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Micron Strikes Stock Swap Pact With Maker of Flash Memory

Posted on: Thursday, 9 March 2006, 18:00 CST

By Bob Mims, The Salt Lake Tribune

Mar. 9--In a move to bolster its flash memory market punch, Micron Technology Inc. on Wednesday struck a $688 million stock-for-stock deal to acquire Lexar Media Inc.

The deal came on the heels of Micron's January deal with Intel to provide flash memory for Apple's popular iPod music and video players. The joint $500 million pact with Intel is the impetus for the ramping up of Micron's long, all-but-mothballed Lehi memory chip plant for full operation by early next year.

"With this acquisition, Micron will have a complete package of [flash] memory solutions for our customers," said Steve Appleton, Micron chairman, CEO and president. "Micron is in a strong position to serve the flash storage requirements of consumer electronics and enterprise customers."

For investors in Lexar, a Fremont, Calif., company that reported $681.7 million in revenues for its latest fiscal year, the news was cause the celebrate: The company's stock closed Wednesday at $8.83 per share, up $1.74, or 25 percent.

Micron stock closed down 11 cents to $14.87 per share.

Despite its milestone deal with Intel and Apple, and the increased chip production its Utah County plant will generate, Micron needs a quick punch to stake its claim in the $10 billion flash memory market.

Currently, that sector is dominated by Samsung, which rakes in more than 50 percent of NAND-format flash memory sales. Micron's share is about 5 percent, according to Douglas Freedman, an analyst at American Technology Research.

Lexar not only currently resells many Samsung products but counts Wal-Mart as one of its major retail outlets. As such, it is a popular memory brand.

The deal calls for a stock trade on the basis of one full Lexar share for every 0.5625 Micron share. In all, the Boise-based Micron expects to exchange 81.6 million outstanding Lexar shares.

Eric Stang, Lexar chairman, CEO and president, is counting on the acquisition to smooth out bumps in his company's development and marketing endeavors, and set the foundation for renewed sales growth.

Stang looks for the most dramatic improvements in what he called the "new emerging mobile handset and solid-state computing businesses."

The transaction is subject to regulatory review and stockholder approval, but is expected to close by September with Lexar becoming a wholly owned subsidiary of Micron.

Lexar may have become an attractive takeover target after warning earlier this month that it expects to lose up to $21 million for its fiscal fourth quarter. Analysts had predicted a slight profit.

The company also is embroiled in a lawsuit against Toshiba Corp. over the alleged theft of trade secrets. Neither Lexar nor Micron commented on how the acquisition might affect that litigation.

The Associated Press contributed to this story.

ABOUT THE ACQUISITION

--In a stock-for-stock deal worth $688 million, Micron acquires low-cost memory retailer Lexar Media.

--Lexar may have been ripe for the acquisition after warning it could lose up to $21 million for its most recent quarter, instead of the slight profit analysts had predicted.

--Purchase bolsters Micron's ability to respond to burgeoning flash memory market demands in competition with such giants as Samsung.

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Source: The Salt Lake Tribune

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