Market Overview

Why Intel Could Be The 'Key' To A Tsinghua-Micron Merger

Why Intel Could Be The 'Key' To A Tsinghua-Micron Merger
Related MU
Q4 13F Roundup: How Buffett, Einhorn, Loeb, And Others Adjusted Their Portfolio
5 Tech Growth Stocks To Click With Investors Despite Selloff
A Look at David Tepper's Largest Holding (GuruFocus)
Related INTC
Cramer Looks At The Dow's Biggest Losers
Fintech Sandbox Supports Its 100th Startup: 'Data Is The Lifeblood' For Entrepreneurs
Venture capital deals of the week (Seeking Alpha)

Earlier this week, reports that China's Tsinghua Unigroup Ltd. made a bid for Micron Technology, Inc. (NASDAQ: MU) worth $23 billion. That's a 9 percent premium to Micron's current market price, though the arbitrage opportunity was larger on Monday, before shares jumped nearly $2 per share on the rumor.

On Wednesday afternoon, the analyst who essentially predicted the bid made some further commentary on Micron.

The 'Key'

Summit Research's Srini Sundararajan, who maintains a Buy on Micron with a $34 price target, said Intel Corporation (NASDAQ: INTC) is the "key" to the deal.

Why? Sundararajan said Intel's pending merger with Altera Corporation (NASDAQ: ALTR) is the "lens through which" the U.S. government should view Tsinghua-Micron. "While we are circumspect about the price being offered, we are somewhat open about what will or will not happen," he added. "Checks suggest that MU is apparently taking this bid seriously and has taken on a Big Gorilla investment bank as its advisor for the deal."

So, why is Intel the key? The company is an important partner for Micron in the NAND space and it's also a 20 percent shareholder in Tsinghua. Sundararajan believes Intel is "somehow involved on all sides of this equation."


More broadly, this deal is linked with other M&A activity in the semiconductor space. Sundararajan explained that China's Ministry of Commerce (MOFCOM) is a crucial player as well. It's possible the entity will stand in the way of Intel-Altera if the Department of Justice blocks Tsinghua's bid for Micron.

Sundararajan's price target of $34 on Micron is just shy of the stock's 52-week high of $36.59. Micron's "upside risk is a rapid improvement in DRAM fundamentals while downside risk would be further loss of market share or a lack of PC growth and drop in DRAM spot and contract prices," he added.

Latest Ratings for MU

Feb 2018Morgan StanleyMaintainsOverweightOverweight
Feb 2018Stifel NicolausMaintainsBuyBuy
Feb 2018NeedhamUpgradesBuyStrong Buy

View More Analyst Ratings for MU
View the Latest Analyst Ratings

Posted-In: Micron Srini SundararajanAnalyst Color M&A Analyst Ratings Movers Tech Best of Benzinga


Related Articles (ALTR + INTC)

View Comments and Join the Discussion!