* KKR presented plan to Renesas shareholders, banks on Tues
* Shares jump 35 pct on news of possible KKR investment
* KKR declines comment, Renesas says not announced by
By Maki Shiraki and Emi Emoto
TOKYO, Aug 29 Private equity firm KKR is in
talks to invest about 100 billion yen ($1.3 billion) for control
of Japan's Renesas Electronics Corp, sources said on
Wednesday, offering a lifeline to the struggling chipmaker and
pushing its shares up 35 percent.
The deal would give KKR more than 50 percent of
cash-strapped Renesas, and could speed the pace of its current
restructuring as it fights for survival in the face of sinking
prices and aggressive overseas rivals.
News of the plan pushed Renesas' battered shares to a
seven-week high, but the stock is still trading at around half
its levels of six months ago. At Tuesday's close it had a market
value of about $1.2 billion.
A deal with KKR would be the firm's largest investment in
Japan, and would be among the top ten biggest private equity
investments into the world's third largest economy.
"If KKR holds management control, it will quicken the
decision making process compared to the current management, and
it will be possible to speed up the restructuring plans," said
Katushide Takahashi, credit sector specialist at Citigroup.
Under the proposal, New York-based KKR & Co LP
would buy new shares of Renesas, the world's fifth-largest
chipmaker, through a private placement, sources familiar with
the deal said.
Executives from KKR traveled to Tokyo this week to present
the plan to Renesas' main banks and its three major
shareholders, NEC Corp, Hitachi Ltd and
Mitsubishi Electric Corp, one of the sources said.
Renesas, the world's leading manufacturer of microcontroller
chips used in cars, is currently implementing a restructuring
plan that would lay off 12 percent of its workforce and sell or
consolidate half of its domestic plants.
The company has been slow to shutter loss-making businesses,
and is struggling to fund the heavy investments required in
other parts of its business.
KKR would likely push forward an even more aggressive
restructuring of the loss-making system LSI business, several
analysts said, which has been badly hit by a steep decline in
sales to Japan's beleagued consumer electronics makers.
The U.S. buyout firm was hoping to reach a formal agreement
as early as September, the Nikkei business daily said.
KKR EYES JAPAN
KKR, run by cousins and private equity pioneers Henry Kravis
and George Roberts, arrived in Asia in 2006. A Renesas stake
would be KKR's second deal in Japan after their 2010 acquisition
of recruitment services company Intelligence from Usen Corp for
KKR is currently raising its second fund for Asia, which at
$6 billion would be the largest ever raised for the region.
Japan is targeted as one of its main investment destinations, as
the country has long been touted by Asia head Joseph Bae as a
promising place to put the firms money to work.
Henry Kravis has also pointed to signs of change in Japan,
and says its exports make it a vital piece of the Asian and
"They really do want to change the way they are doing
business, they want to become more open, they want to move much
faster," he told a conference last November.
KKR's bid marks the second time this year that foreign
private equity firms have targeted investments in a Japanese
chipmaker, after China's Hony Capital and U.S. buyout fund TPG
Capital teamed up to bid for bankrupt Elpida Memory Inc
Elpida, Japan's last remaining player in the dynamic random
access memory (DRAM) market, is now in talks to be bought by
U.S. rival Micron Technology Inc.
Other private equity funds had presented plans to inject
cash into Renesas in recent months, sources have told Reuters.
Renesas recently secured 49.5 billion yen in support from
Hitachi, Mitsubishi Electric and NEC, which together own a 90
percent stake in the company, while banks have promised an
additional 50 billion yen loan.
Renesas said various media reports on Wednesday were not
based on announcements by the company. KKR declined to comment.
The chipmaker, which faces stiff competition from South
Korea's Samsung Electronics and Freescale
Semiconductor, earlier this month forecast a record
annual net loss of 150 billion yen.
Renesas closed up by its daily limit at 308 yen, its highest
level since July 10.
KKR's expected bid would be the third billion-dollar plus
acquisition investment in Japan by foreign private equity funds
so far this year, following Bain Capital's $1.3 billion
acquisition of TV shopping channels company Jupiter Shop
Channel, and Permira's $1 billion acquisition of sushi
restaurant chain Akindo Sushiro.