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Micron Technology to Acquire Inotera for a 30% Premium

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Semiconductor consolidation update

The semiconductor consolidation has revived again after reporting intense activity so far in 2015. Micron Technology (MU) and China’s Tsinghua Unigroup announced acquisitions while Atmel (ATML) announced the receipt of a hostile bid offer that was superior to Dialog Semiconductor’s offer. Explore the series to get a sneak preview of the recent M&A (merger and acquisition) activity in the semiconductor space.

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Micron Technology acquires Inotera

Intel’s (INTC) memory chip partner Micron announced that it’s acquiring the remaining 67% stake in its joint venture partner Inotera Memories for a total consideration of $4.1 billion. Micron already owns a 33% stake while Nanya Technology’s parent Formosa Group Companies owns a ~32% stake in Taiwan’s (EWT) Inotera. By acquiring a full, 100% stake in Inotera, Micron aims to get full control of its intellectual property.

Simultaneously, Micron expanded its partnership with Nanya by giving the latter license for its 1x and 1y DRAM (dynamic random access memory) technologies. Micron already has a 20nm (or nanometer) technology licensing deal with Nanya.

Details of the transaction

As part of the acquisition agreement, Micron will purchase Inotera shares for $0.92 each, representing a 30% premium over its closing price of $0.70 on December 14, 2015, when the deal was announced. Micron would use a combination of $2.5 billion debt, $1 billion stock, and its cash reserves to fund the $4.1 billion acquisition.

According to the signed agreement, both parties have been given a 60-day period to discuss the details of the acquisition. In case an agreement is not reached, either party has the right to terminate the transaction during this period. If the acquisition goes through, necessary approvals are required by regulators and Inotera shareholders. The transaction is scheduled to be completed in mid-2016.

Micron is the third largest DRAM manufacturer in the world after Samsung (SSNLF) and SK Hynix. In the next part of the series, we’ll evaluate Micron’s strategy behind acquiring DRAM manufacturer Inotera.

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