* Tokyo court dismisses rival proposal by group of Elpida bondholders
* Elpida bondholder group says $2.5 bln price tag undervalues company
* Group to vote against trustee's plan, to urge other creditors to do the same
SAN FRANCISCO/TOKYO, Oct 31 (Reuters) - Micron Technology's plan to acquire Japanese memory chipmaker Elpida took a big step toward completion after a Tokyo court approved the agreement and dismissed a rival proposal promoted by a group of bondholders.
A district court in Tokyo said on Wednesday it was referring bankrupt Elpida's plan to be bought by U.S. chipmaker Micron to creditors for approval, according to a news release on Elpida's website.
The court said it dismissed a rival proposal by a group of bondholders, led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisors, who have said the $2.5-billion price tag grossly undervalues Elpida, arguing that the company is worth 300 billion yen ($3.78 billion).
The bondholder group said in a statement on Thursday that they would vote against the trustee's plan and urged other creditors, including secured lenders, trade creditors and individual Japanese bondholders, to do the same.
"The bondholders will continue to pursue the rights and remedies available to them in the Japan, U.S., and other applicable courts," they said.
Elpida, the last of Japan's dynamic random access memory (DRAM) chipmakers, was driven into bankruptcy by falling chip sales and foreign competition.
Boise, Idaho-based Micron, which is losing money due to a crumbling PC industry, wants to create larger economies of scale and offered in early July to buy Elpida for about $750 million in cash and to pay creditors a total of $1.75 billion in annual installments through 2019.
The deal would catapult Micron into the No. 2 spot in the global market for DRAM chips, behind Samsung Electronics .
"We view this as a positive development, and continue to expect Micron to close its Elpida acquisition by (the first half of 2013)," Jefferies analyst Sundeep Bajikar said in a note to clients.
Last week, a U.S. judge overseeing Elpida's parallel U.S. case said the company was taking a risk by not keeping creditors better informed.
That U.S. judge would eventually have to approve the transfer of U.S. assets.