Micron to merge two production units after Elpida buy05 Jul 2012
Micron revealed that under the agreement, $2.5 billion total consideration and less certain reorganization proceeding expenses will be used to satisfy the reorganization claims of Elpida's secured and unsecured creditors. Micron will acquire 100 percent of the equity of Elpida to be paid in cash at closing.
In addition, future annual installment payments through 2019 will be paid from cash flow generated from Micron's payment for foundry services provided by Elpida, as a Micron subsidiary. As a result of these payments, all pre-petition debt obligations of Elpida will be fully discharged under the corporate reorganization proceedings. The agreement also calls for Micron to provide certain financing support for Elpida capital expenditures, subject to specified conditions, and to maintain Elpida's operations and employees.
Elpida's assets include a 300mm DRAM fabrication facility located in Hiroshima, Japan; about 65 percent ownership interest in Rexchip, whose assets include a 300mm DRAM fabrication facility located in Taiwan; and an assembly and test facility located in Akita, Japan. Together with the Rexchip shares acquired from Powerchip, Micron will control nearly 89 percent of Rexchip's outstanding shares, the U.S. firm noted. The fab assets of Elpida and Rexchip together can produce more than 200,000 300mm wafers per month, which would represent about 50 percent increase in Micron's current manufacturing capacity.
The transactions are subject to certain conditions, including approval by Elpida creditors, the Tokyo District Court and other customary antitrust approvals.
Following Micron Technology's acquisition of Elpida Memory, Inotera Memories and Rexchip Electronics will likely be merged into a single operating company, industry sources speculate.
After acquiring Elpida and owning a majority stake in Rexchip, Micron's next move will be merging Rexchip and Inotera, in which it now holds an about 40 percent stake, the sources said. Micron also announced a separate agreement with Powerchip Technology and certain of its affiliates to acquire the Powerchip's 24 percent share of Rexchip. The transactions are expected to close in 1H13, according to Micron.
Micron indicated that its purchase of Powerchip's Rexchip shares will occur upon close of the Elpida transaction. Micron will control about 89 percent stake in Rexchip after the transaction completes.
Acquiring Elpida will allow Micron to grow its DRAM market share to 24 percent from the current 11 percent, and compete head-to-head with SK Hynix.
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