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.

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