Renesas set to acquire chipmaker IDT for $6.7 billion

Japanese firm Renesas Electronics announced its plans to buy US chipmaker Integrated Device Technology (IDTI) for $6.7 billion. The $49 per share-deal is said to be at a 16% premium to Integrated Device’s stock price on Monday and is expected to close by next June.

Renesas plans to fund the transaction mainly through a bank loan of $6.1 billion and cash and believes it will be able to generate close to $80 million of cost savings within two years of closure. The purchase price raised concerns among analysts as it will add to the company’s debt load. However, Renesas remains optimistic that the deal will provide significant benefits that will bring in the cash required to pay down the debt meaningfully over a period of two years.

Renesas believes the deal will help solidify its position as a supplier of devices for autonomous cars and other advanced driver assistance systems. Last year, Renesas acquired another American chipmaker Intersil Corp. for $3.2 billion. The combination of products from Intersil and IDT will give Renesas significant strength and open up new opportunities for revenue generation and growth.

Renesas believes the deal will help solidify its position as a supplier of devices for autonomous cars and other advanced driver assistance systems

The field of autonomous driving and smart cars are gaining much prominence and the production of various components and systems related to this is a lucrative space. Several companies are looking to tap into the vast opportunities available in this area through partnerships and other tie-ups.

The transaction between Renesas and IDT is subject to regulatory approvals and while it is likely to face scrutiny particularly in the US and in China, the Japanese firm remains confident that the deal will go through as it is not harmful to competition.

Renesas shares rose over 3% during afternoon trading in Tokyo and IDT shares surged more than 10% in Nasdaq and hit a new 52-week high today.