Here comes the Chinese juggernaut yet again, stock market woes totally notwithstanding. Last night after the close of trading, reports began to appear that Tsinghua Unigroup is ready to bid $21 per share, or $23 billion, to take over Micron (MU), the U.S.-based flash/ NAND/ DRAM chip giant.
This would be a huge take-UNDER if it goes through at current levels. Micron's 52-week high was $36 and change, and as recently as June 1 the shares were priced at $28 and change.
Tsinghua's offer works out to a 19% premium to Monday's closing price for Micron. So a huge coup if the Chinese can take the company out at the current price. I expect this is juts the opening salvo, and the Tsinghua will raise the bid or other players will step into the fray.
In addition, the deal will be looked at very closely by U.S. authorities including the Committee on Foreign Investment in the United States (which will review it for national security implications), given the fact that MU is the biggest memory chipmaker in the U.S.
Interestingly, Tsinghua Unigroup is a partner of no other than Intel (INTC) which invested $1.5 billion in the company last fall in exchange for a stake of roughly 20%. Tsinghua also completed the acquisitions of RDA Micro and Spreadtrum for a combined $1.6 billion last year.
I know there are anti-trust issues. However, the industry is ripe for consolidation and with the strong possibility of this being just the opening bid, I think it needs to get done.
National security scrutiny is just an impediment and something thought up by politicians. Micron already has a plant in Asia and also a JV (20% stake) with Nanya Tech in Inotera, a Taiwanese chip maker.
Of course, if the deal goes through, there will be no one unhappier that David Einhorn of Greenlight capital, who just yesterday said that Micron would be worth more than Netflix(NFLX) in a few years. Micron ended yesterday with a market capitalization of $19 billion while Netflix was valued at $43 billion at closing of regular market trading.
David probably did not sleep a wink last night.
C'est la vie.