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NEC Electronics and Renesas Sign Merger Agreement

Wed, 12/16/2009 - 3:51am
Renesas

KAWASAKI, Japan, TOKYO, Japan, December 15, 2009 -- NEC Electronics Corporation (NEC Electronics; TSE: 6723) and Renesas Technology Corp. (Renesas) today announced they have entered into a merger agreement to integrate business operations at NEC Electronics and Renesas (the "Business Integration" or the “Merger”) on April 1, 2010 (scheduled). The agreement is subsequent to the definitive agreement, which was signed on September 16, 2009. The Business Integration will become effective following the adoption of the resolutions at Extraordinary General Meetings of Shareholders of both NEC Electronics and Renesas and approval by relevant authorities.

1. Goals of Business Integration

Both as leading semiconductor companies, NEC Electronics and Renesas provide a wide variety of semiconductor solutions, primarily specializing in microcontroller units (MCUs). In light of fierce global competition and structural changes triggered by the rapid expansion of emerging markets in the semiconductor market, NEC Electronics and Renesas have been exploring the possibility of the Business Integration after signing a basic agreement on April 27, 2009, in order to further strengthen their business foundations and technological assets, while increasing corporate value through enhanced customer satisfaction.
The integrated company after the Business Integration (the “Integrated Company”) will provide globally competitive products in its three major product groups -- MCUs, SoCs, and discrete products -- by concentrating its development resources to enhance the companies’ respective advantages. The Integrated Company aims to expand its business by offering complete solutions that leverage these three major groups to best fit the requirement of customers of all kinds of industries.
In order to address the ongoing challenges of the current economic downturn, NEC Electronics and Renesas will each continue to execute structural reform plans in order to strengthen their business frameworks. The two companies will integrate their operations and generate synergies to establish a powerful new semiconductor company that is capable of consistently achieving high earnings in order to withstand changing semiconductor market conditions.

2. Outline of Business Integration

(1) Schedule of Business Integration
Signing of basic agreement April 27, 2009
Signing of definitive agreement September 16, 2009
Meeting of the Boards of Directors for the approval of merger agreement December 15, 2009
Signing of merger agreement December 15, 2009
Public Notice of record date for Extraordinary�Shareholders’ meeting (NEC Electronics) December 16, 2009
Record date for Extraordinary Shareholders’ meeting (NEC Electronics) December 31, 2009 (Note)
Shareholders meetings for approval of merger agreement (both NEC Electronics and Renesas) February 24, 2010 (planned)
Effective date of Merger April 1, 2010 (planned)
Note: The actual date will be December 30 as December 31 is a holiday at JASDEC.

(2) Structure of Business Integration

The Merger will be effective with NEC Electronics being the surviving entity.

(3) Share allocation in accordance with the Business Integration

  NEC Electronics

(surviving entity)

Renesas
Merger Ratio (Note 1) 1 20.5
Note 1: Share allocation ratio

NEC Electronics will issue 20.5 shares of its common stock in exchange for every Renesas common share held by shareholders recorded in Renesas’ registers of shareholders at the end of the day prior to the effective date of the merger.

Note 2: Number of NEC Electronics’ new shares to be issued upon Merger (scheduled)

Common shares:   146,841,500 shares

Note 3: In accordance with Art. 124 §4 of the Corporation Law, Hitachi, Ltd. (Hitachi) and Mitsubishi Electric Corporation (Mitsubishi Electric), the new shareholders of the Integrated Company after the Business Integration, will be entitled to vote at the ordinary shareholders meeting of the Integrated Company which is scheduled to be held in June 2010.

(4) Outline of reinforcement of capital

As a condition to the Business Integration, Renesas will issue shares of its common stock to Hitachi and Mitsubishi Electric, the sole shareholders of Renesas, in exchange for an aggregate of approximately 71.7 billion yen (including shares issued on September 29, 2009 in exchange for an aggregate of 55.0 billion yen) before the effective date of the Business Integration (the “Pre-merger Capital Injection”). In addition, on the effective date of the Business Integration (scheduled to be April 1, 2010), the Integrated Company will issue shares of its common stock to NEC Corporation (NEC), Hitachi and Mitsubishi Electric in exchange for an aggregate of approximately 134.6 billion yen (the “Post-merger Capital Injection”).

(5) Notes on share acquisition rights and bonds with share acquisition rights of Renesas

: None

3. Basis and Process of Calculation of Merger Ratio

The merger ratio under the Business Integration represents the ratio between (1) total of 146,841,500 common shares (planned); a number of shares to be issued by NEC Electronics based on the integration ratio (NEC Electronics : Renesas=1:1.189, Note) in exchange for every Renesas common share held by shareholders recorded in Renesas’ register of shareholders at the end of the day prior to the effective date of the merger, and (2) 7,163,000 common shares (planned); a number of shares issued by Renesas to Hitachi and Mitsubishi Electric in exchange for the Pre-merger Capital Injection of approximately 71.7 billion yen.
Please refer to Exhibit 1 of “NEC Electronics and Renesas Reach a Definitive Agreement on Business Integration” press release issued on September 16, 2009 for the basis and process of calculation of the integration ratio.

Note: The Integration Ratio represents the ratio between the total number of the NEC Electronics common shares outstanding (not including the potential shares) immediately before the Business Integration and the total number of the NEC Electronics common shares to be allocated to the Renesas shareholders as a result of the Business Integration, based on the assumption that the Pre-merger Capital Injection is funded before the Business Integration.

4. Outline of NEC Electronics and Renesas

(1) Company Name NEC Electronics Corporation

(Surviving entity)

Renesas Technology Corp.
(2) Headquarters Kawasaki City,

Kanagawa Prefecture, Japan

Chiyoda-ku, Tokyo, Japan
(3)

Representative

Junshi Yamaguchi,

President and CEO

Katsuhiro Tsukamoto, Representative Director, Chairman

Yasushi Akao,

Representative Director, President

(4) Major Operations R&D, manufacture, sale, and servicing of semiconductor devices mainly on system LSIs Development, design, manufacture, sale, and servicing of SoC products such as MCUs, logic devices, and analog devices; discrete semiconductor products; and memory products such as SRAM
(5) Capital ¥85.955 billion

(As of September 30, 2009)

¥104.500 billion

(As of September 30, 2009)

(6) Established November 1, 2002 April 1, 2003
(7) Number of Stocks Issued 123.5 million

(As of September 30, 2009)

6.09 million

(As of September 30, 2009)

(8) End of FY March 31 March 31
(9) Employees 22,207 (Consolidated, As of September 30, 2009) 25,000 (Consolidated, As of September 30, 2009)
(10) Major Customers Electronic equipment manufacturers, Semiconductor production equipment manufacturers, Semiconductor materials manufacturers Electronic equipment manufacturers, Semiconductor production equipment manufacturers, Semiconductor materials manufacturers
(11) Main Banks Sumitomo Mitsui Banking Corporation The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd.

(12)

Major Stockholders and  Ownership Ratios NEC Corporation: 65.02% Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account): 5.02% (Note 1) Hitachi, Ltd.: 55% Mitsubishi Electric Corporation: 45%
(13) Present Relationship between Corporate Parties
  Capital Ties Renesas owns 100 shares of stock in NEC Electronics.
  Personal Ties No relevant items
  Business Relationship NEC Electronics outsources some production processes to Renesas Northern Japan Semiconductor, Inc., a consolidated subsidiary of Renesas.
  Relevant Circumstances of Related Parties No relevant items
(14) Business Performance for the last three years

(Unit: ¥1 million except for otherwise expressly stated herein)

  NEC Electronics

(Consolidated, US-GAAP)

(Note 2)

Renesas

(Consolidated, Japan-GAAP)

Fiscal Year Ending March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2007 March 31, 2008 March 31, 2009
  Net Sales 692,280 687,745 546,470 952,590 950,519 702,739
  Semiconductor  Sales 659,733 653,275 521,735 - - -

 

Operating Income (Loss) -28,557 5,094 -68,355 23,644 43,480 -96,573
  Ordinary Income (Loss) 15,931 29,215 -102,799
  Income (Loss) before Income Taxes -35,375 -3,252 -89,335 13,275 28,171 -136,656
  Net Income (Loss) -41,500 -15,995 -82,625 8,738 9,468 -203,257
  Net Income (Loss) Per Share (¥) -336.04 -129.52 -669.04 1,747.52 1,893.64 -40,627.31
  Dividend Per Share (¥) 0 0 0 0 0 0
  Net Assets Per Share (¥) 2,146.32 1,839.20 1,037.51 65,735.31 66,623.71 31,497.69
Note 1: 5.02% of shares which are owned by Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account) were shares that were contributed by NEC as severance indemnities trusts. The voting rights of such shares will be exercised at the instruction of NEC.

Note 2: NEC Electronics’ consolidated financial information until FY 09/3 is in accordance with U.S. GAAP. However, the figure for operating income shown above represents net sales minus the cost of sales, research and development expenses, and selling, general and administrative expenses. The figure for net assets per share shown above represents shareholders’ equity per share.

Note 3: After the Pre-merger Capital Injection of approximately 71.7 billion yen, the amount of Renesas’ capital is expected to amount to 112,850 million yen and the total number of shares issued is expected to be 7,163,000 shares.

5. Outline of the Integrated Company

(1) Company Name Renesas Electronics Corporation
(2) Headquarters Kawasaki City, Kanagawa Prefecture, Japan
(3) Candidates of Administrative Organization

(Note 1)

Junshi Yamaguchi, Representative Director, Chairman

(currently President & CEO of NEC Electronics)

Yasushi Akao, Representative Director, President

(currently Representative Director, President of Renesas)

  Members of the Board

Kazuaki Ogura

(currently General Manager, Merger Preparation Office of Renesas)

Masaki Kato

(currently Executive Vice President and Member of the Board of NEC Electronics)

Yoichi Yano

(currently Executive Vice President and Member of the Board of NEC Electronics)

Shozo Iwakuma

(currently Board Director and General Manager of Human Resources & General Affairs Division of Renesas)

  Outside Directors

Toyoaki Nakamura

(currently Representative Executive Officer, Senior Vice President and Executive Officer of Hitachi)

Nobuhiro Endo  

(currently Senior Vice President and Member of the Board of NEC)

Noritomo Hashimoto

(currently Executive Officer, Director of Mitsubishi Electric, Outside Director of Renesas)

Hajime Matsukura

(currently General Manager, Corporate Strategy and Business Development of NEC, Outside Director of NEC Electronics)

To Be determined

(Plan to appoint an expert director from the high-tech field)

(4) Major Operations Research, development, design, manufacture, sale, and servicing of semiconductor products
(5) Capital ¥ 153,255,000,915 (including the Post-merger Capital Injection)
(6) End of FY March 31
(7) Net Assets To be determined
(8) Total Assets To be determined
Note 1: Title in parenthesis indicates position currently held. The Members of the Board who are not currently NEC Electronics’ Members of the Board will officially be appointed following the adoption of the resolutions at the Extraordinary General Meetings of Shareholders to be held on Feb 24, 2010. The Representative Directors will officially be appointed following the adoption of the resolution at the Board of Directors meeting to be held on April 1, 2010. Please refer to the Exhibit “Brief biography of Representative Directors of the Integrated Company“ hereto.

6. Financial Outlook after the Merger

To be informed upon determination.

About NEC Electronics

NEC Electronics Corporation (TSE: 6723) specializes in semiconductor products encompassing advanced technology solutions for the high-end computing and broadband networking markets, system solutions for the mobile handset, PC peripheral, automotive and digital consumer markets, and multi-market solutions for a wide range of customer applications. NEC Electronics Corporation has subsidiaries worldwide including NEC Electronics America, Inc. and NEC Electronics (Europe) GmbH. For additional information about NEC Electronics worldwide, visit www.necel.com.

About Renesas Technology Corp.

Renesas Technology Corp. is the world's No.1 supplier of microcontrollers and one of the world's leading semiconductor system solutions providers for mobile, automotive and PC/AV (Audio Visual) markets. It is also a leading provider of Power MOSFETs, Smart Card microcontrollers, RF-ICs, High Power Amplifiers, Mixed Signal ICs, System-on-Chip (SoC), System-in-Package (SiP) and more. Established in 2003 as a joint venture between Hitachi, Ltd. (TSE:6501, NYSE:HIT) and Mitsubishi Electric Corporation (TSE:6503), Renesas Technology achieved consolidated revenue of 702.7 billion JPY in FY2008 (end of March 2009). Renesas Technology is based in Tokyo, Japan and has a global network of manufacturing, design and sales operations in 16 countries with 25,000 employees worldwide. For further information, please visit http://www.renesas.com

Exhibit 1: Brief biography of Representative Directors of the Integrated Company

Junshi Yamaguchi

BIRTHDAY

27, November 1950

EDUCATION

1974.3  Bachelor of Science, engineering, Keio University, Japan

PROFESSIONAL HISTORY
2009.6 -
President & CEO
2005.6 -
Executive Vice President and Member of the Board
2004.8 -
Senior Vice President, Vice President of the Corporate Planning Unit, and General Manager of the Corporate Communications Division
2003.10 -
Senior Vice President, and Vice President of the Corporate Planning Unit
2002.9 -
Vice President, Corporate Planning Unit, NEC Electronics Corporation
1993 -
Vice President, Corporate Operations, NEC Electronics Inc. (now NEC Electronics America, Inc.)
1976.12 -
Joined NEC Corporation

Yasushi Akao

BIRTHDAY

7, August 1954

EDUCATION

1979.3  Master of Electronics and Electrical Engineering, Keio University, Japan

1977.3  Bachelor of Technology, Keio University, Japan

PROFESSIONAL HISTORY
2009.4 -
President
2008.4 -
Board Director, Executive General Manager of MCU Business Group
2007.4 -
Board Director, Deputy Executive General Manager of MCU Business Group
2004.12 -
Managing Officer, Deputy Executive General Manager of System Solution Business Group
2004.4 -
Managing Officer, General Manager of Corporate Strategy Planning Div.
2003.10 -
Deputy General Manager of Corporate Strategy Planning Div.
2003.4 -
Deputy General Manager of SOC Div. of MCU & SOC Business Unit, Renesas Technology Corp.
1979.4 -
Joined Hitachi, Ltd.

 

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