Renesas acquires IDT in $6.7bn deal to boost self-driving car chip business
Renesas has announced the acquisition of Integrated Device Technology (IDT) in a deal worth $6.7 billion.
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On Tuesday, the Tokyo, Japan-based semiconductor manufacturer said the deal will add a number of "complementary product lines" to the Renesas lineup, which will support the firm's growth strategy.
The acquisition has been agreed for $49 per IDT share, representing a premium of roughly 29.5 percent over IDT common stock price as of August 30. The all-cash transaction is worth approximately $6.7 billion (733 billion yen).
Equity finance will not be raised for the transaction' instead, cash reserves and bank loans will provide the funding required.
Founded in 1980 and headquartered in San Jose, Calif., IDT offers system-level solutions for IT applications, including wireless power, smart sensors, and RF technologies.
IDT also boasts a smart sensor and timing software range suitable for the automotive industry. In 2015, the company acquired ZMD AG, which now acts as its subsidiary. Now known as IDT Europe GmbH, this business unit was acquired for the development of automotive and industrial applications which adhere to ISO 26262 safety and functionality requirements.
According to Renesas, the latest acquisition will take ZMD AG's groundwork further through a bolstered portfolio of analog mixed-signal products including sensors, high performance interconnect, RF & optical and wireless power solutions.
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Like many enterprise players, the Japanese company considers future business growth and data to be intertwined.
"Acquisition of these products enables Renesas to extend its reach to fast-growing data economy-related applications including data center and communication infrastructure, and to strengthen its presence in the industrial and automotive segments," Renesas says.
IoT, data processing, and vehicle connectivity all rely on analog mixed-signal chips which are used to transform signals into data.
Renesas may have a strong portfolio when it comes to microcontrollers (MCUs), embedded processors, and power management solutions, but the chip maker does not have a huge array of options when it comes to analog chips.
However, the combination of both portfolios may give Renesas the groundwork it needs to carve out a niche in the self-driving vehicle space.
"This acquisition will bring us complementary, market-leading analog mixed-signal assets and an incredibly talented group of professionals to help us boost our embedded solution capabilities," said Bunsei Kure, President, and CEO of Renesas. "IDT's products combined with our MCUs, SoCs and power management ICs will enable Renesas to widen its product offerings as well as to expand its reach into areas such as the growing data economy-related space."
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However, the road ahead may not be that easy. Unlike Tesla, Google, or Volvo, Renesas is not generally linked to automotive technologies and, therefore, will need to work hard not only to develop solutions but also to establish a strong customer base.
"Renesas is weak in telecommunications chips, so the combination isn't bad," Akira Minamikawa, principal analyst at IHS Markit told Reuters. "But IDT doesn't have many automotive clients. Bringing their chips up to the level needed for automotive standards will not be easy."
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The boards of directors of both companies have unanimously approved the transaction, which is expected to close in the first half of 2019, on the condition that IDT shareholders approve.