Micron Buys Bankrupt Japanese Chipmaker (MU, AAPL, SSNLF)

Following a second round of bidding for Japan’s failed Elpida Memory Inc., Micron Technology Inc. (NASDAQ: MU) has signed an agreement to purchase the DRAM maker for $2.5 billion, the same price it had offered during the first round of bidding. Elpida’s creditors forced a second round in late May believing that the company was worth more than Micron’s $2.5 billion bid, but the market did not yield a higher offer.

Micron will pay $750 million for all the equity in Elpida at closing and the remainder of the total amount in annual installment payments through 2019. The annual payments will be paid from Elpida’s cash flow “from Micron’s payment for foundry services” paid to Elpida as a subsidiary of Micron:

As a result of these payments, all pre-petition debt obligations of Elpida will be fully discharged under the corporate reorganization proceedings.

Elpida’s creditors must still sign off on the deal, but barring an eleventh-hour offer from another buyer, the creditors have little hope of a better offer. Elpida’s liabilities totaled $5.6 billion, so creditors will get about $0.31 on the dollar.

Micron also announced today that it would acquire a 24% stake in Taiwan’s Rexchip Electronics for $334 million. Elpida owns 65% of Rexchip.

On of Elpida’s largest customers is Apple Inc. (NASDAQ: AAPL) and following the acquisition, Micron will control about 25% of the DRAM market, second only to market share leader Samsung Electronics (OTC: SSNLF.PK), which holds about 42% of the market.

Shares of Micron are up about 7% at $6.75 in pre-market activity. The stock’s 52-week range is $3.97-$9.16.

Paul Ausick