Japan's Renesas Electronics will buy smaller US chipmaker Intersil for $3.2 billion (roughly Rs. 21,392 crores), the companies said Tuesday, as part of a push into the lucrative auto market.
Renesas, one of the world's biggest supplier of automotive microcontroller chips, said it would pay $22.50 a share for its rival, in an all-cash deal that represents a 14 percent premium on the stock's closing price Monday.
The combined firms would have annual revenue of around $7.18 billion.
Among its products, Intersil makes chips that manage battery voltage in hybrid and electric vehicles and operate on-board cameras and displays. The California-based firm reported sales of about $520 million last year.
Renesas - created through a merger of the chip units of Hitachi, Mitsubishi Electric and NEC - is finding its feet after years of losses forced a major restructuring including job cuts and factory closures.
The company - whose customers include major automakers Toyota and Ford - reported its second year of profits in the fiscal year through March, after piling up red ink of some 400 billion yen over the previous five years.
Japan's semiconductor industry has been undergoing a major shakeup in recent years as firms have been battered by fierce competition from lower-cost overseas rivals.
"The whole universe of chipmakers is combining to provide solutions for the automotive and industrial space, because some of these opportunities require a complete package of capability," said Damian Thong, an analyst at Macquarie Group in Tokyo.
"It's not so much the price of the deal that matters, it's whether the market is comfortable with Renesas being able to execute on deal integration. In this respect, the company has a little bit to prove."
Renesas shares were down 0.49 percent at 600 yen in Tokyo on Tuesday morning.