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Elpida in talks to merge with Micron, Nanya: report
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TOKYO |
Tue Jan 24, 2012 2:45am EST
TOKYO (Reuters) - Japan's Elpida Memory (6665.T) is in talks to merge with U.S. firm Micron Technology (MU.O) and Taiwan's Nanya Technology (2408.TW), the Yomiuri newspaper reported on Tuesday, as the memory chip makers battle a weak market and well-funded South Korean rivals.
Elpida, Japan's last remaining player in the dynamic random-access memory (DRAM) market, also faces a debt repayment crunch in late March and early April that has stirred market worries and sent its shares tumbling to a record low earlier this month.
Elpida said in a statement it would not comment on rumors and speculation. An Elpida spokesman said some parts of the Yomiuri report were wrong but declined to be specific.
"It's an interesting idea, but there are three countries involved and I think it would be difficult to carry through," said Yukihiko Shimada, an analyst at SMBC Nikko in Tokyo.
He said Elpida was second only to DRAM sector leader Samsung Electronics (005930.KS) in mobile DRAM technology and could refinance its debt, and would likely remain independent.
Elpida, which successfully redeemed 30 billion yen ($390 million) in corporate bonds due on Tuesday, has said it is working on refinancing debt and trying to raise more money via advance payments from clients.
Its shares rose 4.6 percent to 367 yen on Tuesday and have gained nearly 25 percent from their all-time low of 297 yen hit two weeks ago. Media reports in recent weeks of talks with potential partners including Micron, Nanya and Toshiba Corp (6502.T) have boosted confidence that Elpida would be able to put together a rescue plan.
RESCUE PLAN
The Yomiuri said Elpida, Micron and Nanya planned to begin due diligence soon and Elpida may seek an investment of as much as 100 billion yen from the Innovation Network Corp of Japan, a mostly publicly funded body that supports technology companies.
But the paper said the fund would look cautiously at any investment proposal. A spokesman for it declined to comment.
Elpida President Yukio Sakamoto made an unscheduled trip to the United States last week, sources familiar with the situation said, although sources at financial institutions doing business with Elpida said at the time there was no word of progress on a possible Micron deal.
Jiji news agency said Sakamoto would meet with Elpida's lenders on Wednesday and Thursday to report on the progress of negotiations on an equity deal with Micron and to seek their continued support.
Micron, which also makes NAND flash memory but reported a worse-than-expected net loss in its latest quarter, has a 10-year agreement with Nanya until 2018 to codevelop new DRAM chip technology. The two also run contract DRAM maker Inotera Memory via a joint venture.
Nanya has posted losses for seven consecutive quarters but has been kept going by funds from its parent, the Formosa petrochemical group.
The Yomiuri said bankers were cautious about the prospects of a three-way merger actually reaching fruition.
The DRAM market has been hit by slumping prices in a weak economy and as consumers switch to tablets that use flash memory instead of DRAM chips. Although spot DRAM prices have bottomed out, they are still below Elpida's break-even point, SMBC Nikko analyst Shimada said.
Elpida, which has also been battered by the strong yen, faces 92 billion yen in loan repayments and corporate bond redemptions in late March and early April.
Toshiba said earlier this month it had held talks about possible support for Elpida but was unlikely to come to its rescue after pulling out of the DRAM business a decade ago.
($1 = 77.0100 Japanese yen)
(Reporting by Isabel Reynolds, Nobuhiro Kubo, Taro Fuse, Maki Shiraki; Editing by Michael Watson and Chris Gallagher)
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