Micron / Elpida deal now official

The agreement has been entered into in connection with Elpida's corporate reorganization proceedings conducted under the jurisdiction of the Tokyo District Court. Under the agreement, 200 billion Yen (approximately USD $2.5 billion assuming 80 Yen/USD) total consideration, less certain reorganization proceeding expenses, will be used to satisfy the reorganization claims of Elpida's secured and unsecured creditors. Micron will acquire 100 percent of the equity of Elpida for 60 billion Yen (approximately USD $750 million) to be paid in cash at closing. In addition, 140 billion Yen (approximately USD $1.75 billion) in future annual installment payments through 2019 will be paid from cash flow generated from Micron's payment for foundry services provided by Elpida, as a Micron subsidiary. As a result of these payments, all pre-petition debt obligations of Elpida will be fully discharged under the corporate reorganization proceedings. The agreement also calls for Micron to provide certain financing support for Elpida capital expenditures, subject to specified conditions, and to maintain Elpida's operations and employees. In a related transaction, Micron also announced today a separate agreement with Powerchip Technology Corporation, a Taiwanese corporation, and certain of its affiliates to acquire the Powerchip group's 24 percent share of Rexchip Electronics Corporation for approximately 10 billion NTD (approximately USD $334 million assuming 30 NTD/USD). Elpida's assets include a 300 millimeter (mm) DRAM fabrication facility located in Hiroshima, Japan; an approximate 65 percent ownership interest in Rexchip, whose assets include a 300mm DRAM fabrication facility located in Taiwan; and an assembly and test facility located in Akita, Japan. Together with the Rexchip shares acquired from Powerchip, Micron will control approximately 89 percent of Rexchip's outstanding shares. The fab assets of Elpida and Rexchip together can produce more than 200,000 300mm wafers per month, which would represent an approximate 50 percent increase in Micron's current manufacturing capacity. Using its advanced technologies, Elpida has built a strong presence in Mobile DRAM, targeting mobile phones and tablets. Micron is a leader in delivering enterprise DRAM solutions for networking and servers as well as offering a wide product portfolio in NAND and NOR. Combining the two complementary product portfolios will further strengthen Micron's position in the memory market and enable it to provide customers with an even more complete set of high-quality solutions. "We are creating the industry-leading pure-play memory company," said Micron CEO Mark Durcan. "Today's transactions will help strengthen the combined companies' market position in the memory industry through increased research and development and manufacturing scale; improved access to core memory market segments; and additional wafer capacity to balance among DRAM, NAND and NOR memory solutions for the ultimate benefit of Micron and Elpida customers." "Micron's sponsorship of Elpida will enable stable payment of creditor claims and help to streamline approval of the reorganization plan by the creditors and the Tokyo District Court. Joining with Micron also delivers a clear advantage for Elpida's customers, suppliers and employees," said Yukio Sakamoto, co-trustee of Elpida. "The transaction is a strong testament to the value of Elpida's technologies, products and people, and it will result in a combined organization that can best serve customers with broader memory solutions, strength and scale." The transactions are subject to certain conditions, including approval by Elpida creditors, the Tokyo District Court, and other customary antitrust approvals. Elpida's reorganization plan is currently anticipated to be submitted to the Tokyo District Court for approval in August 2012. The transactions are expected to close in the first half of calendar 2013. Micron's purchase of the Powerchip group's Rexchip shares will occur upon close of the Elpida transaction. Elpida filed a petition for commencement of Corporate Reorganization Proceedings with the Tokyo District Court under the Corporate Reorganization Act of Japan on Feb. 27, 2012.