Tuesday, July 03, 2012
Micron Buying Elpida For $750M
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Micron and Elpida Memory trustees have signed a definitive
sponsor agreement for Micron to acquire and support Elpida.
The agreement has been entered into in connection with
Elpida's corporate reorganization proceedings conducted
under the jurisdiction of the Tokyo District Court.
Under the agreement, 200 billion Yen (approximately USD
$2.5 billion assuming 80 Yen/USD) total consideration, less
certain reorganization proceeding expenses, will be used to
satisfy the reorganization claims of Elpida's secured and
unsecured creditors. Micron will acquire 100 percent of the
equity of Elpida for 60 billion Yen (approximately USD $750
million) to be paid in cash at closing. In addition, 140
billion Yen (approximately USD $1.75 billion) in future
annual installment payments through 2019 will be paid from
cash flow generated from Micron's payment for foundry
services provided by Elpida, as a Micron subsidiary. As a
result of these payments, all pre-petition debt obligations
of Elpida will be fully discharged under the corporate
reorganization proceedings. The agreement also calls for
Micron to provide certain financing support for Elpida
capital expenditures, subject to specified conditions, and
to maintain Elpida's operations and employees.
In a related transaction, Micron also announced today a
separate agreement with Powerchip Technology Corporation, a
Taiwanese corporation, and certain of its affiliates to
acquire the Powerchip group's 24 percent share of Rexchip
Electronics Corporation for approximately 10 billion NTD
(approximately USD $334 million assuming 30 NTD/USD).
Elpida's assets include a 300 millimeter (mm) DRAM
fabrication facility located in Hiroshima, Japan; an
approximate 65 percent ownership interest in Rexchip, whose
assets include a 300mm DRAM fabrication facility located in
Taiwan; and an assembly and test facility located in Akita,
Japan. Together with the Rexchip shares acquired from
Powerchip, Micron will control approximately 89 percent of
Rexchip's outstanding shares. The fab assets of Elpida and
Rexchip together can produce more than 200,000 300mm wafers
per month, which would represent an approximate 50 percent
increase in Micron's current manufacturing capacity.
Using its advanced technologies, Elpida has built a strong
presence in Mobile DRAM, targeting mobile phones and
tablets. Micron is a leader in delivering enterprise DRAM
solutions for networking and servers as well as offering a
wide product portfolio in NAND and NOR. Combining the two
complementary product portfolios will further strengthen
Micron's position in the memory market.
"We are creating the industry-leading pure-play memory
company," said Micron CEO Mark Durcan. "Today's
transactions will help strengthen the combined companies'
market position in the memory industry through increased
research and development and manufacturing scale; improved
access to core memory market segments; and additional wafer
capacity to balance among DRAM, NAND and NOR memory
solutions for the ultimate benefit of Micron and Elpida
"Micron's sponsorship of Elpida will enable stable payment
of creditor claims and help to streamline approval of the
reorganization plan by the creditors and the Tokyo District
Court. Joining with Micron also delivers a clear advantage
for Elpida's customers, suppliers and employees," said
Yukio Sakamoto, co-trustee of Elpida. "The transaction is a
strong testament to the value of Elpida's technologies,
products and people, and it will result in a combined
organization that can best serve customers with broader
memory solutions, strength and scale."
The transactions are subject to certain conditions,
including approval by Elpida creditors, the Tokyo District
Court, and other customary antitrust approvals. Elpida's
reorganization plan is currently anticipated to be
submitted to the Tokyo District Court for approval in
August 2012. The transactions are expected to close in the
first half of calendar 2013. Micron's purchase of the
Powerchip group's Rexchip shares will occur upon close of
the Elpida transaction.
Elpida filed a petition for commencement of Corporate
Reorganization Proceedings with the Tokyo District Court
under the Corporate Reorganization Act of Japan on Feb. 27,
With its planned purchase of Elpida Memory, Micron will
become the world's second largest supplier of dynamic
random access memory.
Micron had been ranked the No.-4 global DRAM supplier in
the first quarter, with $759 million in revenue and a 12.2
percent share of the market, (DRAM), according to
calculations based on first-quarter rankings from the IHS
iSuppli Memory & Storage service. The company placed behind
top-ranked Samsung Electronics, No. 2 Hynix Semiconductor
Inc., and No.-3 Elpida.
"The purchase of Elpida represents a huge boost for
Micron?s status in the DRAM industry," said Mike Howard,
senior principal analyst for DRAM & memory research at IHS.
"Micron will see its market share and DRAM manufacturing
base nearly double as a result. Furthermore, Micron is
gaining access to some excellent mobile DRAM technology,
which should greatly improve its product portfolio. The
$2.5 billion sale price is reasonable and shouldn?t impact
Micron?s cash position adversely. It will likely take at
least six months for the deal to close, but IHS expects a
very quick transition and integration once it does."