Orix Capital Trading - Japanese electronics firm in $4 billion chip deal

LONDON - Aug. 25, 2016 - PRLog -- An electronics sector source who preferred to remain anonymous said that American chipmaker Intersil Corp have agreed a preliminary buyout deal with Japanese electronics company Renesas.

Renesas will purchase Intersil for a reported $4 billion, according to the source.

The industry has been a-buzz with consolidation in recent years as big companies look to combine in order to stay competitive. The Intersil offer is just the latest in the trend, and the source said the agreement will be finalised "in the coming months".

Renesas have declined to comment on the rumours, but had recently announced they were looking at a number of different growth options and mentioned on more than one occasion a "deal with a prominent U.S. chipmaker".

Hidetoshi Shibata, Renesas CFO told Bloomberg in December 2015 that the company had set aside billions of dollars for M&A activity in order to defend their number two spot in the sector. Last year saw several of the firm's competitors merge. He mentioned there was a $4 billion kitty available.

Renesas will aim to buy full control of Intersil, a power management IC firm which was founded in 1999 and based in California, which was worth around $2 billion as of Thursday. Renesas will be forced to pay a premium for the company if it wants a complete all-cash acquisition.

Although Shibata said the company has cash on hand, Renesas may look to lenders in order to raise the substantial funds required for the deal, especially as they are looking for a quick transaction.

Smart phones and computers have been a traditional mainstay of the electronics sector, but slower than average growth in those two areas has forced chipmakers to turn to other industries, such as auto-electronics, for continued growth.

The rise in internet related gadgets and increased demand for cheaper chips has also spurred M&A. As a result, there were numerous mergers over the past 12 months, with global semiconductor deals over $90 billion in 2015 alone.

"Even though Renesas is the globes third biggest chipmaker, it has been forced to look for partners," said Director of Asset Allocation at Orix Capital Trading (https://www.orixtrading.com), Steve Rogers. He added, "Only last year we saw the firm lose its second place ranking after a close rival from Holland merged with another U.S. chipmaker, Freescale."