Micron/Hynix Deal Dead

Micron Technology has walked away from negotiations to
acquire rival chipmaker Hynix Semiconductor, ignoring a request from Hynix’s
Creditors Council to reignite the talks.

Micron, spurned in its bid to shell out about $3.4 billion to acquire the memory
chip business and a 15 percent ownership stake in Hynix, bluntly announced
the deal was dead.

“Despite considerable efforts, the parties could not reach a preliminary
agreement. After careful evaluation, we are unable to discern a process that
would allow the numerous parties involved to reach agreement in a timely
manner,” Micron said, effectively giving the cold shoulder to word from
Hynix’s unhappy lenders who are pushing for a new deal. “As a result, we
are withdrawing from the Hynix negotiations.”

“There is no change in (our) position to sell Hynix,” said Lee Kang-Won, an
executive of Hynix’s main creditor bank. Kang-Won’s Korea Exchange Bank are
among a group of lenders owed about $3.4 billion.

“We hope that there would be room to restart negotiations with Micron,”
Kang-Won was quoted as saying.

Looking to resolve its corporate debt headaches, the South Korean government
was also nudging a Hynix/Micron marriage but Hynix’s board of directors
chose to derail the deal and keep the company as a separate entity.

With memory chip prices showing no signs of improving, it is not clear how
Hynix, currently ranked third in the chip-making sector, would survive
without backing from Micron and its Creditors Council.

Kang-Won made it clear the Creditors Council would not be providing
additional funds to Hynix, insisting the company could no survive on its own
because there are no guarantees that memory chip prices would remain high.

Unfazed by the threat of imminent demise, Hynix’s board of directors
announced it would spin off its non-memory operations and sell equity to
raise money for its main memory chip business. Hynix said it is content to
pursue a stand-alone option and reject the Micron buyout.

Under the stand-alone plan, Hynix said it would sell a 20 percent stake in
the non-memory business for about $200 million and secure an additional $300
million next year by gradually selling off a bigger chunk.

“There are too many problems with the creditors’ post-merger restructuring
plan for the remaining company. The plan overestimates the value of the
Micron stock to be paid for the sale of Hynix’s memory business;
unrealistically presumes the size and timing of contingent liabilities; and
is too optimistic in its estimate of the cash flow of the remaining
company,” according to a statement from the Hynix board.

“In addition, we have confirmed that, after its careful examination of the
restructuring plan, Micron has also expressed concern to Hynix and its
creditors regarding the viability of the remaining company. This concern is
based on the restructuring plan placing too much liability onto the
remaining company; restricting the sales of the stock of the remaining
company as a collateral security; and overestimating the revenue and cash
flow of the remaining company,” it added.

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