Reported Chinese offer for Micron faces far too many hurdles

Tue Jul 14, 2015 10:44pm EDT
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By Diane Bartz, Noel Randewich and Andrea Shalal

WASHINGTON/SAN FRANCISCO (Reuters) - A Chinese state-backed company's plan to buy U.S. chip maker Micron Technology faces no shortage of obstacles - questions about the price, worries on Capitol Hill, an aggressive regulator - and any one of them could torpedo the deal.

Analysts argued Tsinghua Unigroup Ltd's proposed price, $23 billion, was far too low. But China's critics on Capitol Hill worried about the impact on the Defense Department. And any deal would likely face a close look by the agency charged with vetting transactions that have potential national security concerns.

"If people decide that if what Micron makes isn't important any more (it will be approved)," said Jim Lewis of the think tank Center for Strategic and International Studies. "But I think that Tsinghua will have to get over a whole lot of hurdles and it won't be easy."

Tsinghua, which sources said was preparing a bid for Micron but had not officially submitted it, has been at the forefront of China's efforts to expand its chip industry.

The company bought Chinese mobile chipmakers Spreadtrum and RDA Electronics in the last two years. Last year, Intel Corp bought into Tsinghua with a $1.5 billion investment.

Buying Micron would give China access to both DRAM and NAND memory chips, which are used in personal computers and to store music, pictures and other data on smartphones and mobile devices.

But analysts said the $23 billion planned offer price far undervalues the plants, employees and intellectual property of Micron, whose stock has recently taken a hit due to slow demand for personal computers.

"We think the price was only floated through the media because they were too embarrassed to bring it to Micron's board," said Stifel analyst Kevin Cassidy.   Continued...

The booth of U.S. memory chip maker MicronTechnology is pictured at an industrial fair in Frankfurt, Germany,  July 14, 2015. REUTERS/Kai Pfaffenbach