Renesas: Acquisition of IDT for $6.7bn

Renesas may not be known to the wider public, but it happens to be one of the largest semiconductor makers of the world. Today, Renesas announced that it will acquire the San Jose, CA-based company IDT (Integrated Device Technology) in a deal worth ¥733.0billion (or $6.7bn).

Renesas has made clear its intent to expand its automotive offerings further: as noted in its press statement, the acquisition will allow it to grow its automotive segment, as the automotive market is expected to grow tremendously due to autonomous driving and EV/HEV. Further to this, the acquisition of IDT will enable Renesas to capitalise on the new developments in Industry 4.0, 5G wireless communications, and IoT.

The combination of Integrated Device Technology’s analog mixed-signal leadership with Renesas’ world-leading microcontroller and automotive/industrial franchise creates a new global powerhouse
— Gregory L. Waters, President and CEO - IDT

As Reuters notes, Renesas currently commands 30 percent of the global market for automotive microcontrollers (a market share second to just NXP Semiconductors’) - yet, the Japan-based company lacks in analog chips which are used to convert sound, light or temperature data into digital data. As autonomous vehicles are expected to largely base their navigation efficacy on data from such analog sensors, it is imperative for any semiconductor maker, that wants to remain relevant, to adjust its portfolio accordingly. Renesas had made clear its intention to be involved in the self-driving cars race with frequent, relevant tweets.

The shares of IDT will be acquired by Renesas at a price of $49 - the closing price of IDTI before the breaking of the news was approximately $42, so Renesas will pay a 16-17 percent premium. As Renesas notes in its press statement, the $6.7bn transaction will be funded through the company’s cash reserves, as well as a jumbo loan of approximately $6bn. As an unidentified source told Reuters, the loan will be offered by the core banks of Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc.

Integrated Device Technology, or IDT is based in San Jose and was founded in 1980 - its annual revenue reached $730m in 2017. As Renesas noted, the approximately 1600 employees of IDT possess talent that will help Renesas execute its strategy of becoming a global leading embedded solution provider. The deal is still subject to approvals by IDT shareholders and the relevant regulatory authorities but should be cleared and completed by the first half of 2019.

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