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Questions linger on NEC-Renesas merger

Posted: 18 Sep 2009 ?? ?Print Version ?Bookmark and Share

Keywords:NEC Renesas merger? MCU? microcontroller?

After a number of delays, NEC Electronics Corp. and Renesas Technology Corp. have finally merged.

The proposed merger, which was originally signed on April 27, had some surprises based on the recent announcement. NEC Electronics will become the "surviving entity" in the merged chipmaker, which is said to become the third largest IC vendor in terms of worldwide sales. But strangely, the combined entity will be called Renesas Electronics Corp.

Still, the announcement was short on details. It is still unclear how NEC Electronics and Renesas will integrate their respective and bloated operations. The two companies own too many older fabs. Obviously, the combined company must implement layoffs. The headcount of the combined organization is much too large.

The integrated company will compete in three major product groups: microcontrollers, SoC and discrete products. But NEC Electronics and Renesas have several overlapping and competing products, it was noted.

Under the plan, NEC Electronics, Hitachi Ltd and Mitsubishi Electric Corp. announced that they have signed a definitive agreement to integrate business operations at NEC Electronics and Renesas. The combined company will have 47,476 employees.

The new chipmaker will receive 200 billion yen ($2.2 billion) in funds from their parent companies. The effective date of the merger is scheduled to be on April 1, 2010.

The merged company will be based at the home of NEC Electronics, which is located in Kawasaki City, Kanagawa Prefecture, Japan.

Junshi Yamaguchi, president and CEO of NEC, will become chairman of the combined company. Yasushi Akao, representative director and president of Renesas, will become president of the new company.

NEC Corp. will have a 33.42 percent stake in the combined company, Hitachi will have 30.73 percent, Mitsubishi will have 25.14 percent and the Japan Trustee Services Bank Ltd will have 1.54 percent.

NEC Corp. will no longer be the parent company of NEC Electronics, as it is no longer the majority stockholder. NEC, Hitachi, and Mitsubishi Electric will become the major stockholders of NEC Electronics.

Under the terms of the deal, Renesas will issue shares of common stock to Hitachi and Mitsubishi Electricthe sole shareholders of Renesasin exchange for an aggregate of 78 billion yen before the effective date of the merger. The merged company will issue shares of its common stock to NEC, Hitachi, and Mitsubishi Electric in exchange for an aggregate of approximately 122 billion yen.

Previously, Hitachi owns a 55 percent stake in Renesas, while Mitsubishi has a 45 percent share. Previously, NEC Corp. owns a 65.02 percent stake in NEC Electronics.

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