Renesas shareholders set to approve $2.4 billion bailout, shares soar

Mon Nov 26, 2012 1:58am EST
 
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By Maki Shiraki and Mari Saito

TOKYO (Reuters) - Shareholders of Japan's embattled Renesas Electronics Corp are close to approving a government-led bailout, sources familiar with the talks said, sending the firm's shares 17 percent higher on relief that the $2.4 billion rescue was being finalized.

The deal is set to keep the world's biggest maker of microcontroller chips afloat for the next few years, but analysts say that despite job cuts and planned plant closures, Renesas still faces many challenges including the restructuring of its loss-making system chip division.

The state-backed Innovation Network Corp will spend 180 billion yen ($2.2 billion) to take a two-thirds stake in Renesas, which has been hit by fierce overseas competition, production cuts by clients and fragile finances that have prevented it from upgrading infrastructure.

As part of the bailout, eight manufacturers including key clients such as Toyota Motor Corp and Nissan Motor Co Ltd will provide another combined 20 billion yen.

Shareholder approval of the deal, while expected, had been delayed for several weeks and an announcement is now likely in early December, said the sources, who declined to be identified as the matter is not public.

A Renesas spokesman said nothing had been decided.

Investors jumped to cover short positions in the stock, said Makoto Kikuchi, chief executive officer of Myojo Asset Management, noting that unlike some other troubled Japanese electronics firm such as Sharp Corp, the company's expertise in chips for cars meant it was worth investing in.

The bailout was put together to counter an earlier bid by U.S. private equity firm KKR & Co LP amid worries that the firm's technology would fall into foreign hands.   Continued...

 
The Japanese chipmaker Renesas Electronics Corp's logo is pictured at the company's headquarters in Tokyo, in this file picture taken May 28, 2012. Shareholders of Japan's embattled Renesas Electronics Corp have approved a government-led bailout, the Nikkei newspaper said, sending the chipmaker's shares more than 6 percent higher on relief that the $2.4 billion rescue was being finalised, Reuters reported on November 26, 2012. REUTERS/Yuriko Nakao/Files