Micron / Elpida: value judgment Rescue ahoy (almost). When US chipmaker Micron sent out a lifeline to Elpida last week by offering to buy it, the Japanese chipmaker's survival seemed assured. That was until Elpida's bondholders announced that the offer undervalued the company and that they could do better. On Monday, in a filing to a Tokyo district court (which must approve the deal) they said they would present an alternative proposal. That looks decidedly risky. Micron's offer values Elpida at Y200bn ($2.5bn) and includes Y60bn in cash up front for all of Elpida's equity. That is double the norm for typical deals. Indeed, if Micron were simply to buy all of Elpida's existing capacity, it would cost the US company 70 per cent more. The rest of the offer - Y140bn - will be paid to Elpida's creditors in annual instalments through 2019. Bondholders hold about half of Elpida's debt of Y300bn. The deal may mean that they do not get their money back immediately. They argue that the current conditions do not guarantee the instalments will ever be paid. After all, Micron is offering to make the payments through Elpida's cash flow. Still, by buying Elpida, Micron morphs into the world's second-largest maker of dynamic random access memory chips, from fourth place today. That scale should boost performance and help both companies return to profit. If creditors block the deal, all of that is at risk. When a creditor-backed rescue saved Japan Airlines in 2010, creditors waived almost 90 per cent of unsecured loans. Without a buyer, Elpida would go into liquidation. When Texas Instruments scooped up assets from the bankrupt German chipmaker Qimonda in 2009 it paid roughly 18 cents on the dollar for equipment. A read-through to Elpida suggests that the liquidation value of Elpida's property, plant and equipment is just Y60bn, Macquarie estimates. Is that all creditors want?