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Report: Micron, Elpida reach acquisition deal

Posted: 29 Jun 2012 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM market? Elpida bankruptcy? memory chip?

Micron Technology Inc. and Elpida Memory Inc. have reached a deal.

According to a report by Japan's Nikkei newspaper, U.S.-based Micron will acquire the bankrupt Japanese memory firm for about $.2.5 billion (roughly ?200 billion).

Nikkei noted that about $1.75 billion (about ?140 billion) of the acquisition price will go to pay off Elpida's debt. About 70 percent of Elpida's outstanding debt, totaling more than $5.2 billion (about ?420 billion) won't be repaid, the report added.

According to C.J. Muse, an analyst with Barclays Capital, the actual purchase price Micron will reportedly pay for Elpida is roughly the $1.75 billion that will go toward Elpida creditors. The remainder, around $755.5 million (approximately ?60 billion), will go toward investments to upgrade Elpida's production facilities, Muse said.

"While details are still limited, we believe the news is positive for shares," Muse wrote in a report.

Muse added that the price tag of $1.75 billion is more or less in line with Barclays' initial estimate of $1.75 billion to $2 billion that Micron would pay for Elpida.

A spokesman for Micron declined to comment on the report, citing company policy not to comment on rumors or conjectures.

According to the Nikkei report, Micron plans to invest about $1.26 billion (?100 billion) in Elpida's fabs, including Elpida's flagship fab in Hiroshima prefecture, to boost output.

Micron has been rumored as a suitor for Elpida since the final Japanese DRAM vendor filed for bankruptcy protection early this year. Micron was one of only two bidders to submit a final proposal to acquire Elpida in an unusual auction process that culminated in May. After initially declining to comment, Micron confirmed in May that had bid for Elpida and was in talks with Elpida's trustee to acquire the firm.

Elpida tragedy stabilizes DRAM pricing
Since Elpida Memory Inc. filed for bankruptcy last February, pricing in the dynamic random access memory market has been noticeably less volatile.
Read more about IHS iSuppli's report here.

Analysts have speculated that an acquisition of Elpida by Micron would have a positive impact on the DRAM industry as a whole, primarily through consolidating and removing some of the industry's DRAM manufacturing capacity. Market research firm IHS iSuppli noted again in a report earlier this week that DRAM pricing has been markedly less volatile since Elpida's bankruptcy in February.

Elpida is due to finalize its business rehabilitation plan and submit it to the Tokyo District Court by Aug. 21, Nikkei reported.

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