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Renesas chases $6bn deal for IDT to enhance self-driving chips

Once-troubled Japanese chipmaker is on the hunt in US

Renesas Electronics is the world's second-largest producer of automotive chips.     © Reuters

TOKYO -- Japanese semiconductor manufacturer Renesas Electronics wants to acquire U.S.-based Integrated Device Technology in a deal that could total well over $6 billion, hoping to expand its global footprint in automotive chips.

The companies are in the final stages of talks and are to meet at the beginning of next week. The prospects for striking an agreement remain unclear, but Renesas is expected to make a tender offer for all of IDT's  shares at a premium.

The purchase would be funded with the Japanese company's cash reserves -- which came to about 130 billion yen ($1.17 billion) at the end of June -- as well as bank loans. The final price tag is expected to top the $3.2 billion announced by Renesas for its purchase of U.S.-based Intersil, completed last year.

In a statement issued on Friday, Renesas acknowledged that the the talks are in progress. "While Renesas is considering the reported acquisition to accelerate its business growth, no definitive decision has been reached," Renesas said. The company said it will make a prompt announcement if it makes any concrete decisions.

It also said should it require financing for the deal, it will work out an arrangement with optimal costs.

IDT trades on the Nasdaq and has a market capitalization of about $4.89 billion -- around a third that of Renesas. It reported revenue of $842.76 million and operating income of $110.91 million for the 12 months ended April 1.

California-headquartered IDT is known for its communications chips, used by data centers and telecom companies. It bought a German chip company focused on automotive products in 2015.

Renesas is the world's second-largest producer of automotive chips. It hopes to apply IDT's know-how to self-driving systems, which need to be able to transfer large amounts of data.

Renesas' roots go back to 2003, when it started out as a joint venture between semiconductor operations of Hitachi and Mitsubishi Electric. In 2010, it integrated with NEC Electronics to become Renesas Electronics.

The new company immediately fell into crisis when facilities suffered heavy damage from the March 2011 earthquake and tsunami in northeastern Japan. But it was bailed out by the government-backed Innovation Network Corp. of Japan as well as clients like Toyota Motor in 2013.

Streamlining efforts and growing chip demand helped the company turn a net profit for fiscal 2014. The INCJ has cut its stake to just over 30% from a peak of nearly 70%.

The semiconductor industry faces a major shift as big players snap up smaller ones around the world. NXP Semiconductors of the Netherlands bought U.S.-based Freescale Semiconductor in 2015. Qualcomm recently gave up on acquiring NXP for $44 billion after Chinese antitrust authorities failed to rule on the deal in time.

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