TOKYO — Shareholders of the chip maker Renesas Electronics of Japan are close to approving a multibillion-dollar government-led bailout, three people familiar with the talks said Monday. The news lifted the company’s shares 17 percent.
The deal could keep Renesas, the world’s biggest maker of microcontroller chips, afloat for the next few years, but analysts said that despite job cuts and planned plant shutdowns, Renesas still faced many challenges, including the restructuring of the unprofitable unit that makes system chips.
The state-backed Innovation Network will spend ¥180 billion, or $2.2 billion, to take a two-thirds stake in Renesas, which has been buffeted by strong overseas competition, production cuts by clients and fragile finances that have prevented it from improving its infrastructure.
As part of the bailout, eight manufacturers, including clients like Toyota Motor and Nissan Motor, will provide an additional combined ¥20 billion.
Shareholder approval of the deal, while expected, has been delayed for several weeks, and an announcement is now expected in early December, said the people, who declined to be identified, as the matter is not public. A Renesas spokesman said nothing had been decided.
Investors jumped to cover short positions in the stock, said Makoto Kikuchi, chief executive of Myojo Asset Management, noting that unlike some other troubled Japanese electronics companies, like Sharp, Renesas’s expertise in chips for cars meant it was worth investing in.
The bailout was put together to counter a bid by Kohlberg Kravis Roberts, the U.S. private equity firm, amid worries that the company’s technology would fall into foreign hands.
“As soon as stock investors see signs that the company is working hard to return to profit, they will be prepared to invest long-term,” Mr. Kikuchi said.
Shares in Renesas closed up 16.6 percent at a two-month high, but were still down 42 percent since the beginning of April, the start of the Japanese financial year.
Recent history has been brutal for Japanese chip makers, and Renesas — formed from the struggling chip divisions of its major shareholding companies, Hitachi, Mitsubishi Electric and NEC — will be trying not to repeat mistakes of the bankrupt Elpida Memory.
Elpida, formed from the merger of units from several companies that made dynamic random-access memory chips, succumbed to slumping prices and competition from South Korean rivals. It is being acquired by Micron Technology of the United States.
The Japanese technology sector has also seen the creation of Japan Display, formed from the divisions of three television makers that manufacture small liquid crystal displays. The company has received investment funds from Innovation Network.
Renesas’s bailout comes on top of ¥161 billion in syndicated loans from four Japanese banks in September. Before that, Renesas received ¥97 billion from banks and its major shareholders.
In return, the company has cut about 7,000 jobs this year and pledged to sell or close 8 of its 18 domestic plants within three years.
Renesas, which competes with Samsung Electronics and Freescale Semiconductor of the United States, has forecast a net loss of ¥150 billion for the year ending in March.
The newspaper Nikkei said Monday that Renesas would receive an additional ¥1 billion each in support from Hitachi and NEC. It was reported that the two companies would not take in Renesas employees; Mitsubishi Electric, however, is considering taking on some workers from the chip maker.
Meanwhile, Japanese government bond prices stabilized Monday. The benchmark 10-year bond yield was flat at 0.735 percent, near a nine-year low of 0.720 percent set in July.
Expectations that Shinzo Abe, the leader of the opposition Liberal Democratic Party, will push for aggressive monetary efforts to bolster the economy, however, helped bolster demand for “superlongs,” or bonds with 20-year and 30-year maturities. The 30-year yield fell 0.015 percentage point to 1.935 percent, and the 20-year yield also fell 0.015 percentage point to 1.67 percent.
Shareholders Expected to Back Bailout for Renesas
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Shareholders Expected to Back Bailout for Renesas
