Japan Said to Plan 200 Billion Yen Rescue of Renesas

Renesas Electronics Corp. (6723), the world’s largest maker of microcontrollers, may be acquired for about 200 billion yen ($2.5 billion) by a group led by Japan’s state-backed fund as early as November, two people familiar with the matter said.

Innovation Network Corp. of Japan may be joined by private companies, the two people said on Oct. 13, asking not to be identified because the discussions are private. The parties involved and the breakdown of investment are under negotiation, they said.

Renesas, whose customers include Apple Inc. and Nintendo Co., forecast a 156 billion yen loss this fiscal year and recorded cumulative losses of 472 billion yen in the previous seven years, according to data compiled by Bloomberg. The company has cut jobs to reduce costs by 54 billion yen annually and may close or sell factories to end losses exacerbated by falling demand for its system LSI chips.

State-run Innovation Network will ask Renesas to sell the LSI division in a further restructuring, a condition the chipmaker may reject as overly strict, one of the two people said.

The fund will inject 150 billion yen in return for two- thirds of Renesas’s shares, and a group of about 10 companies will invest about 50 billion yen in total, the Nikkei newspaper said Oct. 13.

Toyota Motor Corp., Panasonic Corp., Nissan Motor Co. and Denso Corp. are among those involved, according to one of the people familiar with the talks. Calls for comment to the companies and Renesas outside business hours were not answered.

Global Slowdown

KKR & Co. withdrew its bid for Renesas, the Yomiuri newspaper reported on Oct. 13. The New York-based private-equity firm offered about 100 billion yen for control of Renesas to the chipmaker’s banks and three main shareholders -- NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp., a person with knowledge of the matter said in August.

The global chip industry has been roiled as a slowdown in economic growth erodes demand, with personal-computer shipments falling 8.3 percent in the quarter ended September, research firm Gartner Inc. said last week. Advanced Micro Devices Inc. cut its sales forecast on Oct. 12 and said it will eliminate about 20 percent of its workforce. Applied Materials Inc., the largest producer of chipmaking equipment, has announced plans to trim its payroll by as much as 9 percent.

Renesas on Oct. 12 announced the sale of its Renesas High Components Inc. subsidiary to Aoi Electronic Co. Financial terms of the deal were not disclosed in the statement. The company eliminated about 7,500 jobs, or about 17 percent of its workforce, through an early retirement program and has said as many as eight of 18 domestic factories may be closed or sold.

Chipmakers Struggle

Japan’s chipmakers have struggled as South Korea’s Samsung Electronics Co. extended its dominance. Boise, Idaho-based Micron Technology Inc. agreed in July to buy Elpida Memory Inc. after the Tokyo-based maker of memory chips filed for bankruptcy protection.

Renesas held a 27 percent share of the global microcontroller market last year, making it the world’s largest supplier of the devices used in automobiles and televisions. It plans to raise that share to 35 percent in five years by targeting emerging markets, and extended its alliance with Taiwan Semiconductor Manufacturing Co., a move that will help cut costs and widen profit margins, Renesas said in June.

The company was formed in 2010 through the merger of money- losing chipmakers NEC Electronics Corp. and Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net;

To contact the editor responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net

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