NEC, Renesas Plan To Merge With Cash Infusion

By Shannon Henson

Law360, New York (September 16, 2009) -- NEC Electronics Corp. and Renesas Technology Corp. said they will receive an injection of 200 billion yen ($2.2 billion) from their parent companies, NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp., as they form a giant semiconductor company.

In an announcement Wednesday Japan-based NEC Electronics and Renesas said they had signed a definitive agreement to merge. Renesas, a joint venture between Hitachi and Mitsubishi, and NEC first signaled their intent to merge in April 2009 and said they hope to finish the deal by April 1, 2010.

As part of the merger, Renesas will issue shares of Renesas common stock to Hitachi and Mitsubishi Electric in exchange for an aggregate of 78 billion yen ($859 million). On the day the merger becomes effective, the new entity will issue shares of its common stock to NEC, Hitachi and Mitsubishi Electric in exchange for an aggregate of about 122 billion yen ($1.35 billion).

The companies said NEC, Hitachi and Mitsubishi Electric will own 33 percent, 31 percent and 25 percent of the new entity, respectively. Currently, Hitachi owns 55 percent and Mitsubishi owns 45 percent of Renesas.

The companies said they hope to have the merger agreement signed by mid-January and plan to ask their shareholders to approve the merger agreements in February.

Both units have seen significant drops in revenue over the past year. NEC Electronics reported a net loss of 82.6 billion yen ($902 million) in the fiscal year that ended March 31, 2009. The unit experienced a net loss of about 16 billion yen ($176 million) in the prior fiscal year.

Meanwhile, Renesas reported a net loss of 203 billion yen ($2 billion) in the fiscal year that ended March 31, 2009. The unit reported a net profit of more than 9 billion yen ($99 million) in the prior fiscal year.

NEC Electronics and Renesas provide a wide variety of semiconductor solutions, primarily specializing in microcontroller units.

The companies said they wanted to integrate to further strengthen their business foundations and technological assets in light of fierce global competition and structural changes triggered by the rapid expansion of emerging markets in the semiconductor market. They also will continue to conduct structural reform plans to address the ongoing challenges of the economic downturn, they said.

Renesas President Yasushi Akao will serve as president of the merged company, which will be called Renesas Electronics Corp. NEC Electronics President Junshi Yamaguchi will be chairman of the new entity, the units said.

The law firms working on this deal, if any, could not be identified by the time of publication.