Elpida aims for Micron deal as early as next month

TOKYO Thu Jan 26, 2012 8:02am EST

An Elpida DRAM chip (front) is pictured in Taipei March 17, 2010.  REUTERS/Nicky Loh

An Elpida DRAM chip (front) is pictured in Taipei March 17, 2010.

Credit: Reuters/Nicky Loh

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TOKYO (Reuters) - Japan's Elpida Memory Inc 6665.T aims to reach a deal as early as next month for a capital infusion from Micron Technology (MU.O), the Nikkei business daily said, as it confronts a punishing memory chip market and imminent debt repayments.

The two have yet to hammer out details on an equity tie-up, in which Elpida will eventually seek to include Taiwanese chipmaker Nanya Technology Corp's (2408.TW) parent, Formosa Plastics Group, the Nikkei said.

The Nikkei said Elpida presented a broad outline of a recovery plan centered around a partnership with Micron and Nanya during a meeting on Wednesday with lenders.

Elpida's lenders have given President Yukio Sakamoto until next month to come up with a turnaround plan as the company confronts an uncertain outlook, sources familiar with the situation said.

They had originally demanded a plan be presented by January, although the company's negotiations with potential partners have hit snags, the sources said.

"Clearly, the issue facing Elpida is that they need to tide over the near-term refinancing pressures. There will also be an eventual need to fund R&D and further capital spending," said Macquarie Securities analyst Damian Thong.

"Elpida has technology, but it doesn't have a lot of money. Any source of funding that relieves the situation should be seen as a positive for them as a company."

A source close to the company has said Elpida was determined to remain independent, with any discussion on equity ties targeting a non-majority stake while it looks at cooperation on technology.

RECOVERY PLAN

Elpida said in a statement that it would not comment on rumors and speculation. Micron also said it would not comment on speculation.

Elpida's shares slipped nearly 3 percent to 363 yen on Thursday, breaking a seven-day rally after a series of recent media reports boosted expectations for a rescue via an equity tie.

That rally helped to lift Elpida's shares from an all-time low of 297 yen early this month to an intraday peak on Wednesday of 378 yen, a gain of more than one-fourth.

Elpida, Japan's last remaining player in the market for dynamic random access memory (DRAM) chips used in personal computers, faces a debt repayment crunch in late March and early April, when 92 billion yen ($1.2 billion) in loan repayments and bond redemptions will come due.

The DRAM market has been hit by slumping prices in a weak economy and as consumers switch to tablets that use flash memory instead of DRAM chips.

Elpida, Micron and Taiwanese producers are also struggling to compete with well-funded South Korean rivals Samsung Electronics Co (005930.KS) and Hynix Semiconductor Inc (000660.KS), the two largest players in the DRAM sector.

Micron has already begun conducting due diligence and has selected Goldman Sachs Japan Co as its financial adviser for these negotiations. Elpida has signed up Mitsubishi UFJ Morgan Stanley Securities Co, the Nikkei said.

Micron, which also makes NAND flash memory but reported a worse-than-expected net loss in its latest quarter, has a 10-year agreement with Nanya until 2018 to co-develop new DRAM chip technology. The two also run contract DRAM maker Inotera Memory via a joint venture. ($1 = 78.2250 Japanese yen)

(Additional reporting by Taiga Uranaka in Tokyo, Noel Randewich in San Francisco and Ashutosh Pandey in Bangalore; Writing by Edmund Klamann; Editing by Jean Yoon)

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