Micron to Acquire Elpida for 200 Billion Yen, Nikkei Reports

Micron Technology Inc. (MU) will buy bankrupt Japanese chipmaker Elpida Memory Inc. for an estimated 200 billion yen ($2.5 billion), the Nikkei newspaper said.

As much as 140 billion yen of the acquisition price will be used to pay Elpida’s debts, and about 70 percent of the Tokyo- based company’s liabilities won’t be repaid, the Nikkei reported, without saying where it got the information. Micron will invest 100 billion yen in Elpida facilities including its plant in Hiroshima, Japan, to boost output of dynamic random- access memory chips, the report said.

Acquiring Elpida, an Apple Inc. (AAPL) supplier, would double Micron’s share of the global market for DRAM, the most widely used memory chips in personal computers, to about 24 percent. That would help the Boise, Idaho-based company vie with industry leader Samsung Electronics Co. while giving it greater control over supply gluts that have caused it to report four straight quarterly losses amid falling prices.

Dan Francisco, a spokesman for Micron, declined to comment on the report. Phone calls to Elpida weren’t immediately answered.

Micron shares gained 4.4 percent, the most since March 13, to close at $5.97 yesterday.

The largest U.S. maker of computer memory won approval from the Tokyo District Court in May to negotiate to acquire Elpida’s entire business after the Japanese company held two rounds of bidding. SK Hynix Inc. (000660), the only company that had publicly expressed interest in buying Elpida at the time, decided not to participate in the second round, the Icheon, South Korea-based manufacturer said May 4.

Elpida Bankruptcy

Sakamoto is heading Elpida’s restructuring efforts as a court-appointed trustee. The company plans to submit its revival plan Aug. 21.

Elpida sought protection from creditors in February after prices of DRAM chips plummeted. The lower prices and a stronger yen, which erodes the value of repatriated earnings from overseas, led the company to report a fifth straight quarter of losses.

Micron reported a fourth consecutive quarterly loss on June 20 after sluggish demand for personal computers dragged down chip prices. The company had a net loss of $320 million in the three months that ended May 31, compared with profit of $75 million a year earlier, Micron said.

Micron Chief Executive Officer Mark Durcan told analysts on June 20 the company will only go ahead with a purchase of Elpida if it doesn’t involve diluting stock or taking on too much interest-bearing debt.

DRAM Market

Samsung maintained its top slot in the DRAM market in the first quarter with a 41.4 percent share, TrendForce Corp. said May 8. Hynix had 23.9 percent, Elpida’s share was 12.4 percent, and Micron had 11.6 percent, the researcher said.

Micron’s purchase of Elpida would mark “the end of a perfectly competitive market as Samsung, Hynix, and the new Micron team become the three main players in an oligopolistic market,” TrendForce said in a June 6 statement. The researcher forecast the DRAM market by value may shrink 15 percent to $25 billion this year from 2011.

Taking over Elpida would also help Micron boost its mobile DRAM business, as the Japanese chipmaker held a 17 percent share in the market in the fourth quarter, TrendForce said. Micron controlled 7.3 percent of the mobile-DRAM market, lagging behind Samsung’s 54 percent and Hynix’s 21 percent.

Elpida Plants

Elpida has three production sites, including one in Taiwan through its Rexchip Electronics Corp. (4932) unit. The company’s main Hiroshima factory, which produces mobile DRAM, has about 2,400 workers, according to the Hiroshima prefectural government.

Whoever buys Elpida would have to spend $3 billion during the next 12-18 months to help restore the company’s competitiveness, making the deal risky, Bank of America Merrill Lynch said in a March 30 report.

The Japanese chipmaker was created through the 1999 merger of the memory businesses of NEC Corp. (6701) and Hitachi Ltd. (6501) Toshiba Corp. (6502) announced its withdrawal from the DRAM business in 2001 to focus on making NAND flash memory chips. Elpida failed to recover after the government and banks bailed out the company in 2009 with 140 billion yen in financial aid and loans.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.