Micron Technology, Inc. (MU) Gets $23B Bid From China’s Tsinghua Unigroup While Einhorn Is Upbeat


Taking advantage of the current price in the market, China-based Tsinghua Unigroup announced that it is planning to submit a proposal for acquiring Micron Technology, Inc. (NASDAQ:MU). The Chinese State-owned company is offering a price of $21 a share or $23 billion while the 52-Week high is $36.59. It is most likely that the American company will reject the unsolicited offer since it is worth much more than the current offer. Hedge fund manager, David Einhorn, is upbeat about the chip company.

Premium Offer

Considering the closing price of $17.61 on Monday for Micron Technology, Inc. (NASDAQ:MU) shares, the offer represents 19.3% premium. The Chinese company has obviously understood that they might have to revise the price upwards and started with a premium less than 20%. If the acquisition comes through for Tsinghua Unigroup, it will become the largest takeover of an American company by a China firm beating the earlier takeover of $7 billion paid for Smithfield Foods two years ago.

The United States Company said that the company has not received any proposal from the Chinese firm on the takeover. However, according to an interview in Bloomberg, Tsinghua Chairman, Zhao Weiguo, said that his firm was very much interested in cooperation with the American firm.

Fall Out Of Quarterly Results

Micron Technology, Inc. (NASDAQ:MU) shares got hammered after the quarterly results on June 25 after the market closed. Before the results announcement, its share was at $24.02. After the announcement, the stock lost about 18.2% the next day, i.e. June 26. As a result of the continuous weakness, the shares of the company slipped to $17.14, the lowest in a year, on July 9. In the current year alone, the share lost nearly 50%.

The negative sentiments on the stock were primarily because of concerns over the weak demand for DRAM chips amidst a slowdown witnessed in the PC market during the first half of the year. The company is the only producer of DRAMs from the United States. As far as Tsinghua is concerned, the potential acquisition would help its domestic chip sector since there are no major memory makers in the country.

Einhorn Upbeat

Greenlight Capital Funds manager, David Einhorn, said that the semiconductor technology is looking bright for the next several years. He said that the long-term outlook for Micron Technology, Inc. (NASDAQ:MU) was that it will be worth more than Netflix, Inc. (NASDAQ:NFLX). Currently Micron has a market value of around half of the video streaming company. He was surprised that Netflix shares surged 58% in the second quarter despite its earnings miss in the first quarter whereas Micron shares dipped 31% in the same period.

Einhorn termed the sharp drop in the share price of Micron Technology, Inc. (NASDAQ:MU) as too far. The reaction of the market appears to be far-fetched considering that the second half is expected to be better for the PC market. Also, the company is in the process of launching more products.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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