Hony, TPG consider bid for Japan’s Elpida Memory
Hony Capital and TPG Capital are preparing a bid for Elpida Memory, the Japanese chipmaker that filed for bankruptcy protection in February. The private equity firms are expected to face significant competition from strategic investors, with South Korea’s Hynix Semiconductor having already submitted a proposal and Micron Technology reportedly also in the running.
A source familiar with the deal told the Financial Times that the Hony-TPG effort represents a long shot, adding that a strategic investor would be the most likely buyer. Reuters reported that Micron had bid at least JPY150 billion ($1.82 billion), prompting Toshiba Corp. to approach Hynix about a potential joint offer.
The second round of bidding for the asset is scheduled to close on April 27.
Elpida is the world's number three chipmaker by market share and its bankruptcy, with debts of $5.6 billion, is the largest ever by a Japanese manufacturer. The company, which itself was formed a decade ago through the merger of several struggling chipmakers, was brought down by falling product prices and heavy capital spending.
According to DRAMeXchange, dynamic random access memory (DRAM) chip prices fell 58% last year, while spot prices tumbled 70%.
TPG has previously invested in several companies directly or indirectly related to chip manufacturing, including Freescale Semiconductor, MEMC Electronic Materials and Aptina Imaging Corp. It has also shown an interest in distressed assets in Japan, losing out in the race for consumer lender Takefuji and reportedly considering an investment in scandal-hit Olympus Corp.
Hony made its first foray into Japan last summer, purchasing a 20% stake in Tokyo-listed hotel chain operator and real estate business Tokai Kanko for JPY1.4 billion. The investment was part of a wider alliance between Hony, Tokai Kanko and Hong Kong-listed Far East Consortium International (FECI).
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