Micron share price soars, receives a $23-billion buyout bid from China’s Unigroup

State-owned Tsinghua Unigroup has prepared a $23-billion offer to acquire US memory chip maker Micron Technology Inc, according to people familiar with the matter, which could be the biggest foreign takeover by a Chinese company.

Unigroup said on Tuesday that a deal was still “under discussion” and that it could pay $21 per Micron share, representing a 19.3% premium over the US companys $17.61 close on Monday. Micron shares surged more than 10% in pre-market trading on Tuesday after The Wall Street Journal first reported on the possible acquisition.

One of the people familiar with the matter said that Micron has received a letter outlining Unigroups bid, while the US company declined to comment, saying that it hasnt been presented with any buyout proposition. The offer could come as early as Wednesday, Reuters reported.

Tsinghua Unigroup, Chinas largest chip design company, was founded by the Tsinghua University and has long been considered as the champion of Chinas tech sector, aiming to become the worlds third-biggest chipmaker. It transformed into a significant semiconductor maker after it acquired last year Chinese chip makers RDA Microelectronics and Spreadtrum for a total $1.6 billion.

Unigroup has been in the center of the Chinese governments push to build more domestic manufacturers of semiconductors, which are key to the production of consumer products as well as defense equipment, and reduce the countrys dependence on foreign suppliers.

China is particularly weak in memory chips production and acquiring Microns cutting-edge manufacturing technology would be a major step forward for the countrys modest, but improving, chip industry.

“They have decided that they really have to buy somebody because they can’t deliver the intellectual property themselves,” said for the Wall Street Journal Handel Jones, president of International Business Strategies consultancy.

However, given the size of the deal and the importance of DRAM (dynamic random access memory) for the global IT industry, the proposed acquisition will likely face much tougher scrutiny by US regulators compared to previous Chinese acquisitions of US companies, such as Lenovos purchase of Motorola last year.

The deal may fall under review by the Committee on Foreign Investments in the United States, which is charged to determine whether any foreign investments or acquisitions pose a threat to national security. In such case, the transaction can be blocked, and some analysts rate the chance of the deal getting the green light as next to zero.

However, it is not clearly defined whether a transaction is subject to CIFIUS approval and Tsinghua Unigroup has already established ties with major US companies. In May, it acquired a controlling 51% stake in Hewlett-Packard Cos China-based data-networking business, while Intel Corp last year invested $1.5 billion for a 20% stake in Unigroup, with the two companies pledging to cooperate in research and the further development of Chinese technology.

Micron Technology Inc settled 0.23% higher at $17.61 per share on the NASDAQ on Monday, marking a year-to-date decline of 49.70% and valuing the company at $19.1 billion. Shares surged 13.6% to $20.00 by 10:00 GMT in pre-market trading on Tuesday. According to CNN Money, the 33 analysts offering 12-month price forecasts for Micron Technology Inc have a median target of $30.00, with a high estimate of $40.00 and a low estimate of $15.00. The median estimate represents a 70.36% increase from the last price of $17.61.