Makiko Yamazaki - Reuters
Renesas Electronics Corp (6723.T) on Tuesday said it has agreed to buy U.S. chipmaker Intersil for $3.2 billion, an all-cash deal that bolsters the Japanese group's efforts to refocus the company around automotive chips. Slowing growth in computers and smartphones - the traditional mainstays of the chip industry - has fueled a wave of mergers globally as chipmakers turn to areas such as auto electronics for sales growth.
Renesas, created from the semiconductor units of several Japanese companies, has amassed a significant war chest since a state fund and key clients bailed it out after the Fukushima earthquake five years ago. "It was a competitive bid and we settled at a price almost at the maximum limit," Renesas CEO Bunsei Kure told a briefing for reporters and analysts in Tokyo.
"We can combine our products and offer them in a package," he added, saying the chipmaker would "actively seek out other mergers" to further grow its business. Kure's company paid $22.5 a share for Intersil, 14 percent above Monday's closing price.
"They might be over-paying just a little, but if Renesas doesn't buy Intersil they will struggle to supply customers in the U.S.," said a manager at an investment fund in Singapore that owns Renesas shares. "If they want to be a top auto-industry component maker they have to do this," he added, asking not to be identified because he was not authorized to talk to the media.
But Masatsune Yamaji, principal research analyst at Gartner in Tokyo, said he doubted the benefits of the deal. "It's not clear that Renesas will be able to sell Intersil's chips to its existing customers. Intersil produces for PCs and IT infrastructure while Renesas makes for automakers," Yamaji said.
Intersil, whose chips are used in industrial, mobile and infrastructure applications, would expand Renesas' portfolio in analog chips, which process signals such as sound, light and temperature before converting them into digital signals. It would also give it a presence in the $10 billion power management segment of the chip market.
By combining those products, Kure said he expected to bolster income by as much $170 million annually after four to five years. At the end of last year, Tokyo-based Renesas was the world's third-largest chipmaker by market share, with 9.1 percent, data from technology research firm Gartner showed.
The acquisition will need to win approval from the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security issues.
While Intersil has a growing aerospace business and produces chips with military applications, Japan has close military ties with the United States and Renesas Chief Financial Officer Hidetoshi Shibata said he expected regulators to sign off on the deal.
Renesas, which controls nearly 40 percent of the global market for microcontroller chips used in automobiles, will fully control Intersil after the buy-out. It aims to complete the deal by June 2017.
Renesas beat U.S. suitor Maxim Integrated Products, promising Intersil access to its network of automotive clients to boost the auto-related business, sources have told Reuters. A Maxim spokeswoman declined to comment.
San Jose, California-based Maxim has been on the hunt for a deal for some time, according to the sources. The company could therefore be at the center of further consolidation in the still-fragmented market for analog chips, they said.
Shares in Renesas were up 1.5 percent at 0500 GMT compared with a smaller 0.34 percent gain in the benchmark Nikkei 225 index.
(Additional reporting by Liana Baker in SAN FRANCISCO; Emi Emoto and Kentaro Hamada in TOKYO; Writing by Clara Ferreira-Marques; Editing by Stephen Coates)