Intersil Corp (NASDAQ:ISIL) is waving at the market in its rearview, at least for today, as ISIL stock sits on gains of over 9% as of this writing.
Intersil’s pop comes on news that Japanese chip maker Renesas Electronics Corp (OTCMKTS:RNECY) is buying ISIL for $3.2 billion.
The buyout should give Renesas a foothold in the analog chip market just as the semiconductor industry undergoes a period of flagging growth and skyrocketing costs.
What This Means for RNECY and ISIL Stock
Renesas agreed to pay $22.50 per share of ISIL stock, all in cash. That’s a premium of about 44% from ISIL’s last trading day on Aug. 19, when the intent of a deal was first made public.
RNECY justifies the high premium by citing synergies that should positively affect the company’s top and bottom lines.
Renesas, a semiconductor manufacturer, derives 70% of its sales from its automotive and industrial businesses. Its main four areas of focus in auto are sensing, connectivity, security and safety. Now, after its structural reform, Renesas is looking to move into a growth stage.
With Intersil, RNECY can beef up its automotive business via ISIL’s solutions in battery management, processor power management, data converters, optoelectronics and proximity and light sensors, among others.
Renesas, essentially, is using Intersil to create a next-generation car with seamless “solutions,” including a heads-up display, advanced driving assistant system, a camera network, display network and battery management.
The fruits of the acquisition also extend beyond Renesas’ automotive business. Renesas calls it a “smart society,” where it hopes to provide advanced smart home solutions, high-speed networks, machine vision and smart factories.
Pending approval from ISIL stock holders and regulators, Renesas and Intersil are expected to close the deal by the beginning of next year.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
