Bringing an end to a year-long merger tale between two of the biggest names in the chip industry, Micron Technology
on Monday announced a tentative deal to acquire the memory-chip operations of South Korea’s Hynix Semiconductor.
Under terms of the cash and stock deal, Micron said it would give up about 108.6 million shares of its stock in exchange for the memory chip business of Hynix. Micron also plans 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 also gives Micron full control of several memory-chip production lines in South Korea as well as a plant in Oregon.
The two companies have until April 30 to hammer out a definitive agreement, which would be subject to U.S and European antitrust clearance and shareholder approval.
In a separate announcement later on Monday, Micron said it would buy the commodity DRAM operations of Dominion Semiconductor L.L.C for $250 million in cash. Micron would also issue 1.5 million shares to Dominion’s parent company, Toshiba Corp. of Japan.
Micron said the Dominion Semiconductor acquisition would help cut chip-making costs. The company plans to transfer its .13 micron manufacturing technologies to Dominion’s headquarters in Virginia by the end of this year.
The Dominion facility was originally set up as a joint venture between Toshiba and IBM. In 2000, Toshiba purchased IBM’s ownership interest.
The announced nuptials between Micron and Hynix brings an end to months of negotiations and media speculation ever since Hynix ran into financial trouble with its creditors.
As part of the transaction, the two sides said Hynix’s creditors would also pump an additional $1.5 billion of long-term debt financing for use by Micron in its Korea-based operations.
Hynix, ranked number three in the chip-making sector, has found the going tough in recent months. The Hynix Creditors Council, which took control of the sale negotiations, are said to be discussing a debt-to-equity swap that would give it a 50 percent stake in Hynix by May this year.
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.
In a brief statement, Micron CEO Steve Appleton cautioned the deal is still subject to continued negotiations.
“Although there remain additional details to be negotiated before a definitive agreement can be achieved, we’re confident the outstanding resources of Hynix combined with Micron’s operations will create a leading semiconductor company that will benefit its employees, shareholders, affiliates and worldwide customers,” Appleton said.
If all goes according to plan, the Idaho-based Micron would knock South Korea’s Samsung Electronics from the top of the chip-making perch. The entire 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.