BEIJING: Tsinghua Unigroup Ltd, the State-backed technology giant, is planning the biggest-ever Chinese takeover of a United States firm, but it is likely to face both financial and US regulatory challenges if it is to succeed.
The integrated circuit manufacturing specialist is believed to be bidding a record $23 billion to buy US chipmaker Micron Technology Inc, sources said here the other day.
Unigroup refused to comment on the potential buyout and Micron said it had yet to receive a formal offer.
The Beijing-based company has been attempting to buy Micron for some time, according to an industry source familiar with the matter.
Zhao Weiguo, chairman of Unigroup, told Bloomberg News in an earlier interview the company is “very interested in cooperation with Micron”.
The acquisition price is estimated at around $21 a share, or 19.3 percent more than Micron’s closing price in New York on Monday, which gave Micron a $19 billion market capitalization.
If completed, the takeover will be the biggest in Chinese history, topping oil giant CNOOC Ltd’s $15.1 billion takeover of Canadian oil and gas producer Nexen Inc in early 2013.
Analysts said Zhao could pay considerably more for Micron, however, as investors went through a poor last year and are looking to the Idaho-based multinational to at least double its market value in the coming years.
Billionaire hedge fund manager David Einhorn said over the weekend that the semiconductor sector’s bright outlook could even make Micron worth more than US online video site Netflix Inc over the “next few years”. Netflix is worth nearly $43 billion.
Gene Cao, a senior analyst at consultancy Forrester Research Inc, said Unigroup would greatly benefit from the takeover.
“Unigroup is planning the acquisition because Micron will enhance its product lines of embedded chipsets and related hardware, as well as flash storage and memory computing,” Cao said.
Micron could also lift Unigroup’s smart-manufacturing capability, he said, so that the Chinese company will be better positioned in the next-generation chip manufacturing and Internet of Things segments.
Zhao said earlier that the company viewed acquisition as an efficient way to grow its technology inventory and lift its top-tier global ranking.
Unigroup and other local players kicked off a series of overseas takeovers starting from last year. One of its subsidiaries spent $2.5 billion to buy shares in a communications hardware arm of Hewlett-Packard Co.
It remains unclear, meanwhile, how the US regulators will react to Unigroup’s ambitious plan, with Washington becoming increasingly uncomfortable about China’s advances in high technology.
In April, the US banned Intel Corp from exporting high-performance processors used in Chinese supercomputers.
Lenovo Group Ltd’s $2.3 billion acquisition of IBM Corp’s x86 server unit also faced opposition from the US’ Committee on Foreign Investment because of information security concerns.
Cao from Forrester said the deal could “take time”, even if the US approves the takeover.
Micron is one of the world’s few memory vendors that can rival Samsung Electronics Co Ltd. Its largest project on the Chinese mainland is a high-end memory module assembly and integrated circuit component testing facility in the northwestern city of Xi’an, the capital of Shaanxi province.
