Tightening credit markets have forced Intel and STMicroelectronics, Europe's largest semiconductor maker, to delay a planned merger of the companies' memory divisions.
The new company, to be called Numonyx, will be formed by March 28 instead of the end of 2007, as originally planned when the deal was announced in May, the companies said.
Numonyx, which would be the largest manufacturer of flash memory in the world, is an attempt to wrest profits from a sector that has seen slumping prices amid increased competition.
The companies estimate Numonyx would represent $3.6 billion in sales, making the new company bigger than Spansion, currently the market leader.
New Deal After Credit 'Turmoil'
A third party in the deal is Silicon Valley-based Francisco Partners, which will invest $150 million for a 6.4 percent stake in the new company.
As the credit situation continues to be tight, banks are looking to scale back their exposure to the deal. In May, Intel and STMicro announced they had commitments for a $1.3 billion loan and $250 million in revolving credit, but Wednesday the companies said financing would be reduced to a $650 million loan and $100 million in revolving credit.
Under the new deal, STMicroelectronics will get 48.6 percent of the new company plus cash and notes worth $364 million. In May, the transaction called for Intel to get a 45.1 percent share of the company plus $432 million. Now, Intel isn't saying how big a payment it will take.
"We'll wait and see when we get the terms all finalized," said Chuck Mulloy, an Intel spokesperson.
Expanding Use in Notebooks
"Numonyx will be the industry's largest supplier of NOR flash memory and a leader in nonvolatile memory solutions with a substantial patent portfolio," the companies said in a statement. "Intel, Francisco Partners, and ST intend for Numonyx to hit the ground running, with an energized and independent work force, substantial intellectual property, modern and well-equipped manufacturing facilities, and a broad and diverse customer base."
The Federal Trade Commission and the European Commission are considering the merger. In August, the FTC asked for more information in its review. Brian Harrison, vice president and general manager of Intel's Flash Memory Group, has been tapped as CEO of Numonyx, and Mario Licciardello, corporate vice president of STMicro's flash group, will be the chief operating officer.
Flash memory is expected to become an increasingly important part of the notebook PC laptop market, especially for military and other rugged uses. Research firm iSuppli estimates flash memory will comprise 60 percent of laptop storage within two years.