GlobalFoundries Says IBM Demanding $2.5 Billion as IPO Nears
[https://finance.yahoo.com/news/globalfoundries-says-ibm-demanding-2-205559991.html](https://finance.yahoo.com/news/globalfoundries-says-ibm-demanding-2-205559991.html)
**Patricia Hurtado and Jackie DavalosMon, June 7, 2021, 3:00 PM**
* [**IBM+0.93%**](https://finance.yahoo.com/quote/IBM?p=IBM)
(Bloomberg) — GlobalFoundries Inc. asked a judge to rule that it doesn’t owe $2.5 billion to International Business Machines Corp. over a 2014 deal in which the semi-conductor maker agreed to take an unprofitable chip-manufacturing unit off IBM’s hands.
In a complaint filed Monday in New York Supreme Court, GlobalFoundries is seeking a declaratory judgment that it didn’t breach the agreement and said IBM is threatening to sue. The suit comes as GlobalFoundries works with banks on an initial public offering that could value the chipmaker at about $30 billion.
“This action arises out of what seems to be a misguided and ill-conceived effort by IBM’s law department to try to extract an outlandish payment,” GlobalFoundries said its complaint.
IBM agreed in 2014 to pay GlobalFoundries $1.5 billion for GlobalFoundries to acquire the unit. As part of the deal, GlobalFoundries became IBM’s exclusive provider of certain power processors for the next 10 years, in exchange for access to IBM’s intellectual property. GlobalFoundries acquired manufacturing facilities in East Fishkill, New York, and Essex Junction, Vermont.
GlobalFoundries is backed by Abu Dhabi sovereign fund Mubadala Investment Co. The chipmaker is coming to market as numerous industries complain they can’t get enough semiconductor supply and governments across the globe gear up to provide financial support for expansions in production.
A call and email to IBM wasn’t immediately returned.
‘Highly Suspect’
In its lawsuit, GlobalFoundries said IBM’s request for damages is “highly suspect” as it follows news of the potential IPO. GlobalFoundries also said that IBM “has yet to provide any substantive explanation” to its claims over the alleged breach.
GlobalFoundries said in its lawsuit that it invested billions of dollars to develop cutting-edge chip-making technology, but that it decided not to pursue IBM’s “failing strategy” and notified IBM in 2018.
According to the filing, development of the chip-technology was more challenging and expensive than initially anticipated, causing delays in the project’s targeted milestones. GlobalFoundries says it spent more money to catch up but still fell behind competitors including Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. It also alleges IBM was “well aware” of delays and the switch to Samsung was beneficial for the company as it was cheaper and faster than GlobalFoundries would have been able deliver.
IBM didn’t complain about GlobalFoundries’ actions until news of its potential IPO broke, and it now seeks “a quick payday,” GlobalFoundries alleges.
The case is GlobalFoundries v. IBM, New York Supreme Court, New York County.
(Updates with details of complaint)
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