August 30, 2012 - US-based investment firm Kohlberg Kravis Roberts and Co. (KKR) reportedly is seeking to snap up struggling chip firm Renesas for ¥100 billion (US $1.3B), weeks after domestic peer Elpida similarly welcomed outside help following filing for bankruptcy earlier this year.
Local media reports that Renesas, which is projecting a ¥150B ($1.9B) net loss for its current fiscal year, had been seeking roughly the same ¥100B from parent companies (NEC, Hitachi, and Mitsubishi Electric) who own 90% of the chipmaker, but was only granted half that (~¥50B). (Renesas’ market capitalization is only around ¥120B-¥130B, point out the Yomiuri Shimbun and The Wall Street Journal.) In July the company announced ¥43B in cost reduction efforts, including some downsizing and closure of production lines and in excess of 10% workforce reduction. In May it expanded an outsourcing deal with TSMC to hand over all 40nm embedded flash production for its MCUs.
Reports (many citing the Nikkei) suggest KKR wants a controlling stake (>50%), and KKR officials want approval from Renesas’ ownership within weeks or even days. (And KKR isn’t alone — other private equity funds have pitched for an investment stake in Renesas in recent months, according to Reuters.) The Asahi Shimbun reported that senior officials at Renesas parents indicated they would approve the KKR deal, though other investors expressed worry about protecting the company’s technology and leadership in its key market for automotive controllers.
Nevertheless, overall investors like the move — since the news broke on Wednesday (Aug. 29), Renesas’ shares have closed about 35% higher on the Tokyo Stock Exchange.
KKR is no stranger to investing in the semiconductor device sector. In 2005 it carved out Agilent’s semiconductor business to create Avago, and was among a consortium that carved out NXP Semiconductors from Philips in 2006. In the past KKR has also been reported to have pursued UMC and packaging outsourcer UTAC.
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