Hedge Funds Flog Micron/Lexar Deal

Several funds reiterate their opposition and plan to vote against the deal.
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Several hedge funds continue to oppose

Micron's

(MU) - Get Report

acquisition of

Lexar Media

(LEXR)

, and recently told the companies that they plan to vote against the merger when shareholders vote on the matter Friday.

In a filing with the

Securities and Exchange Commission

Tuesday, fund partners Elliott Associates and Elliott International, which together own 7.5% of Lexar shares, disclosed that the funds have reaffirmed their opposition to the deal as currently structured in a meeting with Micron and Lexar's management last week.

"The Reporting Persons intend to oppose the current transaction and intend to continue to discuss these viewpoints as well as alternatives to the current transaction with other large shareholders of the Issuer," read the filing.

Icahn Partners made a similar filing a few days earlier about its intention to vote against the deal.

Icahn and Elliott are among several hedge funds that have amassed large stakes in flash memory-chip company Lexar in order to pressure management to shop around for a better offer than the one put on the table by Micron. Under the terms of Micron's deal, each Lexar share will be worth 0.5625 of a Micron share, valuing Lexar at $737 million at Tuesday's market close.

The consortium of hedge funds believes Lexar is worth significantly more. In a letter sent to Lexar's management in March, Elliott Associates accused the company of taking the first deal that came along.

"We believe this outcome was the result of the Company's failure to conduct a robust and thorough sale process, and we fully support and encourage interest from other parties at levels more closely reflecting Lexar's true value," said the filing.

Lexar sells flash memory cards, a popular form of storage for consumer electronic gadgets like digital cameras.

Because Lexar does not produce its own flash memory chips, however, the company has found itself in a competitive disadvantage to companies like

SanDisk

(SNDK)

as prices for NAND flash chips have rapidly come down. To remain competitive in the market, Lexar must slash its retail product prices, while continuing to buy flash chips at higher, prearranged prices.

Shares of Lexar closed down 4.1%, or 39 cents, to $9.13 on Tuesday.