By Maki Shiraki and Emi Emoto
TOKYO (Reuters) - Private equity firm KKR is in talks to invest about 100 billion yen ($1.27 billion) in Japan's Renesas Electronics Corp, sources said on Wednesday, in a deal that would provide a much needed boost to the struggling chipmaker.
The offer under discussion would give KKR more than 50 percent of cash-strapped Renesas, which is in the midst of a sweeping restructuring as it fights for survival in the face of sinking prices and aggressive overseas rivals.
News of the plan pushed Renesas' battered shares up more than 31 percent to a seven-week high, but the stock is still trading at around half its levels of six months ago. At Tuesday's close it had a market value of about $1.2 billion.
A deal with KKR would be the firm's largest ever in Japan and comes at a time of rising private equity interest into the country. The KKR-Renesas stake would be among the top ten biggest private equity investments into the world's third largest economy.
Under the proposal, New York-based KKR & Co LP would buy new shares of Renesas, the world's fifth-largest chipmaker, through a private placement, sources familiar with the deal said.
Executives from KKR presented the plan to Renesas' main banks and its three major shareholders, NEC Corp, Hitachi Ltd and Mitsubishi Electric Corp on Tuesday, one of the sources said.
The U.S. fund was hoping to reach a formal agreement as early as September, the Nikkei business daily said on Wednesday.
KKR EYES JAPAN
New York-based KKR, run by cousins and private equity pioneers Henry Kravis and George Roberts, arrived in Asia in 2006. A Renesas stake would be KKR's second deal in Japan after their 2010 acquisition of recruitment services company Intelligence from Usen Corp for $357 million.
KKR is currently raising its second fund for Asia, which at $6 billion would be the largest ever raised for the region. Japan is targeted as one of its main investment destinations, as the country has long been touted by Asia head Joseph Bae as a promising place to put the firms money to work.
Other private equity funds had presented plans to inject cash into Renesas in recent months, sources have told Reuters.
KKR's bid marks the second time this year that foreign private equity firms have targeted investments in a Japanese chipmaker, after China's Hony Capital and U.S. buyout fund TPG Capital teamed up to bid for Elpida.
Renesas, the world's leading manufacturer of microcontroller chips used in cars, is implementing a restructuring plan that would lay off 12 percent of its workforce and sell or consolidate half of its domestic plants.
Hitachi, Mitsubishi Electric and NEC, which together own a 90 percent stake in Renesas, agreed in July to provide 49.5 billion yen in support to pay for the restructuring, while banks have promised an additional 50 billion yen loan.
Renesas said various media reports on Wednesday were not based on announcements by the company. KKR declined to comment.
Renesas, which competes with South Korea's Samsung Electronics and Freescale Semiconductor, earlier this month forecast a record annual net loss of 150 billion yen.
Shares in Renesas were trading up 31.1 percent at 299 yen by the midday trading break on Wednesday, compared with a 0.3 percent rise on Tokyo's benchmark Nikkei average.
KKR's expected bid would be the third billion-dollar plus acquisition investment in Japan by foreign private equity funds so far this year, following Bain Capital's $1.3 billion acquisition of TV shopping channels company Jupiter Shop Channel, and Permira's $1 billion acquisition of sushi restaurant chain Akindo Sushiro. ($1 = 78.5000 Japanese yen)
(Additional reporting by Junko Fujita; Editing by Michael Flaherty and Richard Pullin)