Mubadala discusses GlobalFoundries IPO at $20bn value

Abu Dhabi’s Mubadala Investment Co. has started preparations for a US initial public offering of chipmaker GlobalFoundries, people with knowledge of the matter said.

The sovereign wealth fund has been having initial discussions with potential advisers about a listing of GlobalFoundries that could value the business at about $20bn, according to the people. It hasn’t yet selected underwriters, the people said, asking not to be identified because the information is private.

Technology companies have already raised $20bn in US IPOs this year, according to data compiled by Bloomberg. Deliberations are at an early stage, and details of the potential deal could change, the people said.

Representatives for Mubadala and GlobalFoundries declined to comment.

GlobalFoundries chief executive officer Thomas Caulfield, in a Bloomberg Television interview this week, said the company always reviews strategic alternatives, and the timetable for an IPO “has always been sometime in 2022.”

The IPO market has been booming since last year, with firms from South Korean e-commerce operator Coupang to food-delivery service DoorDash jumping on their debuts. The technology-heavy Nasdaq Composite Index has gained 70 per cent over the past 12 months, outpacing the 47 per cent gain in the S&P 500 Index.

Contract Chipmakers
GlobalFoundries is one of the largest contract chip manufacturers, competing with market leader Taiwan Semiconductor Manufacturing Co. The company was created when Mubadala bought Advanced Micro Devices’s manufacturing facilities in 2009 and later combined them with Singapore’s Chartered Semiconductor Manufacturing Ltd.

With factories in Europe and the US, GlobalFoundries is in a unique position as the industry gets sucked into the trade war and tension between China and the US. Most of the rest of foundry manufacturing of chips takes place on Taiwan or in South Korea, and US and European politicians are increasingly pushing chipmakers to build more capacity outside of Asia.

As the world economy begins to recover from the coronavirus pandemic, GlobalFoundries has seen a surge in demand for the tiny electronic components it manufactures for other companies.

Surprise Surge
Working and studying from home and reluctance to use public transport sparked a rally in demand for computers and cars, spurring an increase in demand that caught some in the chip industry by surprise.

Caulfield and his peers contend the current spike isn’t a one-time event. The increasing use of artificial intelligence and other forms of computing in new areas will spur a multi-year expansion of industry sales, Caulfield has said.

Mubadala manages about $232bn of assets, with stakes in businesses ranging from private equity firm Silver Lake to Indian conglomerate Reliance Industries Ltd.’s retail unit. It was among a few sovereign investors that last year seized on opportunities from a dislocation in markets caused by the coronavirus pandemic.

The fund is now overhauling its structure and deploying capital to double in size to nearly half a trillion dollars in the next decade, a plan that will vault it into the top ranks of the world’s sovereign wealth funds.

Abu Dhabi is the capital of the United Arab Emirates, home to almost 6 per cent of the world’s oil reserves. It’s looking to Mubadala to harness energy revenue and power broader development at a time when public finances are under strain from lower crude prices.