Middle Eastern tycoons sell off GlobalFoundries shares

A unit of Mubadala Investment Co. is seeking to raise $950 million by selling shares in GlobalFoundries Inc., two years after the chip maker went public.

The unit of the Abu Dhabi Investment Fund offered to sell shares for $50.75 to $52.50 apiece, according to terms of the deal seen by Bloomberg. An earlier statement showed the company intends to buy back $200 million of shares at the offering price.

The price range represents a discount of 4.9% to 8% to GlobalFoundries’ closing price of $55.21 per share on Wednesday, according to Bloomberg calculations.

GlobalFoundries shares have fallen 8.9% so far this year, valuing the company at about $30.5 billion. Mubadala is GlobalFoundries’ largest shareholder, holding an 85% stake before the sale, according to data compiled by Bloomberg.

Representatives for Mubadala and GlobalFoundries did not immediately respond to requests for comment.

The offering consists entirely of secondary shares sold by selling shareholders, and no proceeds will be received, according to the statement. GlobalFoundries intends to fund the share purchases with cash on its balance sheet.

GlobalFoundries and Mubadala raised about $2.9 billion in the company's 2021 IPO, including an overallotment option.

Morgan Stanley and Bank of America are underwriters for the offering, according to a news release.

In mid-February this year, GlobalFoundries announced its financial results for the three months ending December 31st.

Data showed that GlobalFoundries' fourth-quarter revenue fell 12% year-on-year to $1.854 billion. Despite this, the company's revenue was slightly higher than the market's general expectation of $1.85 billion. The decline in sales reflects a decrease in chip shipments: GlobalFoundries sold 552,000 wafers worth of semiconductors in the fourth quarter, down from 580,000 wafers in the same period last year.

The sales decline was partly due to lower demand from data center operators and telecom providers. Such customers accounted for 8% of GlobalFoundries’ fourth-quarter revenue, down from 18% a year earlier. The company makes chips that can be used to power network equipment such as 5G base stations.

While GlobalFoundries’ data center and telecom businesses contracted in the fourth quarter, sales to automakers surged. In the last three months of 2023, the automotive industry accounted for 17% of GlobalFoundries’ revenue, compared with just 5% in the same period last year.

Thomas Caulfield, CEO of GlobalFoundries, said: "In the fourth quarter, GF's dedicated teams around the world delivered financial results that exceeded the midpoint of the guidance range we provided in our November earnings report. We will continue to drive GF's foundry innovation and differentiation in key end markets, and we are particularly proud of the revenue growth in the automotive end market, with revenue exceeding $1 billion in 2023."

In the fourth quarter, GlobalFoundries achieved two business milestones that will help accelerate the long-term growth of its automotive chip business.

First, the company received a $35 million grant from the U.S. government to upgrade its Vermont factory. The plant will receive equipment that can be used to manufacture so-called gallium nitride on silicon chips. Such chips can withstand higher temperatures and voltages than standard processors, which makes them ideal for use in demanding environments such as power grids.

Semiconductors containing gallium nitride are also used in systems such as electric vehicles. The power flowing from the vehicle's battery must be converted to a lower voltage before it can be delivered to other subsystems. In many cases, the components responsible for performing this task are powered by gallium nitride chips.

In the fourth quarter, GlobalFoundries also expanded its manufacturing partnership with Infineon Technologies AG, a major chip supplier to the German automotive industry. The newly expanded alliance focuses on the latter’s AURIX TC3 series of automotive processors. GlobalFoundries will help Infineon mass produce these chips, which are used to power vehicle safety and partially automated driving systems.

Although GlobalFoundries' revenue fell by double digits year-over-year, its revenue has stabilized on a sequential basis. The company's sales for the three months ended Dec. 31 were $1.85 billion, up slightly from the previous quarter. GlobalFoundries' sales also rose slightly sequentially in the first two quarters.

The company's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) reached $773 million in the last three months of 2023, down from $821 million a year ago. Still, GlobalFoundries beat consensus estimates: adjusted earnings per share were 64 cents, while analysts surveyed by Zacks Estimate expected 59 cents.

GlobalFoundries expects sales of $1.5 billion to $1.54 billion for the current quarter. The company expects its net income to be between $100 million and $156 million.

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