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Japanese Chipmaker Renesas Will Pay $5.9 Billion To Acquire Altium Software

Japanese Chipmaker Renesas Will Pay $5.9 Billion To Acquire Altium Software
Renesas Electronics of Japan announced on Thursday that it will acquire electronics design company Altium for $5.9 billion in cash. The acquisition comes as the automotive chipmaker strives to provide clients with digital device design services.

Renesas is now at the vanguard of investment and deal-making in Japan's chips industry thanks to the purchase, and the government is working to increase supply chain resilience against geopolitical shocks and increase competitiveness.

Renesas, a chip manufacturer for automakers including Nissan and Toyota, plans to acquire Altium, a company that provides digital tools for designers and engineers creating circuit boards, in order to offer device design services.
"As long as we remain a traditional device manufacturer we will only be marginalised," Renesas CEO Hidetoshi Shibata said at a news conference.
Renesas stated it will use bank loans and cash on hand to finance the acquisition of Altium, and it has made an offer of A$68.50 per share, 34% higher than the stock's closing price on Wednesday.

With its headquarters being in the US, Altium is listed in Australia. With $263 million in revenue, it reported earnings before interest, taxes, depreciation, and amortisation margin of 36.5% for the year that ended in June.
At the press presentation, Altium CEO Aram Mirkazemi stated, "This is going to help us execute at a faster pace."

The boards of directors of both firms have accepted the acquisition; nevertheless, regulators, an Australian court, and Altium shareholders must also approve it. stated Renesas. The agreement is anticipated to close in the latter part of the year.
Following the announcement, the price of Renesas' stock dropped as much as 4.9% before cutting losses to close the afternoon session down about 1.3% at 2,568 yen. Shares of Altium, which had increased 9.4% thus far this year as of the most recent close, surged 28% to A$65.83.
"They don't seem to be overpaying," Tatsunori Kawai, au Kabucom Securities' chief strategist, stated.

"But the fact (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."

In the event that there was no better offer and an independent expert determined that the sale was in the best interests of Altium's shareholders, the company declared that its board had approved the transaction.
"It's a strong endorsement of Altium's strategy and its performance," Mirkazemi added.
Autodesk made a $3.9 billion buyout offer in 2021, but Altium turned it down because it was too low.
Later, Autodesk halted negotiations.

In a client note, analyst Paul Mason of E&P Capital stated, "We would expect the transaction to be supported and go through, given unanimous support from the board and the large premium to prior close."

According to LSEG data released in late December, Japan was the only significant Asian market to witness growth in outbound merger and acquisition agreements in 2023, with a 71% increase from the previous year to $56 billion. In 2018, it reached a height of $178 billion in overseas agreements.
As Japanese businesses create revenue streams abroad to counteract declining demographics locally, Nippon Steel announced a $14.9 billion acquisition for U.S. Steel in recent weeks, and homebuilder Sekisui House closed a $4.95 billion deal for U.S. builder MDC Holdings.

In 2010, the chip division of NEC and Renesas Technology, which had been formed by the union of Hitachi and Mitsubishi Electric's chip businesses, merged to form Renesas itself.

After closing factories and laying off employees, the floundering company saw a turnaround under the guidance of a government-backed fund, which ultimately sold down its stake.
After that, it embarked on a spending binge abroad, paying $3.2 billion to acquire chipmaker Intersil in 2016 and $6.7 billion to acquire rival Integrated Device Technology, which was disclosed in 2018.
The chipmaker announced last month that it will pay $339 million to acquire Transphorm Technology, a US power semiconductor startup, in an effort to expand its business into the production of gallium nitride chips for use in electric vehicles.

Christopher J. Mitchell

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