Chinese tech giant prepares biggest-ever US takeover bid

Idaho-based Micron said: “While Micron does not comment on rumours or speculation, we can confirm we have not received an offer”.

Aside from the price, there are other hurdles Tsinghua faces, including possibly securing the USA government’s approval for a deal in an industry that Washington D.C. may view as sensitive.

CFIUS, as the group is known, is charged with determining whether any foreign acquisitions or investments pose a security threat – and if it decides that it does, the transaction can be blocked.

Second, the deal will surely attract political scrutiny – especially since China’s efforts to beef up cybersecurity laws that favour domestic tech companies are already irking Washington. “It’s hard to purchase the critical technology”.

The bid comes as China is looking to build more semiconductors at home that are crucial to consumer goods such as smartphones and equipment used for defence purposes.

“They have decided that they really have to buy somebody because they can’t deliver the intellectual property themselves”, said Handel Jones, president of the Silicon Valley consultancy global Business Strategies.

Tsinghua would attain access to Micron’s best-in-class memory chip technology. Spreadtrum Communications, a Shanghai-based mobile phone chip designer bought by Tsinghua in 2013, is a classic example. A buyout of Micron could potentially affect that relationship.

It would also be the biggest foreign deal by a Chinese company, ahead of CNOOC’s $15.15bn acquisition of Canadian oil and gas company Nexen in February 2013.

Chinese officials have been transparent about their desire to reduce reliance on foreign information technology, partly in order to exercise greater control over data within the country.

TrendForce said yesterday that while Tsinghua Unigroup plans to make an offer to acquire Micron, the talks are still in the preliminary stages.

According to the WSJ report, Tsinghua Unigroup has offered to acquire Micron Technology for $21 per share, representing a 19.3 percent premium to Micron’s closing stock price of $17.61 on Monday. Getting the deal through USA regulators is far from guaranteed, and the low offer price compared to the company’s market capitalization just a few months ago could mean that higher bids, from either Tsinghua or possibly other suitors, could be in the cards.

Tsinghua likely will seek contributions from China federal and regional governments as part of the Micron bid, said Samuel Wang, a China analyst for market watcher Gartner.

Beijing headquartered Tsinghua, which is China’s largest chip design company is owned by the Chinese government.

In 2014, Intel Corporation (NASDAQ: INTC) announced that Tsinghua Unigroup had agreed to hand over 20 percent equity to the American tech giant in exchange for $1.5 billion.

Chin also said that replicating Micron’s memory fabs in China could be hard given a talent shortage in semiconductors and limited research and development synergies with Tsinghua’s wireless semiconductor assets.