A Japan-backed fund will negotiate with Renesas Electronics Corp. (6723)’s main banks this weekend and may announce an investment of more than 180 billion yen ($2.2 billion) in the ailing chipmaker as early as next week, a person with knowledge of the plan said.
Mitsubishi UFJ Financial Group Inc. (8306) and Mizuho Financial Group Inc. (8411) are among the lenders, and at least one bank wants to discuss whether to cut interest payments and extend loan deadlines for Renesas, the person said, asking not to be named because the negotiations aren’t public.
Renesas, a supplier to Apple Inc. (AAPL:US) and Nintendo Co., is cutting jobs and considering closing or selling plants to recover from losses as demand drops for its system LSI chips, used for functions including processing TV images. Some of Renesas’s three biggest shareholders -- Mitsubishi Electric (6503) Corp., NEC Corp. (6701) and Hitachi (6501) Ltd. -- will accept workers from Renesas while others will pay into an early-retirement fund instead, the person said.
Innovation Network Corp. of Japan is close to reaching a basic agreement with those shareholders to take a two-thirds stake in the chipmaker, the person said Nov. 26. Renesas would eliminate as many as 5,000 positions and shut more factories under INCJ’s proposal, the person said.
Mitsubishi UFJ, Mizuho
“INCJ has just decided on the form of support, but the most important thing is whether Renesas can generate profits,” said Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co. in Tokyo. “We cannot see a way into the black at this point.”
Yoichi Kobayashi, a spokesman for Renesas, and an INCJ spokeswoman declined to comment on the negotiations. Tomohiro Kohsaka, a spokesman for Mitsubishi UFJ, and Masako Shiono, a spokeswoman for Mizuho, declined to comment.
Renesas fell 4.7 percent to 283 yen in Tokyo trading, widening its decline to 40 percent this year, compared with a 7.3 percent climb for the broader Topix index.
“Investors and shareholders have a sense of crisis about Renesas failing,” said Natsumu Tsujino, an analyst at JPMorgan Chase & Co. in Tokyo.
Eight other companies, including Toyota Motor Corp. (7203), will invest more than 10 billion yen total for minority stakes under the proposal, the person said.
INCJ competed for Renesas with New York-based private equity firm KKR & Co. (KKR:US), which offered about 100 billion yen for the chipmaker, a person with knowledge of the matter said in August.
Renesas is a key supplier to Japan’s automakers as the world’s largest maker of microcontrollers, with a 27 percent market share last year. A lack of the microcontrollers, used in cars to run systems including airbags and brakes, prompted automakers to shut factories after last year’s earthquake and tsunami in Japan.
Renesas has lost 177.6 billion yen since its formation in 2010 by the merger of money-losing chipmakers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric, and NEC Electronics Corp.
“INCJ has to choose new management to restructure Renesas,” said Takeo Miyamoto, an analyst with Deutsche Bank AG in Tokyo. “Renesas needs to narrow the number of products it makes and reduce its scale.”
Renesas’s net loss may widen to 150 billion yen for the year ending March 31 from 62.6 billion yen a year earlier, the company predicted Oct. 29. Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may be 21 billion yen for the 12 months ending March 31, compared with a loss of 56.8 billion yen a year earlier, Renesas said.
The chipmaker said Oct. 16 it booked a one-time charge of about 84 billion yen to cut about 7,500 jobs. The company employed 42,800 as of March 31, according to data compiled by Bloomberg.
The manufacturer, with 18 factories in Japan, also plans to sell its Renesas High Components Inc. subsidiary to Aoi Electronic Co. (6832) in January, it said Oct. 12.
INCJ was formed in 2009 to invest in companies that support Japanese industry and has spent about 400 billion yen on 29 projects, according to its website.
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