

Given news of AMD buying Xilinx for a $35 Billion All-Stock Acquisition please explain the following:

1. What is an All-stock acquisition and the implications in terms of the existence of Xilinx?

2. How does an all-stock acquisition affect the purchasing company's (AMD) price per share.

Answer 1

Ans 1).The terms all-stock deal and all-paper deal are often used in reference to mergers and acquisitions. In this type of acquisition, shareholders of the target company receive shares in the acquiring company as payment, rather than cash.

All-stock deals may be used when shareholders of a target company prefer to obtain ownership in the acquiring company rather than receive a cash settlement. They may also be initiated by acquiring companies which want to buy out the investors of target companies but do not have sufficient cash assets. In this case, paying shareholders in stock is more affordable than paying investors in cash.

All-stock deals can be favorable for the shareholders of target companies if the merger is successful and results in an increase in the value of the acquiring company’s stock. However, because the value of shares can also decrease, all-stock deals involve more risk for target company shareholders than all-cash deals. Acquiring companies may also offer a combination of stock and cash to shareholders of target companies.

The value of the acquiring company shares offered to target company shareholders in an all-stock deal may be higher or lower than the value of their target company shares.

After aquisition there is no existence of xilinx company ,as all the stakeholders of xilinx inc. Aquired by the AMD.

2)

• When one company acquires another, the stock price of the acquiring company tends to dip temporarily, while the stock price of the target company tends to spike.
• The acquiring company's share price drops because it often pays a premium for the target company, or incurs debt to finance the acquisition.
• The target company's short-term share price tends to rise because the shareholders only agree to the deal if the purchase price exceeds their company's current value.
• Over the long haul, an acquisition tends to boost the acquiring company's share price.

Of course, there are exceptions to the rule. Namely: if a target company's stock price recently plummeted due to negative earnings, then being acquired at a discount may be the only path for shareholders to regain a portion of their investments back. This holds particularly true if the target company is saddled with large amounts of debt, and cannot obtain financing from the capital markets to restructure that debt.