Is Micron Tech a next acquisition target?

News has broken out that Tsinghua Unigroup, a microchip company owned by the Chinese government has made an offer to buy Micron Tech (MU) for $23 Billion.

MU is the world 4th largest semiconductor maker by sales. The deal would only price MU at $21/share, way down from its peak around $36 just a few months ago. So will this deal ever go through? It is almost certainly not! Not only the offer price is way too low, there is more just than the price that will make this acquisition very unlikely.

MU operates in four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. The company offers DRAM products for data storage and retrieval as well as flash memory products, which are widely used in consumer electronics, industrial, wired and wireless communications, computing, and automotive applications. In other words, MU’s business is of the critical sectors that have strategic and security importance for the US. We have seen several attempts by the Chinese companies in the past few years that they wanted buy some US companies but failed as the US government simply blocked the way due to security concerns. This time is likely no difference. Having said that, I think there is a good chance that MU may become a solid target for M&A. MU is a great chip company with important products critically needed in the semiconductor industry in general and in the mobile communication sector in particular. Yes, its share price has been haircut by half but its business continues as usual. We have seen many recent examples that when great companies have short-term challenges with sharp declines of stock prices, they become great M&A targets. In addition, some lucrative deals may also easily pop up their prices. I think MU may be in this kind of situation. Of course this is purely a speculation as I have no insight knowledge whatsoever and don’t know for sure if this will happen, and even if yes, when this will happen. But buying some MU shares now is not a bad idea anyway and potentially a great one if some sort of deal comes true.