After foreign media broke the news that Renesas Electronics planned to acquire Dialog, both companies responded: Japanese semiconductor giant Renesas Electronics is considering plans to acquire Dialog, an established British chip company, for approximately US$6 billion to further consolidate its automotive chip business. This is the first semiconductor merger and acquisition with an amount of more than 5 billion US dollars in 2021.
Among them, Renesas Electronics` offer price for Dialog’s share capital may be 67.5 euros per share, which is a premium of more than 20% compared to Dialog`s after-market price of 55.88 euros per share on February 6. Currently, Dialog's market value is approximately 4.02 billion euros.
In fact, this is also an acquisition transaction between two Apple suppliers. In 2014, Apple acquired Renesas Electronics’ SP Drivers, the LCD display management department in which Renesas Electronics owns 55%; in 2018, Dialog’s power management chip business and R&D team were acquired by Apple for US$600 million.
According to the British financial regulations, Renesas must announce its intention to initiate a bid within 28 days (until March 7). In addition, Bloomberg reported that Dialog has also been negotiating with companies such as STMicroelectronics.
Up to now, Dialog and Renesas Electronics have both made official responses.
Dialog first confirmed the media's speculation about Renesas Electronics' acquisition of the company, and then Renesas Electronics issued a statement in response to Dialog's response, saying that it was "discussing with Dialog's management," but also emphasized that the announcement was not equivalent to a clear offer intention announcement.
1. Dialog: Some teams and technologies were acquired by Apple for $600 million
Dialog is an established European chip company listed in Frankfurt, Germany. It mainly provides mixed-signal chips for the consumer electronics field, including power management chips, lighting chips, Bluetooth chips, audio subsystems, etc.
The growth of Dialog is inseparable from Apple's long-term support. When Apple released its first iPhone in 2007, Dialog began to supply Apple with power management chips. At the same time, a large number of Apple orders have accounted for more than 70% of Dialog's annual revenue for many years.
However, in December 2017, Apple was confirmed to have set up a research and development team that is developing its own power management chip, which directly caused Dialog's stock price to continue to decline and revenues step by step into trouble.
Until 2018, Apple announced the acquisition of some assets of Dialog for US$600 million, including a R&D team of about 300 engineers and some equipment technologies, as well as Dialog’s offices in the UK, Italy and Germany. Among them, the $300 million in the transaction is an advance payment for Dialog to continue to supply chips to Apple in the next three years.
Since then, Dialog has been expanding the diversified development of its business, accelerating its deployment in the automotive and smart home fields.
In 2019, Dialog acquired Creative Chips, an industrial IoT IC supplier, for US$80 million, and Silicon Motion’s mobile RF IC business for US$45 million. In 2020, Dialog acquired integrated circuits (IC) and embedded circuits for US$500 million. System supplier Adesto Technologies.
In January of this year, thanks to consumer demand for 5G mobile phones and tablets that exceeded expectations, Dialog raised its revenue forecast for the fourth quarter of 2020, with revenue expected to be between US$436 million and US$441 million.
2. Renesas Electronics: Automotive microcontrollers account for 30% of the global market, affected by the lack of cores
Renesas Electronics was founded in 2003 by the merger of the semiconductor divisions of Hitachi, Ltd. and the semiconductor divisions of Mitsubishi Electric. Its business covers wireless networks, automotive, consumer and industrial markets, and is the world's leading supplier of embedded semiconductor design and manufacturing.
The origin of its acquisition with Apple can be traced back to 2014, when Apple acquired Renesas Electronics' LCD display management department, which owns 55% of the shares, called Renesas Electronics SP Drivers.
As one of the world’s leading suppliers of microcontrollers, analog power devices and SoC chips, Renesas’ automotive microcontroller business accounts for approximately 30% of the global market share, and it has also been trying to increase the market for analog chip businesses Share.
To this end, Renesas Electronics acquired US chip manufacturer Intersil for US$3.2 billion in 2017, and then acquired US chip design company Device Technology Inc for US$6.7 billion in 2018.
In 2020, Renesas Electronics and Dialog reached a cooperation agreement on automotive computing platforms, and the latter will provide power management solutions for the former's automotive R-Car platform.
However, with the global shortage of automotive chips and growing demand, some automakers have reduced their production plans. In this market environment, Renesas Electronics' acquisition of Dialog is undoubtedly one of its means of stable business development.
It is understood that Renesas Electronics will announce its earnings results for the three months ended December 31, 2020 on Wednesday, with automotive chips accounting for about half of its total revenue.
3. The two parties stated that they are discussing the acquisition and the offer price is 67.5 euros per share
On February 7 this year, Dialog mentioned in the "Statement on News Speculation and Renesas Electronics’ Receipt of Proposals" that it is in in-depth discussions with Renesas Electronics and may propose 67.5 euros per share for the entire issued and upcoming share capital of Dialog. Of the all-cash takeover offer.
The statement also added: "We will make another announcement in due course. It is currently unclear whether (Renesas Electronics) will issue any tender offer to the company, nor can it determine the terms of any tender offer."
At the same time, Dialog also emphasized: "This statement is made without the consent of Renesas Electronics."
On February 7, Renesas also issued two announcements.
The first announcement was Renesas Electronics ` response to Bloomberg`s report, stating that “Although the content of the media reports is basically accurate and we are discussing further business growth, we have not yet made a decision. If there is a major decision, we will immediately Notice."
The second announcement is in response to Dialog`s statement. Renesas Electronics also confirmed that it is in advanced discussions with Dialog`s management. The scope of the discussion includes the cash offer price of Dialog`s entire issued share capital of 67.50 euros per share.