Micron Technology Inc signed an accord to buy most of rival Hynix Semiconductor Inc for US$4 billion in cash and stock, forming the world's biggest memory chipmaker as the industry recovers from its worst-ever year.
Ending five months of talks, the Boise, Idaho-based company agreed to pay about 108.6 million common shares for Hynix's memory chip business and US$200 million for a 15 percent stake in the non-memory chip business, Micron said in a statement.
The purchase will extend Micron's ability to control supply in the US$11 billion industry after fluctuating prices handed it five straight quarterly losses. South Korea's largest direct foreign investment underlines its commitment to slash corporate debt and open industries to foreigners.
"The semiconductor industry is changing into a seller's market from a buyer's market," said Kim Woo-sik, who manages 300 billion won (US$229 million) at Daehan Investment Trust Management Co in Seoul.
At the same time, "The sale will likely send a signal, especially to foreign investors, that Korea's reforms are on track and will continue," he said.
Micron agreed to value its shares at US$35 each, 19 percent above Friday's closing price, valuing the stock at US$3.8 billion, said Song Joo-kyung, a credit official at Korea Exchange Bank.
A purchase would let Micron overtake Samsung Electronics Co to create the world's largest producer of dynamic random access memory chips.
The US-based company will also borrow US$1.5 billion for its local business from South Korean banks, which are owed almost US$5 billion by Hynix.
Micron had a 19 percent market share last year, placing it second behind Samsung's 27 percent, according to research compiled by Gartner Dataquest. Hynix had a 14.5 percent share.
Shares of Hynix, which owes creditors 6.5 trillion won (US$4.9 billion), fell as much as 11 percent on concern shareholders will be left with little after the sale.
The stock, down 50 percent this year, closed down 6.75 percent at 1,175 won.
Creditors such as Korea Exchange Bank and Hanvit Bank have first call on the company's assets after they provided it with two multibillion bailouts last year, when it posted losses of 5 trillion won.
The banks will have to decide how they will distribute the shares, which are equal to about 18 percent of Micron's current total.
Banks may have to report further losses related to Hynix debt, analysts said.
"They are still under obligation to extend loans to Micron, meaning each of them has to set aside hundreds of billions of won of provisions," said Bryan Song, a banking analyst at Merrill Lynch & Co.
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