Micron to Acquire Lexar

Online Staff -- Electronic News, 3/8/2006

DRAM maker Micron Technology Inc. has entered into an agreement to acquire flash player Lexar Media Inc. in a stock-for-stock merger, both companies announced today.

Under terms of the agreement, each outstanding common share of the Fremont, Calif.-based Lexar will receive 0.5625 shares of Micron stock. Micron anticipates issuing shares in exchange for 81.6 million Lexar shares outstanding. Additional Micron shares will be issued upon the exercise of assumed stock options.

The acquisition is said to strengthen Micron's position in the NAND flash business and enable the company to deliver NAND flash applications from design, development and manufacturing to marketing and sales of products to worldwide consumers and device manufacturers. The merger is designed to combine Micron's technology and manufacturing ability in NAND flash memory with Lexar's ability in NAND controller and system design technology, brand recognition and retail channel strength to create a vertically integrated entity fully focused on the NAND business.

"With this acquisition, Micron will have a complete package of NAND memory solutions for our customers," said Steve Appleton, Micron chairman, CEO and president, in a statement. "Together with our NAND designs, technology, manufacturing capability and distribution channels, Micron is in a strong position to serve the flash storage requirements of consumer electronics and enterprise customers."

The transaction is subject to regulatory review, Lexar stockholder approval and other customary closing conditions. The companies expect to complete the merger by the end of Q3. Upon closing, Lexar, will become a wholly-owned subsidiary of Micron, and Lexar's stock will cease trading on the Nasdaq.

"Through this acquisition, we expect to better align Lexar's cost structure with business conditions and increase our development and go-to-market scale in order to compete more effectively," said Eric Stang, Lexar chairman, CEO and president, in a statement. "By merging with Micron, Lexar can achieve significant cost synergies and become better positioned to satisfy customer needs and establish faster growth, especially in new emerging mobile handset and solid-state computing businesses."

The acquisition is seen to pose a threat to memory companies like SanDisk, as Lexar will be viewed as a more credible competitor after the merger, according to Goldman Sachs analysts. The investment banking firm predicts the transaction will allow Lexar to procure NAND from Micron at a more advantageous cost, which will allow the new company to better compete with companies like SanDisk.