Elpida Memory trustees ink definitive Micron Technology sponsor deal

By Caroline Salls

Pittsburgh, July 2 - Elpida Memory, Inc.'s trustees and Micron Technology, Inc. have signed a definitive sponsor agreement for Micron to acquire and support Elpida in connection with Elpida's corporate reorganization proceedings conducted under the jurisdiction of the Tokyo District Court, according to a news release.

Under the agreement, ¥200 billion, or roughly $2.5 billion, of total consideration, minus reorganization proceeding expenses, will be used to satisfy the reorganization claims of Elpida's secured and unsecured creditors.

Micron will acquire 100% of the equity of Elpida for ¥60 billion, or $750 million, to be paid in cash at closing.

In addition, ¥140 billion, or roughly $1.75 billion, of 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 of Elpida's pre-bankruptcy debt obligations will be fully discharged under the corporate reorganization proceedings.

The agreement also calls for Micron to provide financing support for Elpida capital expenditures, subject to specified conditions, and to maintain Elpida's operations and employees.

Rexchip share transaction

In a related transaction, Micron also announced a separate agreement with Powerchip Technology Corp. and some of its affiliates to acquire the Powerchip group's 24% share of Rexchip Electronics Corp. for NT$10 billion, or roughly $334 million.

According to the release, Elpida's assets include a 300 millimeter DRAM fabrication facility located in Hiroshima, Japan, a 65% ownership interest in Rexchip and an assembly and test facility located in Akita, Japan.

Together with the Rexchip shares acquired from Powerchip, Micron will control about 89% of Rexchip's outstanding shares.

"We are creating the industry-leading pure-play memory company," Micron chief executive officer Mark Durcan said in the release.

"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."

Elpida co-trustee Yukio Sakamoto said in the release, "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."

Closing details

The transactions are subject to approval by Elpida creditors and the Tokyo District Court as well as other customary antitrust approvals.

The transactions are expected to close in the first half of 2013. Micron's purchase of the Powerchip group's Rexchip shares will occur upon closing of the Elpida transaction, the release said.

Elpida said its reorganization plan is currently expected to be submitted to the Tokyo District Court for approval in August.

Elpida, a Tokyo-based manufacturer of DRAM integrated circuits, filed for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on March 19 to gain recognition of its Japanese proceedings. Its Chapter 15 case number is 12-10947.

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