RealTime IT News

Hynix Board Rejects Micron Buyout

The tentative takeover pact between rival chipmakers Micron Technology and South Korea's Hynix Semiconductor has been scrapped.

The one-week-old $3.4 billion cash and stock deal collapsed suddenly with the board of directors at Hynix rejecting the restructuring plan hammered out by the Hynix Creditors' Council, a group of Korean lenders that bankrolled the company through tough times in recent years.

"Board of Directors of Hynix Semiconductor, Inc., has decided not to accept the restructuring plan proposed by the Hynix Creditors' Council. As a result, the previously announced Memorandum of Understanding (MOU) signed by Micron, Hynix and Hynix Creditors' Council representatives for the sale of Hynix's semiconductor memory operations to Micron did not become effective," Micron said in a brief statement.

Reports out of Korea suggest the board was spooked by the threat of industrial action by Hynix's unionized workers, who publicly rejected the Micron acquisition.

It is not clear how Hynix, currently ranked third in the chip-making sector, would survive without backing from Micron and its Creditors Council. Hynix was able to stave off bankruptcy by negotiating bailout packages from lenders that reduced its interest-bearing debt to about $3.4 billion. The company's foreign debt stands at some $1.14 billion.

The Hynix Creditors Council, which handled the Micron buyout negotiations, were discussing a debt-to-equity swap that would give it a 50 percent stake in Hynix by May this year. Under terms of the proposed buyout, Micron planned to give up about 108.6 million shares of its stock in exchange for Hynix's memory chip operations.

The Boise, Idaho-based Micron also agreed to shell out $200 million in cash for a 15 percent ownership stake in the remainder of Hynix, bringing the total value of the deal to about $3.4 billion. The deal was also set to give Micron full control of several memory-chip production lines in South Korea as well as a plant in Oregon.

The Micron/Hynix marriage, which had been rumored for more than a year, would have made Micron the number one semiconductor firm. Samsung Electronics currently sits atop the chip-making perch.

The entire chip industry took a hammering last year when chip prices fell to record low levels. A slump in demand for the 128-megabit DRAM chips sent prices plummeting and affected all the major players.

In addition to DRAM chips, Micron manufactures and markets SRAMs, Flash Memory and memory modules.