Micron Gains on Speculation It May Get Elpida Assets Cheaply

Micron Technology Inc. (MU) rose on speculation that the memory chipmaker may try to acquire the assets of Elpida Memory Inc. cheaply after a potential rival dropped out of the bidding.

SK Hynix Inc. (000660), the world’s second-biggest memory chipmaker, said it won’t bid for Japan’s Elpida, which has filed for bankruptcy. That makes Micron more likely to acquire Elpida’s assets for as low as 17 cents on the dollar, according to Doug Freedman, an analyst at RBC Capital Markets.

“Many suspect Micron is now the favorite and stands the best chance to win the assets,” Freedman wrote. “This would be a positive, considering the purchase price comes at a significant discount.”

Micron has no comment on rumor or conjecture, Dan Francisco, a spokesman for Boise, Idaho-based Micron. The company’s executives have said they would consider opportunities to use deals to cope with price fluctuations in the industry and that they are monitoring events in Japan. Micron has declined to say whether it will bid for Elpida.

Micron shares rose 8 cents, or 1.2 percent, to $6.55 at the close in New York after earlier gaining as much as 6.5 percent. The stock has climbed 4.1 percent this year.

SK Hynix, the only company that had publicly expressed interest in buying Tokyo-based Elpida, decided not to participate in the second round of bidding, the Icheon, South Korea-based company said today in a regulatory filing in Seoul. It didn’t elaborate.

Losses, Price Plunge

Elpida is Japan’s largest maker of chips for DRAM, or dynamic random access memory. Beset by plunging prices for the chips and five quarters of losses, Elpida filed for bankruptcy in February with liabilities of 448 billion yen ($5.6 billion).

Elpida’s buyer would gain its 12 percent share of the global market for DRAM chips, which provide the main memory for personal computers, to help compete against industry leader Samsung Electronics Co. (005930) Elpida also supplies Apple Inc. with chips used in the iPhone.

Private-equity firm TPG Capital also planned a bid, a person familiar with the matter said April 6. Jochen Legewie, a spokesman for TPG in Tokyo, declined to comment in an e-mail. Calls to Elpida’s office weren’t answered during a national holiday in Japan.

While Elpida’s creditors may ask for at least $3 billion to $4 billion, bidders won’t probably offer more than $2 billion, Bank of America Merrill Lynch said in a March 30 report. Also, a buyer would have to spend $3 billion during the next 12-18 months to help restore Elpida’s competitiveness, making the deal risky, according to the report.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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