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Elpida to Sell 79.7 Billion Yen in Shares, Convertible Bonds

Elpida Memory Inc. (6665), the world’s third-largest maker of computer-memory chips, plans to raise 79.7 billion yen ($987 million) selling shares and convertible bonds. The shares tumbled the most in almost two years.

The chipmaker plans to sell 57.3 million new shares, equivalent to 27 percent of Elpida’s outstanding stock, for about 52.2 billion yen by as early as July 25, the Tokyo-based company said in a statement. The company also plans to sell 27.5 billion yen in convertible bonds, with the interest rate being decided July 15, it said.

Tokyo-based Elpida, bailed out by the government in 2009, fell as much as 15 percent in Tokyo trading on concern the sale will dilute the value of existing shares. It’s the unprofitable company’s sixth fundraising plan since 2009 to invest in factories to keep up with Samsung Electronics Co., which spends about $10 billion annually to widen its lead in the production of memory chips.

“The company is selling way too many shares,” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. “Individual investors must have sold shares on that news.”

Elpida plans to sell 18.3 million of the shares to local investors and as many as 39 million to overseas investors, according to the company.

Elpida plunged 13 percent to close at 787 yen, reducing the chipmaker’s market value to 168.8 billion yen. Reuters reported on the sale earlier today.

Taiwan Listing

The five-year convertible bonds will be offered at 102.5 percent of the face value and pay interest of 0.5 percent to 0.9 percent, Elpida said.

Daiwa Securities Capital Markets Co., Morgan Stanley MUFG Securities Co., Nomura Securities Co., Mizuho Securities Co. and SMBC Nikko Securities Inc. were hired for the sale.

Last year, the company said it plans to sell 60 billion yen in convertible bonds to local private investors. Earlier this year, Elpida sold NT$4.26 billion ($148 million) of Taiwan depositary receipts to fund research and development. The company’s shares began trading in Taipei this year.

Elpida specializes in making chips known as dynamic random access memory, a product whose industry is marked by companies driven out of the business by low-cost competitors and cycles of boom-and-bust. The last recession pushed German memory-chip maker Qimonda AG into bankruptcy.

Elpida is trying to avoid the same fate. In 2009, Elpida received a 30 billion yen bailout from the state-run Development Bank of Japan following a record loss in the year ended March 2009.

In February, Elpida Chief Executive Officer Yukio Sakamoto said he is scrapping a plan to merge with Taiwanese chipmakers following opposition from the target companies. Chipmakers face mounting pressure to unite to keep up with the South Korean company.

To contact the reporters on this story: Kazuyo Sawa in Tokyo at ksawa3@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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