Japan's Renesas secures $1.8 billion government-led bailout

Mon Dec 10, 2012 6:49am EST
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By Mari Saito

TOKYO (Reuters) - Japanese chipmaker Renesas Electronics Corp, hit by slumping orders and competition from rivals like Samsung Electronics Co Ltd, secured a 150 billion yen ($1.8 billion) lifeline from a government-led bailout on Monday.

The taxpayer-funded Innovation Network Corp of Japan (INCJ), will provide 138.4 billion yen in exchange for a two-thirds stake in Renesas, the world's biggest maker of microcontroller chips for cars.

Eight key manufacturing clients including Toyota Motor Corp, Nissan Motor Co, Canon Inc and Panasonic Corp will provide roughly 12 billion yen.

The bailout was put together to counter an earlier bid by U.S. private equity firm KKR & Co LP amid worries the firm's technology could fall into foreign hands, sources familiar with the talks have told Reuters.

Renesas, battling to avoid the fate of fellow chipmaker Elpida Memory Inc which was driven into bankruptcy earlier this year, said it would spend 60 billion yen of the total support on research and development and capital spending related to its core microcontroller business.

The company said it was also requesting another 50 billion yen in support from the government fund.

INCJ CEO Kimikazu Noumi told a joint news conference the fund was still deliberating whether to agree to the request but if it did supply the extra money, Renesas could use it to expand abroad through mergers and acquisitions.

"The fact that clients are putting up money is positive since it means Renesas will be able to gain some business from them," said Akira Minamikawa, vice president and principal analyst at IHS iSuppli in Tokyo.   Continued...

Renesas Electronics Corp's chips are pictured at the company's office in Tokyo October 23, 2012. REUTERS/Yuriko Nakao