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the chip plants equipped with outdated technology, the company overhauls them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