Renesas to sell US$1.8b in shares to Japan fund, companies

PUBLISHED : Monday, 10 December, 2012, 3:44pm
UPDATED : Monday, 10 December, 2012, 3:44pm


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Renesas Electronics, the ailing Japanese chipmaker, will sell at least 150 billion yen (US$1.8 billion) of new shares to a government-backed fund and customers as part of a bailout plan.

A group led by Innovation Network of Japan will buy 1.25 billion shares for 120 yen apiece, Renesas said on Monday. That compares with Monday’s closing price of 308 yen in Tokyo trading. INCJ will own about 69 per cent of Renesas after the sale, according to the statement. Mitsubishi Electric, Hitachi and NEC  currently own a combined 91 per cent of Renesas.

The capital will help Renesas, a supplier to Apple and Nintendo, boost spending to develop more advanced microcontrollers used in cars and TVs. Japanese chipmakers have struggled amid falling demand, the strong yen and competition from Samsung Electronics, causing Elpida Memory to file for bankruptcy protection in February before agreeing in July to be acquired by Micron Technology.

Renesas may get an additional 50 billion yen of investment or financing from INCJ if more funds are needed, according to the statement. The chipmaker may eliminate as many as 5,000 positions and shut more factories under INCJ’s proposal, a person familiar with the plan said last week.

A group of companies including Toyota Motor, Nissan Motor, Denso, Keihin, Panasonic, Nikon, Yaskawa Electric and Canon will also invest in Renesas, according to Monday’s statement. Toyota will hold 2.5 per cent of Renesas, it said.
Renesas is cutting jobs and considering closing or selling plants as demand drops for its system LSI chips, used for functions including processing TV images.

The chipmaker plans to increase its focus on the microcontroller business, which accounted for 43 per cent of Renesas’s sales last fiscal year.

Renesas has posted 177.6 billion yen in combined losses since it was formed in 2010 through the merger of money-losing chipmakers Renesas Technology, a venture between Hitachi and Mitsubishi Electric, and NEC Electronics. Renesas’s net loss may widen to 150 billion yen for the year ending March 31 from 62.6 billion yen a year earlier, the company said October 29.

Renesas rose 3 per cent to 308 yen in Tokyo trading, trimming its decline this year to 35 per cent.

The INCJ plan keeps Renesas, a key supplier to Japan’s automakers, in Japanese hands after KKR, a private-equity firm, was said in August to seek control of the company. KKR offered Renesas’s main shareholders and lenders about 100 billion yen, a person with knowledge of the matter said at the time.

Renesas had a 27 per cent share of the global market for microcontrollers last year, according to researcher IHS iSuppli. It controlled 42 per cent of the market for microcontrollers used in cars to run systems including airbags and brakes. A lack of the components after last year’s record earthquake and tsunami in Japan prompted automakers to shut factories.

Koji Endo, a Tokyo-based analyst at Advanced Research Japan, estimates Toyota’s Lexus LS luxury sedan uses about 100 microcontrollers. Renesas’s microcontroller business has an operating profit margin of at least 10 per cent, the company said in June.

Renesas said in September it clinched loan contracts for about 200 billion yen with lenders including Sumitomo Mitsui Trust Holdings.

The chipmaker said in October that it had booked a one-time charge of about 84 billion yen to cut about 7,500 jobs. The company employed 42,800 as of March 31, according to Bloomberg data.