Hynix board spurns Micron bid.

Byline: SHERRI BURI McDONALD The Register-Guard

The board of the South Korean parent company of Hynix's computer-chip plant in west Eugene unanimously voted Tuesday to reject a takeover of most of its assets by Micron Technology Inc., saying the $3 billion price was too low.

Hynix's board defied the company's creditors, its own management and the South Korean government, all of whom backed the deal as a way to save the financially troubled chip maker.

But the board said it was determined to see the company survive on its own.

The board's action ended five months of talks between Micron and Hynix to form what would have been the world's largest computer memory chip maker.

The agreement reached with Micron last week and approved by Hynix creditors now is "null and void," Hynix officials said. ``Any further talks with Micron are unlikely,'' said Park Chan Jong, Hynix's chief spokesman.

Sean Mahoney, spokesman for Boise-based Micron, declined to comment on whether the deal is truly dead or could be resurrected in some form.

Some industry analysts said the talk of a merger is over.

"I think it's over for good," Brian Matas, vice president of market research at IC Insights in Scottsdale, Ariz.

But others weren't so sure.

"There's potential that they could resume talks," said Matthew Godfrey, a dynamic random access memory, or DRAM, analyst for Semico Research Corp. in Phoenix.

"The deal could still have some legs; I don't think it's over yet."

Many analysts agreed, however, that a Hynix without Micron faces a grim future. The company has $6.8 billion in debt and no prospects for fresh cash, they said.

While rebounding chip prices may bolster the company, ``there's no way Hynix can survive on its internal cash flow,'' said Ben Akrigg, who helps manage $3 billion in Asian stocks at Morley Fund Management. ``It may be a long and slow death.''

Linked to the fate of its parent company is the 650-employee Eugene plant, one of the seven memory chip factories Micron would have bought under the deal that Hynix's board nixed.

"Anyone who looks at the situation thinks that they're mad, and that they've effectively sacrificed the company," said Richard Gordon, a DRAM analyst with Gartner Dataquest, a Massachusetts-based research company.

Hynix's prospects over the next 12 to 18 months aren't great, Matas said.

"They might be able to carry on," he said.

"But I think they've gone beyond their strongest point in business and might be relegated to the second tier of DRAM manufacturers."

The terms of the deal negotiated by Hynix, Micron and the banks called for Hynix to get 108.6 million shares of Micron stock in exchange for seven memory-chip plants.

The agreement counted the shares at $35 apiece, or $3.8 billion in all, but the market price for the shares had fallen to $24 per share since the deal was announced, including a fall of nearly 10 percent Tuesday.

The board said the proposal could hurt the interests of the parts of Hynix that Micron had not agreed to take over, which mainly make other kinds of chips.

Micron had agreed to invest $200 million for a 15 percent stake in them.

Noting that Micron had expressed concern about ``the viability of the remaining company,'' the board said the plan overestimated its revenues and left it saddled with more debt than it could handle, risking a new collapse.

The surviving Hynix would have been left with responsibility for most of the $6.8 billion in debt.

The board's objection to the deal concerned the plan proposed by Hynix's creditors council to restructure Hynix's remaining business after the memory portion was sold, Mahoney, the Micron spokesman, said.

``It's disappointing that the Hynix board of directors and their creditors council couldn't come to agreement on their restructuring plan,'' he said.

The board's decision did not come as a complete surprise to Micron.

"From the start we have been prepared for either eventuality," Mahoney said. "This deal has always had a 50-50 chance of going either way."

Some analysts speculated that even if this deal fails, the Eugene plant could ultimately end up in Micron's hands.

"I would imagine if the deal completely falls through, you'll see Micron will probably be able to purchase the Eugene plant," Godfrey said.

Hynix may decide that like a "chop shop" for cars, it can get more on the dollar by selling off pieces of the company rather than trying to sell the entire company, Godfrey said.

The New York Times News Service and Bloomberg News contributed to this report.