Japan's struggling Renesas to raise up to $2.43B

Posted at 12/10/12 6:17 PM

TOKYO - Struggling Japanese chipmaker Renesas Electronics said Monday it would raise up to $2.43 billion from a share sale and a separate capital injection to rescue its troubled balance sheet.

Renesas said it would sell about 150 billion yen ($1.82 billion) worth of shares to the state-backed Innovation Network Corp. of Japan (INCJ) and top corporate names including Toyota and Panasonic.

INCJ is also ready to kick in another 50 billion yen worth of investments or loans, it added, as the chipmaker bleeds cash.

"The global financial crisis, natural disasters such as last year's earthquake and flooding in Thailand... have been threatening Japan's major industries, manufacturers in particular," Renesas said in a statement announcing the deal.

"We face a situation where our financial condition could rapidly worsen."

Renesas is one of the world's top suppliers of microcontrollers, which function as the brain of automobiles and many electronics products.

But Japan's microchip sector has struggled with a strong yen and fierce competition, especially from South Korean and Taiwanese rivals, with Renesas in desperate need of a cash injection.

The firm -- created through the mergers of Hitachi, Mitsubishi Electric and NEC Corp.'s chip units -- posted a whopping 94.3 billion yen loss in the three months to September owing to huge restructuring costs, and has forecast a full-year net loss of 150 billion yen.

The deal announced Monday was reportedly put together to counter an investment bid from US-based Kohlberg Kravis Roberts, over fears about a key supplier of electronic parts to Japanese industry falling into foreign hands.

The government-backed INCJ will buy about 138 billion yen of the new shares, giving it about two-thirds of Renesas, while the group of eight firms will pick up about 12 billion yen in shares combined, Renesas said.

The company's stock closed 3.01 percent higher at 308 yen in Tokyo trade on Monday, with the deal announced after markets closed.

Renesas announced earlier this year it would cut thousands of jobs and reorganise domestic production to concentrate on its mainstay businesses.

Media reports said it planned to step up restructuring by boosting the number of job cuts to 14,000 -- or roughly 30 percent of its workforce -- and shutting or selling nine domestic plants within three years.

Renesas has said it would boost outsourcing of its chip production to Taiwan Semiconductor Manufacturing Co., including a bigger share of its output of microcontrollers -- key components in vehicles and home appliances.

Japan's chip sector has seen a major shakeup, with US-based Micron Technology in July unveiling a deal to buy troubled Japanese rival Elpida Memory for $2.5 billion

Elpida, one of the world's top microchip makers, was delisted from the Tokyo Stock Exchange earlier this year in the biggest corporate failure in Japanese manufacturing history.

The troubled firm, which had stayed alive thanks to a 2009 government-backed rescue plan, filed for bankruptcy protection in late February.

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