Renesas Rises After $1.8 Billion Bailout Agreement: Tokyo Mover

Renesas Electronics Corp. (6723) rose to the highest level in five months in Tokyo trading after saying it will raise at least 150 billion yen ($1.8 billion) from a Japan-backed fund and customers as part of a bailout plan.

The chipmaker advanced 10 percent to 340 yen, headed for the highest close since July 5, as of 10:25 a.m. The company will sell new shares to a group led by Innovation Network Corp. of Japan, making the government-backed fund its biggest shareholder with a 69 percent stake, Renesas said yesterday.

The capital will help Renesas, a supplier to Apple Inc. (AAPL) and Nintendo Co., 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 Co. (005930), causing Elpida Memory Inc. to file for bankruptcy protection in February before agreeing in July to be acquired by Micron Technology Inc.

“Things are moving in the right direction, with the company securing capital,” said Makoto Sengoku, a Tokyo-based market analyst at Tokai Tokyo Securities Co. “Renesas has technology, so that should make it easier to keep moving in the right direction as well.”

The group led by INCJ will buy 1.25 billion shares for 120 yen apiece, Kawasaki, Japan-based Renesas said in a statement yesterday.

Renesas may get an additional 50 billion yen of investment or financing from INCJ if more funds are needed, according to the statement.

Toyota, Panasonic

A group of companies including Toyota Motor Corp. (7203), Nissan Motor Co., Denso Corp., Keihin Corp., Panasonic Corp., Nikon Corp., Yaskawa Electric Corp. and Canon Inc. will also invest in Renesas, according to the statement yesterday. Toyota, Japan’s biggest carmaker, will hold 2.5 percent of Renesas, it said.

Renesas President Yasushi Akao said yesterday the company recognizes the need for further restructuring and has received a proposal on job cuts from INCJ. The two sides also will discuss forming new management, he 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 percent of Renesas’s sales last fiscal year.

Forecast Cut

The company plans to spend 40 billion yen to develop microcontrollers and another 40 billion yen to develop automotive semiconductors, it said.

The company has posted 177.6 billion yen in combined losses since it was formed in 2010 through the merger of money-losing chipmakers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric, and NEC Electronics Corp.

Renesas cut its revenue forecast for the year ending March 31 to 820 billion yen from a previous forecast of 868 billion yen, it said yesterday. It maintained its net-loss forecast of 150 billion yen, compared with last year’s loss of 62.6 billion yen.

The INCJ plan keeps Renesas, a key supplier to Japan’s automakers, in domestic hands after KKR & Co., a New York-based 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.

Microcontroller Market

Renesas had a 27 percent share of the global market for microcontrollers last year, according to researcher IHS iSuppli. It controlled 42 percent 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.

Renesas’s microcontroller business has an operating profit margin of at least 10 percent, the company said in June.

The chipmaker said Oct. 16 it 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 data compiled by Bloomberg.

Mitsubishi Electric Corp., Hitachi Ltd. and NEC Corp. currently own a combined 91 percent of Renesas.

Innovation Network Corp. was formed in 2009 to invest in companies that support Japanese industry and has announced about 400 billion yen in planned spending on 31 projects, according to its website.

The fund took a 70 percent stake in the liquid-crystal- display venture formed this year by Sony Corp. (6758), Toshiba Corp. (6502) and Hitachi, and spent $680 million for a 40 percent stake in Landis+Gyr AG, a Swiss electronic-meter company majority-owned by Toshiba.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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