Infineon, Toshiba merger on the rocks?

Still can't come to an agreement

Infineon's interest in Taiwanese memory makers is a sign that its proposed merger with Toshiba's DRAM division may now never take place, a source close to the two companies' talks claims.

Infineon and Toshiba had planned to have a draft merger agreement completed by the end of October, the source said, according to an EBN report, but that stage was never reached.

Why? Because Infineon wants Toshiba's Flash memory operation too, but the Japanese giant is unwilling to hand it over.

Infineon's insistence on preserving its healthy cash position is also impeding discussions, Ulrich Schumacher, chief executive, told the FT yesterday.

"The problem is getting a guarantee (from Toshiba) that whatever the market does in the next one and a half years will have no impact on my cash level."

Without agreement on this, merger talks are unlikely to last beyond the end of the year, he said.

The two groups have been in talks since the summer on folding their D-Ram businesses in a joint venture where Infineon would hold a large majority stake. D-Rams are commodity memory chips used mainly in personal computers.

Without a breakthrough, Mr Schumacher said the talks were unlikely to extend beyond the end of the year

Infineon's move to court a number of Taiwanese memory makers may be motivated by an acceptance that the Toshiba deal isn't going to happen. Then again, it could also be an attempt to put pressure on Toshiba to meet Infineon's demands.

Infineon wins either way. If it gets Toshiba's Flash and DRAM operations, it's happy. Equally, if it doesn't but it buys up a couple of Taiwanese players instead, it's still in a better position to capitalise on a recovery in the memory market - whenever that happens. ®

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Related Link

EBN: Toshiba/Infineon DRAM merger fading fast