Renesas Electronics Corp., the second-biggest supplier of semiconductors used in cars, plans to acquire Integrated Device Technology Inc. for about $6.7 billion to expand beyond the automotive sector into data centers and communications devices.
The Japanese company will pay $49 a share, it said in a statement, about a 16% premium to the U.S. company’s Monday close and 29% higher than the share price when talks were first disclosed. That propelled Renesas’s stock 4.4% higher in Tokyo, its biggest jump in almost two months.
Renesas, which gets more than half of its revenue from auto-sector customers, has signaled plans to make acquisitions beyond the industry to expand into fields from health care to aerospace. IDT, based in San Jose, California, gets most of its revenue from products for high-performance computing and consumer applications, including clock-timing, power management and radio-frequency devices.
“There’s little overlap between their product portfolios, so it’s a strategically sound move for Renesas,” said Masahiro Wakasugi, an analyst with Bloomberg Intelligence. “But it does seem like the price is a little high.”
Morgan Stanley, BofA Merrill Lynch and Mizuho Securities acted as financial advisers to Renesas, while JPMorgan advised IDT.
Renesas can use cash on hand and bank loans to pay for the acquisition and has no plans for an equity fund-raising, Chief Executive Officer Bunsei Kure told reporters in Tokyo. The company plans to get regulatory approval and close the deal by the end of June 2019.
“IDT has been focusing on products that have longer life spans, higher reliability and lower volatility,” Kure said. “Even though we operate in different areas, our core strategies are very similar.”
Renesas is second only to NXP Semiconductors NV in automotive market share. Last year, the Japanese company paid $3.2 billion for Intersil Corp., a U.S. chipmaker whose product lineup includes semiconductors that manage battery voltage in hybrid and electric vehicles.
In June, Chief Financial Officer Hidetoshi Shibata said Renesas’ next purchase will focus more squarely at cutting overlapping legal, administrative and information-systems expenses. The acquisition of IDT will result in more than $80 million of cost savings two years after the deal’s closing, Renesas said.
One of the biggest hurdles to major acquisitions is Renesas’s ability to absorb the target, Shibata said. Renesas, which itself was formed in 2010 through the merger of NEC Corp.’s chip unit and a money-losing venture between Hitachi Ltd. and Mitsubishi Electric Corp., has about 20,000 workers. Intersil had little more than 1,000 employees and IDT has roughly 1,700.
IDT posted an adjusted net income of $124 million on revenue of $843 million for the year ended April 1. Computing accounted for 40% of the company’s revenue in the latest quarter, while the communications and consumer segments contributed 29% and 20%, respectively.
“For some time now, we have been looking to strengthen our connectivity technology,” Shibata said at the briefing. “IDT brings us their radio frequency know-how, but we could still use more. Whether it would be a major acquisition or a small one I can’t say, but that’s something we would consider given the right circumstances.”
By Yuki Furukawa and Pavel Alpeyev
