TI restructures, sells assets: Memory chip business sold to Micron
for $800 million; 3,500 job cuts seen
CNNfn - June 18, 1998: 5:14 p.m. ET
NEW YORK (CNNfn) - Texas Instruments Inc. (TI)
Thursday agreed to sell its troubled memory chip
business to Micron Technology Inc. for about $800
million as part of an overall restructuring that includes
the elimination of 3,500 jobs.
In a joint statement, the companies said the
transaction includes the purchase of substantially all of
Texas Instruments' (TXN) semiconductor memory
assets as well as TI's shares in its two dynamic
random access memory manufacturing joint ventures.
The DRAM industry has been suffering from
pricing pressures, in part because the stronger dollar
makes chips produced in South Korea cheaper than
their American counterparts.
In connection with the sale of the memory
business, TI said it could recognize a "material loss"
when the transaction closes.
Separately, TI said it will implement a worldwide
restructuring program, which will result in a material
charge in the second quarter of 1998.
The plan will include the elimination of about 3,500
jobs around the world over the next few months
through voluntary programs, attrition, outsourcing and
layoffs, as well as the consolidation of several smaller
facilities.
The restructuring is expected to result in pretax
savings of about $270 million annually, which
essentially offsets the fixed and allocated costs of the
memory business that are not absorbed by Micron
(MU).
The transaction includes the purchase of
substantially all of TI's assets involving dynamic
random-access memory (DRAM), as well as TI's
shares in its two manufacturing joint ventures.
The business accounted for less than 12 percent of
TI's $2.1 billion in sales in the first quarter.
Under the terms of the unusually structured
transaction, Texas Instruments will receive about 28.9
million shares of Micron, plus convertible debt
securities. Micron also will assume about $190 million
of government-sponsored debt associated with TI's
Italian memory operations.
In addition to TI's memory assets, Micron will
receive $750 million in financing from TI to facilitate
the deployment of Micron's technology throughout the
business.
Micron and TI have also agreed upon a 10-year
royalty-free semiconductor patent cross-license
agreement, to begin January 1, 1999. TI will retain
ownership of its related patents.
The transaction, which is subject to various
regulatory approvals, is expected to close in the
second half of this year.
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