Japan chipmaker Renesas will acquire software developer Altium for $5.9 billion

Japan chipmaker Renesas will acquire software developer Altium for $5.9 billion
Japan chipmaker Renesas will acquire software developer Altium for $5.9 billion

Japan’s Renesas Electronics announced the acquisition of electronics design firm Altium for $5.9 billion in cash as the acquisitive automotive chipmaker strives to provide clients with digital device design.

On Thursday, Japan’s Renesas Electronics (6723.T) said that it would buy electronics design firm Altium (ALU.AX) for $5.9 billion in cash, as the acquisitive automotive chipmaker seeks to give clients digital device design.

The acquisition propels Renesas to the forefront of dealmaking and investment in Japan’s semiconductor industry, as the government seeks to strengthen competitiveness and supply chain resilience in the face of geopolitical shocks.

Renesas, which manufactures semiconductors for automakers such as Toyota (7203.T) and Nissan (7201.T), hopes to expand into device design with the acquisition of Altium, which provides digital tools for engineers and designers to create circuit boards.

“As long as we remain a traditional device manufacturer, we will only be marginalized,” Renesas CEO said.

Renesas has offered A$68.50 per Altium share, 34% higher than the stock’s Wednesday closing price, and has stated that it will fund the acquisition using cash on hand and bank loans.

Altium is based in the United States and listed in Australia. It had sales of $263 million in the fiscal year ending June 30, with an earnings before interest, tax, depreciation, and amortization margin of 36.5%.

“This will allow us to execute at a faster pace,” Altium CEO Aram Mirkazemi told.

Both firms’ boards of directors have accepted the transaction, but Altium shareholders, an Australian court, and regulators must also approve it, according to Renesas. It anticipates the transaction to be finalized in the second half of the year.

Renesas’ stock dropped as much as 4.9% on the announcement before recovering to trade down approximately 1.3% at 2,568 yen in the afternoon session. Altium shares, which had increased 9.4% this year as of the previous close, soared 28% to A$65.83.

“They don’t seem to be overpaying,” said Tatsunori Kawai, chief strategist at Au Kabucom Securities.

“But the fact that market players are not reacting positively also means they are still unconvinced about how this deal would contribute to the company’s long-term growth.”

Altium said its board recommended the transaction in the absence of a better offer after an independent expert determined it was in the best interests of its shareholders.

“It’s a strong endorsement of Altium’s strategy and its performance,” said Mirkazemi.

Altium rejected Autodesk’s (ADSK.O) $3.9 billion purchase deal in 2021, calling it too low. Autodesk later ended the talks.

“Given unanimous support from the board, as well as the large premium to prior close, we would expect the transaction to be supported and completed,” analyst Paul Mason of E&P Capital wrote.

Japan was the only major Asian market to see growth in outbound merger-and-acquisition agreements in 2023, with a 71% increase from the previous year to $56 billion, according to LSEG data released in late December. Its outbound transactions peaked in 2018 at $178 billion.

In recent weeks, Nippon Steel (5401.T) has opened a new tab and announced a $14.9 billion deal for U.S. Steel, while homebuilder Sekisui House (1928.T) has opened a new tab and sealed a $4.95 billion deal for U.S. builder MDC Holdings (MDC.N) as Japanese companies seek revenue streams abroad to offset deteriorating demographics at home.

Renesas was formed in 2010 by the merger of NEC’s (6701.T) chip division and Renesas Technology, which was formed by the merger of Hitachi (6501.T) and Mitsubishi Electric (6503.T).

After closing operations and laying off people, the troubled company turned around with the help of a government-backed fund, which ultimately sold down its stake.

It subsequently embarked on an overseas shopping binge, paying $3.2 billion for chipmaker Intersil in 2016 and $6.7 billion for competitor Integrated Device Technology in 2018.

Last month, the chipmaker announced the acquisition of Transphorm Technology (TGAN.O.), a power semiconductor company based in the United States, for $339 million in order to expand its business in gallium nitride chips used in electric vehicles.

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