Looking to become a stronger force in the flash memory business, and better compete with industry leader Samsung, Micron Technology today announced plans to grow their portfolio by acquiring Numonyx in a $1.27 billion all-stock deal. The transaction will allow it to overtake Hynix as the world's third-largest memory chip company right after Toshiba.

Micron is the last surviving U.S. maker of dynamic random access memory chips (or DRAMs) and in recent years has become a major supplier of NAND flash memory as well – in partnership with Intel. By acquiring Numonyx, the company will gain access to their strength in NOR flash memory and allow it to expand into the multi-chip package (MCP) business. These chips are widely used in mobile phones.

Numonyx is also working on a new technology called Phase-Change Memory (PCM) which combines some of the speed and bit-addressability of DRAM with the non-volatility of flash. PCM is considered a potential successor to both varieties of memory but such a leap is still a long way off.

Micron plans to issue 140 million shares to Numonyx shareholders, Francisco Partners, Intel and STMicroelectronics, with up to an additional 10 million shares to be issued based on fluctuations in its stock price. The deal should close within three to six months pending regulatory approval.