Japanese Chip Maker To Acquire U.S. Rival -- WSJ

By Josh Beckerman and Takashi Mochizuki 

Japanese chip maker Renesas Electronics Corp. said Tuesday it has agreed to buy California-based Intersil Corp. for about $3.2 billion, a step aimed at beefing up its strength as an automotive-related semiconductor provider.

Renesas will pay $22.50 a share for the U.S. chip maker, a premium of about 43.9% to the company's Aug. 19 closing price, the last trading day before the company said it was in talks with Intersil. The deal is expected to be completed by the first half of 2017 after approval from Intersil shareholders and regulators.

Renesas executives said the premium was justified by the synergy effects from the acquisition. The company said it planned to pay for the acquisition in cash.

The semiconductor industry has experienced a wave of consolidation as chip makers and their suppliers look to build scale in response to slowing growth and rising costs.

Renesas has been focusing its resources on its automotive business, where growth is expected because car makers are adding technology that requires semiconductors such as autonomous-driving features.

Renesas said its automotive and industrial businesses accounted for 70% of its revenue in the most recent fiscal year, up from 55% three years earlier. The combination with Intersil will help it offer better products for in-vehicle entertainment, battery management and safety systems, Renesas said in a presentation to investors.

Innovation Network Corp. of Japan, a fund backed by the Japanese government, owns a majority stake in Renesas. Other shareholders include Toyota Motor Corp. and its suppliers. Renesas was formed through a fusion of the chip-making units of NEC Corp., Mitsubishi Electric Corp. and Hitachi Ltd.

Intersil, based in Milpitas, Calif., sells semiconductors for a variety of applications that include cars, computers, consumer electronics products and aerospace hardware. Intersil Chief Executive Necip Sayiner, who was appointed in 2013 to lead a turnaround effort, has tried to focus the business on chips used to manage power. Intersil also has a major sideline making chips designed to withstand radiation exposure, a feature needed in aerospace gear.

Intersil shares closed at $19.76 on Monday and rose 7.3% to $21.21 after hours, while Renesas's stock price ended up 2.2% on Tuesday in Tokyo.

Write to Josh Beckerman at [e-mail] and Takashi Mochizuki at [e-mail]

(END) Dow Jones Newswires

September 14, 2016 02:48 ET (06:48 GMT)

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