Tsinghua Unigroup reportedly wants to buy Micron Technology for $23 billion in a deal that would garner intense regulatory scrutiny in the US and likely rattle the memory market.
On the bright side, analysts say it's likely that the China controlled Tsinghua would produce too much memory and lower prices for solid state storage used in everything from smartphones to data centers.
According to a Wall Street Journal report, Tsinghua is ready to offer $21 per share for Micron, which is a 19.3 percent premium to the close of Micron's stock on Monday. Micron management has denied receiving a bid from Tsinghua.
If approved, the deal would be the largest Chinese takeover of a US-based company. But it's unlikely that Tsinghua would get an easy green light, from either the US Committee on Foreign Investment or from Micron shareholders.
In a report released Tuesday, analyst firm Credit Suisse said a deal would be "highly unlikely to get past US regulators who are increasingly viewing semiconductors as a strategic industry."
Idaho-based Micron is the last major DRAM chip manufacturer based in the US, therefore if the company was sold, the US would be without a major producer of a key component needed for almost all computing devices. For that reason Credit Suisse said DRAM technology would likely be classified as vital to national security.
Moreover, Micron values its plant and equipment as worth $26 billion, and the company reached almost $37 per share in a 52-week high.
According to Credit Suisse, "the offer price of $21 is not attractive enough to generate interest for a company competitive in a profitable and consolidating industry."
More from JPM Securities:
Given the health of present Micron cash flows, the strategic significance of a deal that could lead to a future Samsung-like powerhouse in China, and the potential for other major Chinese OEMs or ODMs to make competing bids, we find it difficult to imagine that Micron would entertain an offerfor anything less than a modest 5-10 percent discount to its recent 52-week highs of ~$36.50.
As usual, investors love a good dose of M&A speculation -- Micron shares were up more than 10 percent by Tuesday afternoon.