A group of bondholders is planning to present a counter-proposal to the planned acquisition of Elpida Memory Inc. by US-based Micron Technology Inc. (Nasdaq: MU). The bondholders are asking a Japanese court to approve their offer to present an alternate plan, which they say would give creditors and shareholders a better value for Elpida than Micron's $2.5 billion deal.
Micron recently agreed to purchase DRAM rival Elpida to gain access to its technology and manufacturing plants. The deal would eventually result in some of Elpida's manufacturing capacity being taken offline, a development that would further stabilize or even boost pricing in the slowly recovering memory semiconductor market. It will also greatly increase Micron's market share and vault it over current No. 2 market leader Hynix of Korea. (See: Micron Rising, But Can It Catch Samsung?)
A report from Reuters indicates some Elpida bondholders believe Micron's offer "undervalues the company's assets." The bondholders want to put together what they consider a better deal by "striking an alliance with other Elpida creditors, including major Japanese banks." Their strategy centers on securing a new bid from a rival company, although the group of bondholders will need the court's approval to proceed.
This is the kind of pressure Micron doesn't need, and the DRAM vendor may have to reconsider its strategy if the bondholders secure the court's approval. Micron may still be able to close the Elpida deal because few other companies in the DRAM or adjacent markets will be interested in taking on a bankrupt firm in a capital-intensive business. The banking institutions that the dissenting bondholders want to partner with are also unlikely to be easily swayed; they've lost money for so long in the business that Elpida's offer, even if flawed, may represent the best chance of recovering some of their investment.
Micron isn't likely to simply wait for the transaction to unravel either. I suspect it will wait for the court's decision before it unveils its next move, which would most likely be to sweeten the pot by presenting a higher offer that may just prove satisfactory to the bondholders.