UPDATE 3-TPG, China's Hony in joint bid for Japan's Elpida-source

Fri Apr 6, 2012 3:50am EDT

* TPG, China's Hony to make joint bid - source

* SK hynix, Micron, Toshiba also interested - sources

* Elpida slid into bankruptcy in late-Feb

* Was ranked 3rd in DRAM chips, with 12 pct global mkt share

By Junko Fujita

TOKYO, April 6 (Reuters) - Private equity firms TPG Capital LP and China's Hony Capital are to bid jointly for Elpida Memory, a source familiar with the matter said on Friday, joining an increasingly international battle for the bankrupt Japanese chipmaker.

The two firms will take part in a second round of bidding for Elpida, due to close on April 27, said the person, who asked not to be identified because the information is not public.

Elpida is the world's No.3 maker of dynamic random access memory (DRAM) chips, trailing Samsung Electronics and SK hynix with a market share of around 12 percent. Suitors are likely to be interested in the chips it manufactures for smartphones and tablets.

With Chinese, U.S. and South Korean firms in the bidding process, it looks increasingly likely there will be a foreign rescue within Japan's once-mighty technology sector.

South Korea's SK hynix has confirmed it is bidding, while sources have told Reuters that U.S. firm Micron Technology is also in the race. Japan's Toshiba Corp has approached SK hynix about a joint bid after its solo offer was reportedly below Micron's bid of at least 150 billion yen ($1.82 billion), other sources have said.

Elpida, formed over a decade ago via a merger of several big Japanese chipmakers' struggling DRAM operations, filed for creditor protection in late-February, with $5.6 billion in debt - the biggest bankruptcy of a Japanese manufacturer.

The company had been struggling with weak chip prices and as consumers increasingly bypass PCs for products like Apple Inc's iPad, which uses mainly flash memory. It was also saddled with heavy capital spending, while a strong yen undercut its global competitiveness.

According to DRAMeXchange, an industry tracker, DRAM contract prices fell 58 percent last year, while spot prices decreased 70 percent.

EYEING DISTRESS

TPG, which manages $49 billion in global private equity funds, has previously invested in chip-related businesses, including Freescale Semiconductor, MEMC Electronic Materials and Micron's Aptina Imaging Corp.

TPG opened an office in Japan in 2006 and has been linked with distressed Japanese companies.

Late last year, the buyout firm failed in a bid for consumer lender Takefuji, and in January this year, a person familiar with the fund's thinking said TPG was willing to invest about $1 billion in Olympus Corp in a joint deal with one of the corporate suitors of the scandal-hit maker of cameras and medical devices.

Hony Capital is a China-focused middle-market private equity firm with $6.8 billion in assets under management. Hony is sponsored by Legend Holdings, as is Lenovo Group, and has invested before in Japan - in property investment firm Tokai Kanko, according to its website.

A decision on the bidding for Elpida is expected as early as next month.

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