Analyst: Micron-Qimonda Deal Imminent

Last week Samsung revealed that it has offered $26 a share to acquire flash-memory maker SanDisk(SNDK Quote), an offer that SanDisk rejected.

Uche Orji, a semiconductor analyst at UBS, says that acquiring Qimonda would give Micron an important size advantage in the DRAM business.

After a visit last week to Asia, home of many of the big memory firms, Orji says he came away more convinced of the deal's likelihood, which he now reckons has a 50% chance of going through.

The big question, he says, is how Micron will pay for Qimonda. Cheap as Qimonda is, it won't be easy for Micron to find financing for such a deal given the credit market's current tightness. Micron has $1.5 billion in cash, and roughly $2.2 billion in long term debt.

"If they can find the money somehow, and do this deal, it will be a phenomenal deal for them four years out," says Orji.

In the near term however, Orji says an acquisition could negatively impact Micron's earnings, prompting him to cut his rating on Micron from a Buy to a Neutral.

Freedman, of American Technology Research, believes Micron could employ a creative structure to finance the deal, allowing Micron to pay as little as $350 million upfront, while funding the rest with cash flow from the acquired assets.

Shares of Micron were down 7%, or 34 cents, in midday trading Monday. Qimonda's stock was off 5.8%, or 14 cents, at $2.28.