Micron Technology, Inc. (MU) Up on $23 Billion Buyout from Tsinghua Unigroup

Shares of Boise, Idaho, based Micron Technology, Inc. (MU) rose on Tuesday, against the backdrop of a higher day on Wall Street overall. Micron's stock was up 11.36%, rising $2.00 per share, to close at $19.61, and on volume of 103,878,597 shares it was the most active stock in Tuesday's market activity. Chinese IT giant, Tsinghua Unigroup has made a $23 billion bid to purchase the company.

Founded in 1978, Micron Technology, Inc. manufactures and distributes semiconductor solutions, including DRAM, NAND Flash and NOR Flash memory.
It also manufactures and distributes other memory technologies, packaging solutions and semiconductor systems for use in computing, consumer, networking, automotive, industrial, embedded and mobile products. The company's stock trades on the NASDAQ.

On Tuesday, Unigroup offered a bid price of $21 per share for Micron, which puts the value of the company at $23 billion. Unigroup has not announced the terms of the buyout offer, nor is it clear how the company - valued at just $10 billion - will fund the purchase.

Despite the favorable reaction from investors to the news of the buyout, major doubts surround the offer.

Unigroup is a state based Chinese company that is also part of what is considered to be China's top science university, Tsinghua University. The buyout is seen as an effort by China to expand its own chip industry. The company is already involved in deals with Intel and Hewlett Packard. In 2014, Intel purchased a 20% stake in Unigroup for $1.5 billion. Then in 2015, Unigroup paid $3 billion to purchase a controlling stake in H3C from Hewlett-Packard.

The deal will be subject to scrutiny by various agencies of the US Government due to potential national security concerns. The buyout may be interpreted as being an attempt to acquire one of the largest chip manufactures in the US. US weapons systems are heavily reliant on chip technology. Still another concern are allegations over cyber attacks that have been linked to Chinese hackers. If completed, the buyout will be the largest acquisition of a US company, which by itself is bound to draw attention.

Valuation is another concern. With a bid of $21 per share, Micron is considered to be undervalued by many analysts. Analysts a J.P. Morgan have valued the company at between $27 and $29 per share. Analysts at Needham have given the company an even higher value, at $35 per share. This valuation gives Micron a total valuation of $38 billion, or more than 60% higher than the $23 billion being offered by Unigroup. It is also possible that the low valuation of the Unigroup offer could set off a bidding war, as other potential suitors step in ready to make richer offers.

Within hours of the bid offer, TheGrantLawFirm, PLLC announced that it is monitoring and investigating the potential acquisition. The firm is investing the potential deal and whether it will result in an unfair and inadequate transaction. They are inviting shareholders who have questions or concerns to contact the firm.

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Published on Jul 15, 2015
By Kevin Mercadante

Copyrighted 2020. Content published with author's permission.

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