May 7, 2012 / 2:52 AM / 6 years ago

Micron wins exclusive right to bid for Elpida -source

TOKYO (Reuters) - Micron Technology won the right to negotiate exclusively to buy Elpida Memory Inc after offering more than 200 billion yen ($2.5 billion) for the failed Japanese chipmaker, a source with direct knowledge of the deal said, paving the way for the U.S. company to more than double its global market share.

Elpida chips are seen at an electronic store in Tokyo's Akihabara district April 24, 2012. REUTERS/Toru Hanai

By acquiring Elpida, Micron will boost its share to 25 percent, surpassing South Korea’s SK hynix and becoming the second-biggest maker of memory chips used in personal computers, according to U.S. technology research firm IHS iSuppli. Samsung Electronics is the largest.

Elpida, which also makes chips used in smartphones and tablets, has been searching for an investor to sponsor its restructuring after filing for bankruptcy protection in February with 448 billion yen in liabilities.

Part of the 200 billion yen will be used to repay Elpida’s debts and part of it will be invested in the chipmaker’s operations, the source said, declining to be identified because the negotiations are confidential.

As of March 1, Micron held $2.1 billion of cash and short-term investments, while long-term debt totaled $2.2 billion, according to the company’s earnings statement for the quarter ended March 1.

In the final round of bidding that closed last Friday, Micron also offered to keep Elpida’s two main factories in Japan open and guarantee jobs for the company’s current employees for the time being, the source said.

Those promises helped it to outmaneuver SK hynix, which dropped out of the race last week. U.S. private equity firm TPG Capital LP and China’s Hony Capital had placed a joint bid in the final round, the source said.

The auction was overseen by Elpida’s Chief Executive Yukio Sakamoto and lawyer Nobuaki Kobayashi, the court-appointed trustees.

Shares of Micron have fallen about 20 percent since late March when it was first identified as a bidder for Elpida.

Micron officials were not immediately available to comment. The office of Elpida’s trustees declined to comment.

A final restructuring plan for Elpida will require the approval of a local court and the company’s creditors, not all of which may be happy with the acquisition deal.

Last week, a group of Elpida debt holders said they may submit a rival reorganization plan if trustees agreed to a low-ball bid, referring to a previous media report that put Micron’s first-round offer at 150 billion yen.

The 200 billion yen offer is better than the previously reported price, a source close to the group of Elpida debt holders told Reuters on Monday.

“But you cannot tell from the latest reports if what Micron is offering is acceptable or not. The latest numbers could seriously undervalue Elpida,” the source said, declining to be identified because he is not allowed to speak to the media.

The bond holders have told Elpida’s trustees to share information with key creditors before finalizing any deal with Micron, the source said. They also want to know how much of the money to be injected into Elpida would be used to repay creditors, according to the source.

Elpida previously said it may submit its restructuring plans to a local court by August 21.

The company’s failure was the largest ever by a Japanese manufacturer and an embarrassment for the government, which had propped up Elpida with public funds to save what was billed as the country’s last hope for the dynamic random-access memory (DRAM) chip market.

Elpida was formed in 1999 through a merger of the DRAM units of Hitachi Ltd and NEC Corp under a government initiative to promote the country’s DRAM business. In 2003, Mitsubishi Electric sold its DRAM division to Elpida.

Elpida reported losses for five straight quarters, hit by sliding prices of DRAM chips used in personal computers and a strong yen.

Analysts say they are positive about the outlook for chips used in mobile devices, which contributed 50 percent of Elpida’s revenue in the latest fiscal year to March while only accounting for 15 percent of the memory capacity it produced.

($1 = 79.8800 Japanese yen)

Additional reporting by Junko Fujita and Emi Emoto; Editing by Ryan Woo

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