Legal Featured Article
January 18, 2013
Delaware Bankruptcy Court Gives Elpida Memory the Go-Ahead on Micron Deal
By Colleen Lynch, TMCnet Contributor
Elpida Memory, Inc. had its day in court, and has come out the victor.
The Japanese dynamic random access memory (DRAM) chipmaker, the last of its kind in Japan, was in a legal battle with its U.S. stakeholders over the company’s proposed deal with Micron Technology (News - Alert), Inc.
Idaho-based Micron has offered to buy the struggling Japanese company for a reported $2.5 billion, but U.S. Elpida bondholders opposed the deal from the start, calling into question the business practices and dealings between the companies, who were once rivals.
The main issue at hand, and what was put to the court to decide, is whether Micron is unfairly benefiting from the purchase of Elpida.
If Micron does take on Elpida, the company – which has also been struggling of late – would immediately soar to second place in the world for DRAM chips, behind only Samsung (News - Alert) Electronics.
“This is a highly attractive deal for Micron,” said Micron’s chief executive, Mark Durcan. “The combined company will put us in a stronger position in the memory landscape.”
Not everyone wants Micron to be any stronger in the memory landscape, however; after all, the company is currently third in the world for DRAM manufacturing.
Still, the argument is now at an end – legally, but perhaps not wholly – after U.S. Bankruptcy Court Judge Christopher Sontchi handed down his approval of the Elpida deal.
“The bondholders do not cite any facts to contest the proof that these agreements confer substantial benefits on Elpida’s estate,” Sontchi wrote in his 43-page opinion on the case.
Although the decision allows Micron to buy-out Elpida, Sontchi included in his writings certain frustrations with the Japanese company.
“There has been a troubling lack of transparency in this case” on Elpida’s part, he noted, and added that Elpida’s representatives were unreasonably hesitant and “had to be dragged kicking and screaming into court even though they ultimately were seeking the court’s approval of these transactions.”
As for Elpida, the company has made little public comment since the ruling, but did state that it would immediately begin to improve its operations, largely thanks to the licensing agreements it has now been able to make with Micron.
Lawyers for Elpida also likened the uproar over its technology deals to attacks on the Micron deal itself, suggesting the bondholders’ objections are unfounded.
The bondholders in question are led by hedge funds Linden Advisors, Owl Creek Asset Management, and Taconic Capital Advisors.
During the case, the bondholder side alleged that Elpida’s deal was untoward, as it was negotiated in secret in Japan, where Elpida’s main bankruptcy is taking place.
Elpida is reportedly worth $4 billion anyway, and should not qualify for bankruptcy.
The company filed for bankruptcy protection from creditors with a Tokyo Court, and not with the United States, so this issue was largely dismissed in the case. The Delaware Bankruptcy Court was only appealed to for protection of Elpida’s U.S. assets.
Elpida’s U.S. bondholders originally took the case through the Tokyo court system, but upon losing they tried again in Delaware, to no avail.
Elpida has now officially won out, although creditors are in talks to sell the company – a decision to be put to vote by the end of February.
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Edited by Braden Becker
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