Micron likely winner in bid for Japan's Elpida: NHK

SEOUL/TOKYO Fri May 4, 2012 4:12pm EDT

Elpida chips are seen at an electronic store in Tokyo's Akihabara district April 24, 2012. REUTERS/Toru Hanai

Elpida chips are seen at an electronic store in Tokyo's Akihabara district April 24, 2012.

Credit: Reuters/Toru Hanai

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SEOUL/TOKYO (Reuters) - U.S.-based Micron Technology (MU.O) is the likely winner in the bidding for Elpida Memory Inc, Japan's public broadcaster NHK reported on Friday, in a deal that would help the failed Japanese chipmaker sustain operations and repay creditors.

Elpida filed for bankruptcy protection in February with 448 billion yen ($5.6 billion) in liabilities - a record for a Japanese manufacturer - after being hit by a strong yen and a slide in prices of DRAM chips for personal computers.

Suitors were likely interested in the chips Elpida manufactures for smartphones and tablets, analysts have said.

In the final round of bidding that closed on Friday, U.S. chipmaker Micron offered around 200 billion yen ($2.5 billion) and pledged to keep the company's main Hiroshima plant and employees, NHK reported without citing sources.

Micron and Elpida are expected to finalize a deal as early as this month and submit a restructuring plan to the courts by August, the broadcaster said.

South Korea's SK hynix (000660.KS) said earlier on Friday that it had dropped out of the race to buy Elpida. TPG Capital LP TPG.UL and China's Hony Capital had intended to place a joint bid for Elpida in the final bidding round, sources told Reuters previously.

TPG, Micron, Elpida and one of Elpida's trustees declined to comment. Hony officials were not immediately available for comment on the report.

SK hynix decided to pull out as the deal would not "strategically benefit" the company, SK Group's Chairman Chey Tae-won told reporters after a board meeting.

The withdrawal sent the shares of the South Korean chipmaker

to a two-week high.

The final bidding follows protests by a group of Elpida debt holders who said they may thwart the auction if Elpida's trustees agree to a reported selling price of 150 billion yen.

The bond holders said they could submit a rival reorganization plan if the bankruptcy trustees agreed to a low-ball bid that would "unintentionally transfer great value to the winning sponsor."

Elpida is the world's No.3 maker of dynamic random-access memory (DRAM) chips, trailing Samsung Electronics (005930.KS) and SK hynix with a market share of around 12 percent.

Adding Elpida's production capacity to Micron's assets would give the U.S. company more clout in the cut-throat memory market, where chips trade like commodities and even the largest players often struggle to make a profit.

"The market-share leaders play a role in global pricing. It's a supply driven pricing model, so by getting more control over a larger percentage of supply, you have a better control on the market. That's why scale matters," said RBC Capital analyst Doug Freedman.

Shares in SK hynix jumped as much as 6.1 percent to 28,900 won on Friday, the highest since April 19. The stock closed at 28,150 won, up 3.3 percent, compared with a 0.3 percent fall in the wider market .KS11.

Shares of Micron, which lost 19 percent in April, were up 2.9 percent to $6.66 in midday trading.

SK hynix last month posted an operating loss of 260 billion won ($227.8 million) for the three months ended March, its third straight quarterly loss, as tumbling prices of DRAM chips eroded earnings of chipmakers including Elpida.

Prices of DRAM chips used in personal computers have declined due to slower PC sales. Consumers are increasingly switching to tablets and smartphones that use mobile DRAM and NAND-type flash memory chips.

SK hynix said last month it expected DRAM chip prices to rebound from the second quarter, helped by reduced supply from troubled makers including Elpida.

Elpida reported losses for five straight quarters, and its failure was the largest for a Japanese manufacturer ever. ($1 = 80.3800 Japanese yen)

(Additional reporting by Junko Fujita and Maki Shiraki; and Noel Randewich in San Francisco. Editing by Gunna Dickson)

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