Tsinghua Unigroup to buy Micron in potential first Chinese foreign takeover

Micron spokesman Dan Francisco said the company doesn’t comment on rumor or speculation.

Advertisement

The Committee on Foreign Investments in the United States – an inter-agency committee chaired by the Treasury Dept. that reviews transactions that could result in control of a USA business by a foreign person – would be the likely body to conduct an investigation. Only one company has done a big semiconductor deal for cheaper, and it was Micron – in the company’s 2013 takeover of Elpida Memory Inc. out of bankruptcy.

The bid reflects a widening push by the Chinese government to build more domestic sources of semiconductors, which are also used in equipment for defense purposes. Hewlett Packard, for instance, was motivated to sell its 51% stake in H3C Technologies to a Chinese bidder given China’s ongoing crackdown on U.S. tech firms in mainland China.

“We think there is potential for other bidders, for example Intel Corp. could benefit from wafer cost and R&D synergies”, Chin said.

Tsinghua’s interest towards Micron is strategic and tied to the country’s aims for advancing its own chip manufacturing prowess. It has an assembly factory in mainland China. Micron could potentially mine Tsinghua’s local connections to convince leading Chinese smartphone vendors to use Micron’s memory chips. A buyout of Micron could potentially affect that relationship. The deal valued at billion, if confirmed, will be the largest of its kind in the Chinese industry as reported by the Wall Street Journal.

Turning down a $23 billion takeover offer would be a good move for Micron Technology Inc.

The technology conglomerate is prepared to bid $21 per share for Micron, a 19.3 percent premium to the stock’s close on Monday. Getting the deal through US regulators is far from guaranteed, and the low offer price compared to the company’s market capitalization just a few months ago could mean that higher bids, from either Tsinghua or possibly other suitors, could be in the cards. The chip company is part of Tsinghua Holding, a holding company wholly owned by the Chinese state. Founded in 1988, it is a subsidiary of Tsinghua Holdings Co. Ltd.

Additionally, if Tsinghua were to take over Micron, it would have to relinquish the company’s holdings in chip makers Rexchip and Inotera, according to Taiwan regulations, Wong said.

Previous year Intel acquired a stake in two mobile chipmakers through another deal with Tsinghua Unigroup, which owns the companies.

A successful bid for Micron would consolidate Unigroup’s position as a champion for China’s technological development, after it struck deals and research partnerships with worldwide firms in the semiconductor industry. In addition, he noted that “it would give Micron a huge tax break” by moving a large portion of its ownership overseas.

Advertisement

The two Korean tech giants grabbed a record 75 percent share of the global mobile dynamic random access memory (DRAM) market in the first quarter, while Micron took up 22.6 percent, according to industry tracker TrendForce.

Approval from Chinese authorities for the deal has been completed with any takeover still subject to clearance from US regulators