According to sources in Japan the private equity firm KKR, based in New York, is holding talks and looking to invest about 100 billion yen ($1.3 billion) for control of Renesas Electronics in a move that would offer a lifeline to the troubled chip manufacturer. As a result shares in the company have jumped by over a third. The deal, if it goes through, would give KKR more than 50 percent of the company and could help Renesas to speed up its programme of restructuring, according to analysts.
Facing intense competition from overseas rivals and growing pricing pressures Renesas has been struggling. The deal would constitute KKR’s largest investment in Japan to date.
Under the proposal KKR would buy new shares in Renesas, the world”s fifth-largest chipmaker, through a private placement, sources suggested. Executives from KKR are currently believed to be in Japan and holding talks with the company’s banks and its three main shareholders, NEC, Hitachi and Mitsubishi Electric.
Renesas is the world”s leading manufacturer of microcontroller chips for the automotive sector. It is currently in the process of implementing a major restructuring plan that will see 12 percent of its workforce laid off and there are plans to sell or consolidate half of its domestic plants. Job losses could exceed 5000.
The company is having to look at closing loss making operations at a time when it has been struggling to fund heavy investments in other parts of its business.
According to the Nikkei business daily KKR is keen to reach a formal agreement as early as next week.
Renesas, which recently secured 49.5 billion yen in support from Hitachi, Mitsubishi Electric and NEC, made a loss of 150 billion yen last year in the face of growing competition from the likes of Samsung and Freescale.
While not denying the news Renesas did say that media reports were not based on any announcements by the company.