KKR May Lose Renesas to a Japan Consortium Led by INCJ

Major Japanese manufacturers have teamed up with a government-backed Innovation Network Corporation of Japan (INCJ) to put together a rescue package for Renesas Electronics Corp. (6723). According to The Nikkei, the consortium led by INCJ will include Toyota, Nissan, Honda, Panasonic, Cannon, Fanuc, Denso, Keihin and possibly Bosch. It plans to invest more than JPY 100 billion (USD 1.28 billion) to acquire a majority stake in Renesas by the end of the year.

Renesas is one of the world's top producers of microcontrollers used in automobiles, consumer electronics and  industrial machinery. Some of its cutting-edge custom-made products are hard to replace with those from other manufacturers. The concern over ensuring the supply of these microchips apparently alerted the manufactures and INCJ and prompt them to submit a rescue proposal.

In late August, KKR proposed investing about JPY 100 billion in Renesas. Major lenders and major shareholders - NEC, Hitachi and Mitsubishi Electric - were ready to accept at one point. But the manufactures were wary that microcontroller supplies could be disrupted as they learned that KKR is likely to direct Renesas to focus on mass-production of generic chips. As conditions for its investment, the U.S. firm is said to have sought the removal of Renesas' entire board as well as additional loans from the lenders and three shareholders, who have already provided JPY 100 billion to Renesas to enable large-scale restructuring, entailing roughly 5,500 job cuts as well as the sale and closure of 19 domestic plants.

(Pls also see our post on August 29th.)