Tower offers $140 million for Micron fab

LONDON – Tower Semiconductor Ltd., a specialty foundry chipmaker which trades under the name TowerJazz, has announced it is proposing to buy a wafer fab belonging to Micron Technology Inc. in Nishiwaki City, Hyogo prefecture, Japan, for $140 million.

The purchase would nearly double internal manufacturing capacity at Tower (Migdal Haemek, Israel) increasing it by about 60,000 wafers per month. The fab, which can support geometries down to 95-nm, would join two that Tower owns in Israel and a third in Newport Beach, California and the move is part of plans to get Tower's annual revenue up to $1 billion by 2014. Tower also has access to additional manufacturing capacity in China through manufacturing partnerships there.

As part of the acquisition deal Tower would manufacture and supply products for Micron (Boise, Idaho) in the Japan facility for the next three years. Tower said that as well as supplying Micron it would qualify power management process technologies and then build RF capability at the fab.

The total value of the proposed transaction, including assumed liabilities, is expected to be approximately $140 million, of which $40 million would be paid in cash, approximately 20 million of Tower ordinary shares would be issued to Micron Technology or its Japanese subsidiary. The remainder is assumed long-term retirement liabilities that would be payable incrementally upon employee retirements. The parties are currently negotiating definitive agreements for the proposed transaction.

"Previously, I've had many detailed interactions with the Micron R&D and operational groups when I held a position with a semiconductor equipment manufacturer," said Russell Ellwanger, CEO of Tower Semiconductor Ltd., in a statement. "Micron's culture of innovation, efficiency and absolute integrity is best-in-class, and I am confident that the acquisition of an operation that has grown through the Micron culture will be greatly accretive to TowerJazz. We are excited with the opportunity to enter into a multi-year supply agreement with Micron and see this as the first step in a long-term partnership. The acquisition of a fab in Japan would be a strategic move by TowerJazz to enter the Japanese market and strengthen our presence in the Asia-Pacific region through local, high quality manufacturing capabilities and, in addition, would provide us with needed, large scale incremental capacity."

 
"This proposed transaction would provide a long-term bridge toward a successful future for the Nishiwaki site," said Steve Appleton, chairman and CEO of Micron, in the same statement. "Russell and his team have demonstrated an ability to grow the company and achieve positive financial results for shareholders. We look forward to being both a shareholder and working with them in this endeavor and beyond."

The Nishiwaki fab is Micron's only fab in Japan. It is 200-mm facility where Micron builds specialty DRAM. The facility sustained no damage or production disruption from the March 11 earthquake in Japan, according to Micron.



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