Renesas has announced plans to acquire US chip maker Intersil in a $3.2 billion deal as the company shifts its business focus to automotive, IoT and industrial chip applications.
Several years ago, processors destined for smartphones and tablets were fueling increases in profit for chip makers. However, as this market slows, semiconductor and chip designers must turn to other areas to keep ahead of the game, including the Internet of Things (IoT), the infant smart car and infotainment system industry, and advanced industrial applications.
One way to do so is for chip makers to pour funds into research and development efforts for new chip designs and purposes, or acquire smaller companies which already specialise in next-generation technologies -- such as Intersil, a US chip maker founded in 1999 which focuses on industrial, mobile, automotive and aerospace technologies.
On Tuesday, the Tokyo, Japan-based firm said the buyout will provide "immediate opportunities" for revenue growth thanks to Intersil's customers and the combined force of the two companies' geographical penetration.
"By combining Renesas' market-proven microcontroller (MCU) and system-on-chip (SoC) products and technologies and Intersil's leading power management and precision analog capability, Renesas will be well positioned to address some of the most exciting opportunities in key areas such as automotive, industrial, cloud computing, healthcare, and the Internet of Things (IoT)," the company claims.
The deal, an all-cash agreement worth $3.2 billion, will grant shareholders $22.50 per share for all outstanding common stock, a premium of 43.9 percent on Intersil's closing price as of 19 August 2016.
Necip Sayiner, president and CEO and Director of Intersil commented:
"Intersil has been part of the industry's evolution for many decades, carving out key niches and developing core technology that provides tangible benefits over competing solutions. As we've embarked on the most recent transformation over the last three years, we have honed the company's core capabilities and focused them on areas where we are uniquely positioned to solve customer system challenges.
We see great potential in combining the Intersil and Renesas portfolios and gaining the scale that will provide a platform for accelerated growth."
Renasas thinks there is untapped potential prompted through merging the companies, too. The Japanese semiconductor manufacturer says that both short and long-term revenue opportunities are on the horizon, created through "cost efficiencies" and business streamlining linked to a greater business scale. In total, the firm believes that up to $170 million could be added to the pot.
In addition, Renesas says that the acquisition will expand the company's analog device portolio, a market which is expected to be worth roughly $3.9 billion by 2020.
At a briefing in Tokyo, Renesas CEO Bunsei Kure told reporters that the deal "was a competitive bid and we settled at a price almost at the maximum limit," adding that the firm would "actively seek out other mergers" to grow the business further, as reported by the Reuters news agency.
The buyout has been agreed by the board of directors at both Renesas and Intersil and is expected to close in the first half of 2017, subject to regulatory approval.