$ 6.7 billion deal signed between Japanese Renesas and US chip maker IDT

Japanese company Renesas Electronics has announced plans to acquire $ 6.7 billion in Integrated Device Technology (IDT) technology, its second major acquisition as it deepens its efforts in the semiconductor industry for cars autonomous.

US chip design agreement highlights fierce competition among global chip makers as they seek to expand their product offering and market share in the highly lucrative automotive chip business .

Renesas ranks second after NXP Semiconductors in automotive-related chips and accounts for 30% of the global market for microcontrollers used in cars. But it is weak in so-called analog chips that process signals such as sound, light or temperature in digital data.

In particular, Renesas wanted to get its hands on IDT's know-how in analog semiconductors for wireless networks and sensors – an essential expertise for developing autonomous driving and connected car technology.

He will pay $ 49 per share in cash for the outstanding shares of IDT, a premium of 16% over their closing price on Monday.

"We had few chips for the wireless networks needed for the Internet of Things and connected cars, we wanted to get such assets," Renesas general manager Bunsei Kure said at a news conference. press conference.

Renesas said that the combination with IDT will allow the Japanese company to provide more complete chip systems to its customers. IDT is also strong in data center chips, opening a new revenue stream for Renesas.

Renesas shares rose 4% in the afternoon, regaining some of a loss in a 14% drop since the Japanese firm said it was planning to buy the company. IDT August 31st.

Although IDT has recorded revenue growth of nearly 20 percent on average over the past four quarters, some analysts are concerned that the benefits of the deal are difficult to obtain.

"Renesas is weak in telecommunications chips, so the combination is not bad," said Akira Minamikawa, senior analyst at IHS Markit. "But IDT does not have a lot of automotive customers, so it will not be easy to bring chips to the level required for automotive standards."

IDT generates only 11% of its turnover from automotive and industrial companies.

The transaction follows the US $ 3.2 billion purchase of Intersil Corp. last year, which also expanded its analog chip portfolio.

Companies must obtain approval from the US Committee on Foreign Investment (CFIUS), which reviews agreements on possible national security issues, as well as antitrust authorities in markets such as the United States. China.

Renesas is said to be confident of obtaining the necessary permissions.

Renesas, which expects the transaction to close in the first half of 2019, will finance the acquisition with 679 billion yen ($ 6.1 billion) of bank loans and cash, and plans to repay 200 billion yen each year.

The loan will be offered by major banks of Mitsubishi UFJ Financial Group and Mizuho Financial Group, a source with direct knowledge of the case, told Reuters. The source was not allowed to speak publicly about the issue and refused to be identified.

S & P Global Ratings gave Renesas a negative watch, saying the company's rating could be reduced by one or two notches if the acquisition goes as planned.

"The key financial ratios for Renesas Electronics would likely deteriorate significantly, even taking into account the possible contribution of IDT to earnings," said S & P.

Renesas was late for joining a wave of consolidation in the flea industry as he struggled to recover from the damage suffered by major factories during an earthquake that hit Japan in 2011.