What’s better than growing your company’s assets? Doing it at a very attractive price probably is.
Micron Technology, Inc. (NASDAQ:MU) was set to obtain bankrupt Japanese chip maker Elpida Memory, Inc. However, a group of Elpida bondholders claim that the defunct company’s net worth is at least 300 billion yen in a proposal submitted to a Japanese court.
The original offering of Micron was an initial 60 billion yen in cash, followed by a deferred 140 billion until 2019, covering Elpida’s debt. The complaints of Elpida bondholders include not just the valuation of the company but also the process of choosing Micron as the buyer – one that lacked real bidding, sufficient transparency and creditor participation. The proposal outlines an alternative plan involving a loan that should help Elpida restructure.[BANNER]
Micron would benefit from such an acquisition. The deal could increase MU’s production capacity by about 50%. This would give Micron greater flexibility when reacting to changes in pricing and demand and would generally be a very economic way to acquire a large amount of new assets.
Speaking of economy, Micron looks like it could use some of that. Their most recent quarterly report lists a net loss of $320 million and the brains of Wall Street are slowly lowering their EPS projections for the current and next quarter, which were in the negative even a month ago.
The company seems troubled by management issues after former CEO Steve Appleton passed away in a tragic plane crash in February. Mr. Mark Durcan, previously MU’s COO, was appointed to the vacated spot, even though he announced he was planning to permanently retire two weeks earlier.
Mr. Durcan voiced his optimism about the prices of NAND chips stabilizing in 2013 as an oversupply that drove prices down slowly trickles out. The CEO also remains optimistic about the closure of the Elpida deal despite the bondholder opposition. Of course, only time will tell whether Micron manages to lap up the attractively priced assets of Elpida or not but whatever happens, the market is almost sure to react.
