Memory chipmaker Micron Technology, Inc. (MU) announced Tuesday that it has agreed to acquire privately held rival Numonyx Holdings B.V. in an all-stock transaction valuing Numonyx at about US$1.27 billion. The combination will broaden the memory chips product portfolio of Micron and expand its manufacturing and development scale as well as increase its customer reach.
The board of directors and supervisory board of Micron have approved the deal, while the deal is not subject to Micron stockholder approval. The transaction, which is subject to regulatory review and other customary closing conditions, is currently expected to close within three to six months.
Numonyx is an independent semiconductor company providing mainly flash memory solutions and was formed in March 2008 as a flash memory joint venture between Geneva, Switzerland-based STMicroelectronics N.V. (STM) with a 48.6% stake, Intel Corp. (INTC), and independent global equity firm Francisco Partners. Numonyx is the premier non-volatile memory innovator and was the flash memory business of STMicroelectronics before evolving into the joint-venture.
The proposed deal is expected to help Micron replace Hynix Semiconductor as the second biggest player in the memory chip market and position itself closely behind market leader Samsung.
The deal is expected to help strengthen Micron's position as one of the world's leading memory companies, with a broad portfolio of DRAM, NAND and NOR memory products as well as strong expertise in developing and supporting memory system solutions. Micron would also gain access to Numonyx's customer base, and increased manufacturing scale globally. Additionally, Micron would be able to increase its multi-chip offerings in the embedded and mobile markets.
The move comes at a time when the memory chip market is facing a severe oversupply as well as price degradation that are threatening the viability of even the major players in the industry. Like Intel and STMicroelectronics, many of the large companies have moved to exit the market or share the heavy development and manufacturing costs with partners.
Under the terms of the deal, Boise, Idaho-based Micron will issue 140 million Micron common shares to Intel, STMicroelectronics, and Francisco Partners. Micron will also issue up to 10 million additional Micron common shares to Numonyx shareholders, on a pro rata basis, if the volume weighted average price of Micron's common stock for the 20 trading days, ending two days prior to closing of the deal, is between $7.00 and $9.00 per share.
In exchange for its stake in Numonyx, STMicroelectronics will receive about 66.6 million shares of Micron, based on its current trading price of $9.08 per share. Additionally, the Catania, Italy-based M6 industrial facility will be transfered to STMicroelectronics. The agreement also provides for the cancellation of the 30-year note due to STMicroelectronics by Numonyx. The consideration includes the $77.8 million due by STMicroelectronics to Francisco Partners.
Net of the payables to Francisco Partners, STMicroelectronics is expected to receive about $527 million worth of Micron shares, resulting in a gain of about $280 million, upon closure of the deal.
"The exit from the Flash memory business, including the termination of our exposure to the guaranteed debt, is a further step in executing our strategy towards a focused and less capital-intensive business model," chief financial officer of STMicroelectronics, Carlo Ferro stated.
Micron noted that its currently projects the transaction to be accretive to the company on both free-cash flow and non-GAAP earnings beginning fiscal year 2011. Meanwhile, Numonyx balance sheet is anticipated to be debt-free upon closure of the deal.
In its recent first quarter, Micron reported in December a a profit compared to a loss last year, helped by sales volume growth and higher average selling prices. Net income was $204 million or $0.23 per share, compared to a loss of $718 million or $0.93 per share in the prior-year quarter. Quarterly net sales increased to $1.74 billion from $1.40 billion in the same quarter last year.
MU closed Tuesday's regular trading session at $9.08, up $0.17 or 1.91% on a volume of 20.84 million shares, lower than the three-month average volume of 27.12 million shares. In the past 52-week period, the stock has been trading in a broad range of $2.55 to $11.34.
STM closed at $8.09, up $0.09 or 1.13% on a volume of 2.85 million shares, and INTC closed at $19.65, up $0.30 or 1.55% on a volume of 69.45 million shares.
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