Integrated Device Technology (IDTI 46.68, +4.60, +10.93%) is up sharply on news
today that it has agreed to be acquired Renesas Electronics (RNECF), a Japanese
semiconductor company, for $49 per share in cash. The deal does not comes as a
total surprise to investors; a press report on August 31 had indicate that
Renesas was considering a deal for IDTI. At the time of that report, the stock
was trading around $38, so the per share acquisition price represents a 29%
premium from that point. The total deal is worth $6.7 bln. The deal, which has
been unanimously approved by the boards of both companies, is expected to close
The acquisition combines two leaders in embedded processors and analog mixed-signal semiconductors. For Renesas, which has been working to expand its analog product offering and to strengthen its kit offerings that combine its microcontrollers (MCUs), system-on-chips (SoCs), and analog products, the enfolding of IDTI presents a strong opportunity to execute on strategic global growth goals.
One of the areas that made IDTI attractive was its exposure to the fast-growing automotive segment. IDTI acquired privately-held ZMDI, a semiconductor business with considerable footing in the automotive and industrial space, a couple of years ago. Infotainment systems in vehicles and other digital power products have continued to grow in popularity, and even lower-priced cars are beefing up in this area to meet demand. Renesas cited automotive presence as one of the reasons it was interested in IDTI. Renesas believes the automotive segment will see tremendous growth as trends continue to emerge, including autonomous driving and electric vehicles/hybrids. Other areas of interest for Renesas are the industrial and infrastructure segments, which are expected to advance with Industry 4.0 and 5G (fifth-generation) wireless communications, as well as the fast-growing IoT segment.
The acquisition will provide Renesas with access to an array of robust analog mixed-signal capabilities in embedded systems, including RF, memory interface & power management, optical interconnect, advanced timing, wireless power, and smart sensors. The combination of these product lines with Renesas' MCUs and SoCs and power management ICs enables Renesas to offer comprehensive platforms that are able to support the increasing demand of high data processing performance.
The deal also expands business growth opportunities. IDTI's analog mixed-signal products for data sensing, storage, and interconnect are key devices that support the growth of data economy. Acquisition of these products enables Renesas to extend its reach to fast-growing data economy-related applications including data center and communication infrastructure.
Renesas also anticipates near- and long-term revenue growth, developing from expanded opportunities and access to fast-growing industries, and cost savings, building from a greater scale business platform. Renesas expects a financial impact of more than $250 mln (non-GAAP operating income per year on a run rate basis). The transaction is expected to be accretive to Renesas' non-GAAP EPS by 18%.
Renesas has been active on the M&A front. In February 2017, it acquired Intersil Corp., which allowed Renesas to add industry-leading power management and precision analog capabilities to its product portfolio. This newest deal seems like a nice fit with the kind of position that Renesas is endeavoring to build. The 29% premium from when the story first broke coupled with this being an all-cash deal makes this is a good deal for IDTI shareholders as well.
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