LONDON – Struggling Japanese chip company Renesas Electronics Corp. is to seek a 50 billion yen (about $620 million) investment from private equity firm Kohlberg Kravis Roberts & Co. (KKR), according to a Nikkei report.
The 50 billion yen represents about the amount that Renesas needs for a $1.3 billion cash injection for a plan to lay off about one-third its work force and to close more than half its domestic manufacturing sites.
Two of Renesas' three parent companies – Hitachi and Mitsubishi – have agreed in principle to provide a support package worth 50 billion yen. NEC, the third and largest shareholder in Renesas, is unable to contribute with loans as it is struggling with the implementation of its own turn-around plan, according to an earlier Reuters, report.
A contribution of 50 billion yen would increase Renesas outstanding share count by nearly 40 percent, giving KKR a stake of just over 26 percent, according reports. It would also make KKR the largest shareholder in Renesas, ahead of NEC, Hitachi and Mitsubishi, whose shareholdings of about 35, 31 and 25 percent, respectively would be diluted to about 25, 22 and 18 percent, respectively. It is not expected that Hitachi and Mitsubishi would increase their stakes in Renesas.
KKR was part of a consortium that paid 6.4 billion euro (about $8 billion) for an 80 percent stake in chip company NXP as it was spun out of Koninklijke Philips Electronics NV (Amsterdam, The Netherlands) in 2006. NXP loaded with debt to pay for the money used to buy it out. In 2009 the private equity holding was written down to just 10 percent of its original value.
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