TOKYO – Nikkei reported Wednesday (Aug.29) that Kohlberg Kravis Roberts & Co., the New York-based private equity firm, is in talks with Renesas Electronics.
KKR plans to take over management of the ailing Japanese chip maker by spending 100 billion yen ($1.27 billion) through a private placement of new shares, Nikkei reported.
If true, the bid is KKR second crack at rescuing a chip company. KKR, Bain Capital Partners and three other private equity firms acquired NXP Semiconductors in a $9.4 billion leveraged buyout in 2006. NXP went public in August, 2010.
According to Nikkei, KKR presented its proposal to Renesas' top three shareholders -- NEC Corp, Hitachi Ltd. and Mitsubishi Electric Corp.-- as well as Renesas’ main banks. The Japanese newspaper anticipated a formal agreement as early as next month.
Renesas has a market capitalization of about 95 billion yen. KKR’s plan is to lead the chipmaker's turnaround efforts by taking over a majority stake by year's end. If that happens, KKR may replace Renesas’ current management.
At stake is the credibility of Renesas’ restructuring plan. Lingering concerns in the electronics industry are focused on the Japanese company’s willingness to make deep enough cuts, act on the plan quickly, and apply sufficient capital to pull everything off.
While a number of different restructuring plans have been bandied in the Japanese media over the last few months, Renesas is yet to publicly announce a detailed plan beyond seeking slightly more than 5,000 volunteers for early retirement. It’s also working to close some fabs.
Nikkei reported that Hitachi, NEC and Mitsubishi, the three shareholders of Renesas, have already agreed to provide a total of 50 billion yen through loans and other measures. Bank of Tokyo-Mitsubishi UFJ and three other lenders intend to provide 50 billion yen through a credit line, it said.
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