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Micron, Hynix finally agree on $3.8 bn DRAM merger

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CIOL Bureau
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After six months of hard bargaining, Micron Technology announced it has

agreed to pay $3.8 billion in stock for Hynix Semiconductor in a deal that will

create the world's largest computer memory chip producer with 40 percent of the

global DRAM business. Micron also said it had agreed to pay $295 million in cash

and stock for a Virginia-based DRAM plant owned by Japan's Toshiba.

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Micron and Hynix on Monday announced they had signed a non-binding memorandum

of understanding following the latest round of week-end talks in the United

States.

Micron president Steve Appleton said the merger "will create a leading

semiconductor company that will benefit its employees, shareholders, affiliates

and worldwide customers.''

Under the basic terms of the deal Micron agreed to pay 108.6 million of its

shares for Hynix's memory operation, including seven chip fab facilities, as

well as $200 million in cash for a 15 per cent stake in Hynix's non-memory chip

operations, which will continue to operate independently. Korean lenders will

provide Micron $1.5 billion in long-term debt financing for Korean-based

operations.

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Hynix has until April 30 to sell the deal to its creditors, which are

expected to quickly approve the deal. A tougher group to convince of supporting

the deal is Hynix's smaller investors who own the majority of the company's

stock. Many are reportedly dead set against the deal and are claiming the

company is selling the memory unit at too low a price. They would like to see

Hynix continue to operate independently.

Meanwhile, Hynix's employees union has threatened to strike in protest of the

deal. The union fears Micron will consolidate operations and close a number of

Hynix's plants and moving production of DRAMs elsewhere.

But analyst point out that Micron will likely do with the Hynix facilities

what it has done with Texas Instruments' DRAM fabs a few years ago. After buying

the chip plants equipped with outdated technology, the company overhauls them

and brings them up to par with Micron's leading edge, low-cost technology. And

Micron is known for using its capacity intelligently in order to avoid flooding

the market, which depresses prices.

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