Elpida Bondholders Seek Alternative Sponsors to Replace Micron

About 20 bondholders of Elpida Memory Inc., the bankrupt Japanese chipmaker, are negotiating with alternative sponsors to replace a takeover offer by Micron Technology Inc. (MU) they consider too low, a representative said.

“We are talking to both strategic and financial investors,” Anthony Correa, head of Asia operations for Taconic Capital Advisors LP, said today in a conference call with reporters. “We are in the midst of gathering information from the trustee so that we can proceed with the plan.”

Correa, based in Hong Kong, said he represents about 20 bondholders in Asia, Europe, and the U.S. with a total of 100 billion yen ($1.2 billion) in Elpida notes. The bondholders believe Micron’s 200 billion-yen offer for the Apple Inc. (AAPL) supplier is “very unfair” because the company is worth 300 billion yen, and they have presented their own revival plan to creditors, he said.

It’s the second time this month bondholders are publicly opposing Micron’s proposal to buy Elpida, a combination that would double the Boise, Idaho-based company’s share of the global market for dynamic random access memory -- the most widely used memory chips in personal computers. Elpida sought protection from creditors in February with 448 billion yen of liabilities after lower chip prices and a stronger yen eroding the value of overseas earnings prompted a fifth straight quarterly loss.

Samsung Competition

A spokesman for Elpida declined to comment. Dan Francisco, a Micron spokesman, didn’t immediately return a call or e-mail outside business hours seeking comment.

Micron agreed to buy Elpida in July in a deal that may help Micron vie with industry leader Samsung Electronics Co. (005930) while giving it greater control over supply gluts that have caused it to report losses amid falling prices. Micron shares are down 1.4 percent this year in New York trading, compared with a 12 percent increase in the Standard & Poor’s 500 Index.

Micron agreed to pay 60 billion yen in cash at the closing of the deal, while the remaining 140 billion yen in future annual installments through 2019 will come from cash flow generated by Micron’s payments for chips made by Elpida, according to a July 2 statement.

Correa said today that Micron reduced its 60 billion-yen cash offer for Elpida shares to 38 billion yen.

“We have just learned about the reduction this week and are not clear on reasons,” Correa said.

Elpida will get 280 billion yen in support from Micron, the Asahi newspaper reported Aug. 21, without saying where it got the information. The U.S. company will buy Elpida shares for 60 billion yen to make it wholly owned in the first half of 2013 and provide 80 billion yen in loans and debt guarantees, the Asahi said, citing a revival plan submitted in Tokyo District Court.

Micron will also help Elpida generate 140 billion yen in profit by buying its chips during a seven-year period, the Asahi said.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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