Elpida has been desperately looking for an investor to sponsor its restructuring after tough market conditions and global competition drove it to file for bankruptcy protection. Its previous sponsor, the Japanese government, decided that it had wasted enough taxpaper money on the outfit. It had $5.6 billion in liabilities when it went bankrupt.
Under the deal, Micron will also pay Elpida's creditors about $1.75 billion in future annual instalments through 2019. Micron will also buy a 24 percent stake in Taiwan-based Rexchip Electronics from Powerchip Technology for $334 million. Elpida owns about 65 percent of Rexchip.
The money will come from cashflow generated by Micron's payment for foundry services provided by Elpida.
Despite its woes Elpida had a 13.1 percent share of the global market for DRAM chips, while Micron had an 11.6 percent share.
The move takes their share of the DRAM market above Hynix's 23 percent but still well below Samsung's 42.2 percent market share.
Micron CEO Mark Durcan said the deal would create an "industry-leading pure-play memory company," combining the two firms' research and development and manufacturing scale.
The deal needs the approval of Elpida's creditors, the Tokyo District Court and other antitrust agencies.