In a major merger of Flash memory leaders, Micron Technology today agreed to purchase Lexar Media for roughly $688 million in stock.
Under terms of the agreement, each outstanding share of Lexar will receive 0.5625 shares of Micron stock.
The cost of the deal is based on Micron’s Tuesday close of $14.98, with Lexar shares valued at $8.43 each, a premium of 19 percent on their closing price of $7.09.
Micron said it plans to issue stock in exchange for 81.6 million Lexar shares.
The merger will pair Micron’s chip technology and manufacturing assets in NAND
Flash memory is coveted by many makers of handheld gadgets, such as MP3 players and digital cameras, because the data is retained even when the power is cut off.
The deal should significantly improve Micron’s position in the NAND Flash business, where it competes with SanDisk, Samsung and Toshiba, said Gartner analyst Joe Unsworth.
“Lexar is very strong in their controller technology, and that’s really played to Lexar’s strength in the high-end digital photography segment,” Unsworth said.
“Micron is ramping up in NAND Flash and now has an avenue to move some of their NAND Flash via Lexar. This puts Micron/Lexar much closer to an even game with SanDisk.”
The buy is also a bail out for Lexar, which has struggled. Earlier this week, Lexar said that fourth-quarter results will be worse than expected and postponed its earnings release and conference call.
“Through this acquisition, we expect to better align Lexar’s cost structure with business conditions and increase our development and go-to-market scale in order to compete more effectively,” said Lexar CEO and chairman Eric Stang.
The companies expect to close the deal by the end of the third calendar quarter.
The merger plan comes as Lexar is accusing Toshiba of stealing trade secrets and infringing on patents.
A California judge agreed and ordered Toshiba to pay Lexar for breach of fiduciary duty, theft of trade secrets and punitive damages on top of that.
The court has since ordered a new trial.
Lexar’s shares were up a $1.60 (22 percent) at midday trading, to $8.69.