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Micron Agrees to Buy Rexchip Stake Amid Elpida Takeover Plan

Micron Technology Inc. (MU) agreed to buy Powerchip Technology Co. (5346)’s stake in Rexchip Electronics Co. as the U.S. company negotiates to take over Elpida Memory Inc. in the memory-chip industry’s largest consolidation in four years.

Powerchip and an investment unit will sell 691 million shares in its Taiwan venture with Elpida for NT$9.7 billion ($325 million), the Hsinchu, Taiwan-based company said in exchange filings in Taipei today. The sale is conditional on Micron’s purchase of Elpida, Powerchip spokesman Eric Tang said, declining to comment on if or when that deal may be announced.

Micron, the largest U.S. memory-chip maker, in May got approval to negotiate to acquire Elpida, which filed for bankruptcy in February after at least five straight quarters of losses. Buying Elpida will allow Boise, Idaho-based Micron to double its share of the market for dynamic random-access memory chips, the most commonly used memory in computers.

“Under the proposed arrangement with Powerchip, if Micron entered into an agreement to acquire Elpida, Micron would have the right to purchase the Rexchip shares held by Powerchip,” Dan Francisco, a spokesman for Micron, said in an e-mailed statement today. Micron has not yet purchased the shares, he said, declining to comment on the status of discussions to buy Elpida.

Source: Powerchip Semiconductor Corp. via Bloomberg

A worker at Powerchip Semiconductor Corp.'s 12-inch wafer fab factory in Taiwan. Close

A worker at Powerchip Semiconductor Corp.'s 12-inch wafer fab factory in Taiwan.

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Source: Powerchip Semiconductor Corp. via Bloomberg

A worker at Powerchip Semiconductor Corp.'s 12-inch wafer fab factory in Taiwan.

Shares Rise

Powerchip and its fully owned Li Hsin Investment unit agreed to sell the 691 million shares of the Taichung-based company, at NT$14.03 per share, according to the exchange filing. That’s 58 percent higher than Rexchip (4932)’s June 29 closing price, according to data compiled by Bloomberg. Powerchip has a 21.3 percent direct stake in Rexchip, data compiled by Bloomberg shows.

Rexchip added 4 percent to NT$9.26 as of 12:01 p.m. on Taiwan’s GreTai over the counter exchange. Powerchip climbed 5.45 percent to 58 NT cents and is heading for its highest close in two weeks.

Micron will buy Elpida for an estimated 200 billion yen ($2.5 billion), the Nikkei newspaper reported June 29.

“After the merger formally takes effect, Micron and Elpida will likely work to integrate production, which will bring sweeping changes to the industry landscape and supply chain relationships,” Taipei-based researcher DRAMeXchange wrote in a press release today.

Rexchip is expected to continue to make standard computer memory, while one of its factories may be converted to make NAND flash chips, a type of memory used to store information in phones and digital cameras, it wrote.

Micron’s share of global DRAM manufacturing capacity would climb to 35 percent and it would become the second-largest by revenue behind Samsung Electronics Co. (005930), DRAMeXchange said.

In 2008, Micron bought a 35 percent stake in Taoyuan, Taiwan-based Inotera Memories Inc. (3474) from Qimonda AG for $400 million, according to data compiled by Bloomberg. Elpida owns 65 percent of Rexchip, according to data compiled by Bloomberg.

Elpida’s public relations department declined to comment on the transaction.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

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

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