The long-running will-they, won't-they saga of a tie-up between South Korea's Hynix Semiconductor and Micron Technology could soon be at an end. Micron has signed a preliminary agreement worth around $US3.4 billion that will give it Hynix's memory operations and a chunk of the rest of the company.
Meanwhile, Micron made a second wave in the memory chip waters with an announcement that it has acquired part of Toshiba's memory business. Micron has taken control of Toshiba's commodity DRAM (dynamic RAM) operations at Dominion Semiconductor, a subsidiary of Toshiba located in Virginia, the company said in a statement. Micron paid $US250 million and issued 1.5 million shares of its stock in order to complete the deal.
Micron will acquire the memory business of Hynix in exchange for about 108.6 million shares of Micron stock, under the terms of the memorandum of understanding. In addition, Micron said it will pay $US200 million in cash for a 15 per cent stake in Hynix's non-memory operations, which include customised chip design and manufacturing.
The deal was reached with creditors of heavily indebted Hynix. They will also provide $US1.5 billion of long-term debt financing for use by Micron in its Korean operations. Hynix's creditors are in the driver's seat in the negotiations; the company has been teetering on the brink of bankruptcy for some time, and has only avoided defaulting on loans thanks to several rescue packages mounted by local banks last year, when its total debts hovered around $US7 billion.
The company fell deep into debt after the price of DRAM chips collapsed to a level where Hynix was selling chips at a loss. Now, with a rebound in chip prices, debts have fallen and the company announced it had returned to profit. However, the creditors did not stop looking for a white knight to save the company.
While the preliminary agreement is a significant step for both companies, in talks since late December last year, it is not a done deal yet. A number of details remain to be decided before a definitive agreement can be reached, according to a Micron statement.
The two sides have set a deadline of April 30 for approval of the deal by the Hynix Creditors Council, the board of directors of both Hynix and Micron, and company shareholders.
The agreement marks a growing trend towards consolidation in the memory industry, particularly for DRAM, said one analyst.
"Clearly, consolidation is happening," said Nathan Brookwood, principal analyst with consulting firm Insight 64. "The memory business has had too many suppliers for a long time. A lot of companies have been looking at it and saying, 'Why are we doing this; we're losing money'."