Japanese chipmaker Renesas to buy Intersil of US for $3.22 bn

Japanese chipmaker Renesas Electronics Corp today struck a deal to buy US chipmaker Intersil Corp for $3.22 billion in cash, a move designed to strengthen its automotive chip business.

Renesas will pay $22.50 a share, a premium of about 43.9 per cent to the company's 19 August closing price, the day Renesas said it was considering various growth options, including buying Intersil.

The transaction has been unanimously approved by the boards of both companies and closing of the transaction is expected in the first half of 2017.

Renesas expects the acquisition to eventually generate synergies of $170 million and immediately increase both gross and operating margins and be accretive to its non-GAAP earnings per share and free cash flows after closing.

The acquisition combines two industry leaders in their respective segments and the merger will give Renesas deep expertise across a number of state-of-the-art technologies and end markets and enable the company to become a complete solution provider of embedded systems, the company said.

''By combining Renesas' market-proven microcontroller (MCU) and system-on-chip (SoC) products and technologies and Intersil's leading power management and precision analog capability, Renesas will be well positioned to address some of the most exciting opportunities in key areas such as automotive, industrial, cloud computing, healthcare, and the Internet of Things (IoT), Renesas said in a statement.

''Intersil's extensive portfolio of analog and power devices as well as its strength in the automotive, industrial, and broad-based segments complement many of Renesas' initiatives in these areas,'' said Bunsei Kure, representative director, president and CEO of Renesas.

The semiconductor industry has seen a recent wave of consolidation as chip makers face slowing growth and rising costs.

In February, Avago Technologies completed its $37 billion merger of rival Broadcom Corp and the combined company retained the Broadcom name while in July, Analog Devices  agreed to buy Linear Technology in a $14.8 billion cash-and-stock deal.

Intersil, which has a market cap of more than $2.1 billion, was founded in 1967 as Intersil Inc. by Jean Hoerni to develop digital watch processors ,and changed to its present name in 1999 when it acquired the semiconductor business of Harris Corporation.

The California-based company specialises in developing highly efficient power management and precision analog integrated circuits (IC).

The company supplies a full range of power IC solutions, including battery management, computing power, display power, regulators and controllers and power modules; as well as precision analog components such as amplifiers and buffers, proximity and light sensors, data converters, timing products, optoelectronics and interface products.

Its clients are in the infrastructure, industrial, automotive, military, aerospace, computing, and consumer markets.
 
It generates annual sales of around $522 million.

Hitachi Ltd. and Mitsubishi Electric Corp integrated their semiconductor businesses to create Renesas Technology in 2003 and in 2010 NEC Electronics Corp merged itself with Renesas Technology Corp.

Renesas has recently restructured its unprofitable operations, and is now planning to boost its automotive chip business since automakers are seeking to develop more advanced fuel-efficient cars and automated driving technology.

Tokyo-based Renesas was last year the world's third-largest chipmaker by market share, with 9.1 per cent, and holds a near 40 per cent of the global market for microcontroller chips used in automobiles.