Micron Technology and Elpida Memory announced on Monday that the parties have signed a definitive sponsor agreement for Micron to acquire and support Elpida. The agreement has been entered into in connection with Elpida’s corporate reorganization proceedings.
“We are creating the industry-leading pure-play memory company. Today’s transactions will help strengthen the combined companies’ market position in the memory industry through increased research and development and manufacturing scale; improved access to core memory market segments; and additional wafer capacity to balance amoung DRAM, NAND and NOR memory solutions for the ultimate benefit of Micron and Elpida customers,” said Mark Durcan, chief executive officer of Micron.
Under the agreement, ¥200 billion (approximately $2.5 billion) total consideration, less certain reorganization proceeding expenses, will be used to satisfy the reorganization claims of Elpida’s secured and unsecured creditors. Micron will acquire 100% of the equity of Elpida for ¥60 billion (~$750 million) to be paid in cash at closing. In addition, ¥140 billion (~$1.75 billion) in 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.
In a related transaction, Micron also announced today a separate agreement with Powerchip Technology Corporation, a Taiwanese corporation, and certain of its affiliates to acquire the Powerchip group’s 24% share of Rexchip Electronics Corp. for approximately $334 million.
Elpida’s assets include a 300mm DRAM fabrication facility located in Hiroshima, Japan; an approximate 65% 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 approximately 89% of Rexchip’s outstanding shares. The fab assets of Elpida and Rexchip together can produce more than 200 thousand 300mm wafers per month, which would represent an approximate 50% increase in Micron’s current manufacturing capacity.
Using its advanced technologies, Elpida has built a strong presence in mobile DRAM, targeting mobile phones and tablets. Micron is a leader in delivering enterprise DRAM solutions for networking and servers as well as offering a wide product portfolio in NAND and NOR. Combining the two complementary product portfolios will further strengthen Micron’s position in the memory market and enable it to provide customers with an even more complete set of high-quality solutions.
The transactions are subject to certain conditions, including approval by Elpida creditors, the Tokyo District Court, and other customary antirust approvals. Elpida’s reorganization plan is currently anticipated to be submitted to the Tokyo District Court for approval in August 2012. The transactions are expected to close in the first half of calendar 2013. Micron’s purchase of the Powerchip group’s Rexchip shares will occur upon close of the Elpida transaction.