News Releases

9/16/2009

NEC Electronics and Renesas Reach a Definitive Agreement on Business Integration

KAWASAKI, Japan, TOKYO, Japan, September 16, 2009 -- NEC Electronics Corporation (NEC Electronics; TSE: 6723), Renesas Technology Corp. (Renesas), NEC Corporation (NEC; TSE: 6701), Hitachi, Ltd. (Hitachi; TSE: 6501 / NYSE: HIT), and Mitsubishi Electric Corporation (Mitsubishi Electric; TSE: 6503) today announced that they have signed a definitive agreement to integrate business operations at NEC Electronics and Renesas (the “Business Integration”). The Business Integration will become effective following the adoption of the resolutions at the Extraordinary General Meeting of Shareholders of NEC Electronics and Renesas and approval by authorities concerned.

As a condition to the Business Integration, Renesas will issue shares of Renesas common stock to Hitachi and Mitsubishi Electric, the sole shareholders of Renesas, in exchange for a total of 78 billion yen before the effective date of the Business Integration (the “Pre-merger Capital Injection”). In addition, on the effective date of the Business Integration (scheduled to be April 1, 2010), the integrated company after the Business Integration (the “Integrated Company”) will issue shares of its common stock to NEC, Hitachi, and Mitsubishi Electric in exchange for a total of approximately 122 billion yen (the “Post-merger Capital Injection”).

1. Goals of Business Integration
Both as leading semiconductor companies, NEC Electronics and Renesas provide a wide variety of semiconductor solutions, primarily specializing in microcontroller units (MCUs). In light of fierce global competition and structural changes triggered by the rapid expansion of emerging markets in the semiconductor market, NEC Electronics and Renesas have been exploring the possibility of the Business Integration after signing a basic agreement on April 27, 2009, in order to further strengthen their business foundations and technological assets, while increasing corporate value through enhanced customer satisfaction.

The Integrated Company will provide globally competitive products in its three major product groups, MCUs, SoCs, and discrete products, by concentrating its development resources to further strengthen the companies’ respective advantages. The Integrated Company aims to expand its business by offering complete solutions that extend the three major groups to best fit the requirement of customers of all kinds of industries.

In order to address the ongoing challenges of the current economic downturn, NEC Electronics and Renesas will each continue to execute structural reform plans in order to strengthen their business frameworks. The two companies will integrate their operations and generate synergies to establish a powerful new semiconductor company that is capable of consistently achieving high earnings in order to withstand changing semiconductor market conditions.

2. Outline of Business Integration
(1) Schedule of Business Integration

Signing of basic agreement

April 27, 2009

Signing of definitive agreement

September 16, 2009

Signing of merger agreement

By mid-January 2010

Shareholders meetings for approval of merger agreement

February 2010 (planned)

Effective date of merger

April 1, 2010 (planned)

(2) Structure of Business Integration
The merger will be effective with NEC Electronics being the surviving entity.

(3) Integration Ratio (Ratio between equity value of NEC Electronics and that of Renesas after completion of the Pre-merger Capital Injection)

 

NEC Electronics

Renesas

Integration Ratio

1

1.189

Note 1: For the Business Integration, NEC Electronics will issue a total of approximately 146.84 million common shares to the Renesas common shareholders based on a merger ratio that will be calculated in accordance with the Integration Ratio set forth in 2-(3) above.

Note 2: The Integration Ratio represents the ratio between the total number of the NEC Electronics common shares outstanding (not including the potential shares) immediately before the Business Integration and the total number of the NEC Electronics common shares to be allocated to the Renesas shareholders as a result of the Business Integration, based on the assumption that the Pre-merger Capital Injection is funded before the Business Integration. The ratio of the number of the NEC Electronics common shares to be issued to the Renesas shareholders in exchange for a share of the Renesas common stock as a result of the Business Integration (i.e., merger ratio) will be determined at the time the merger agreement is signed.

Note 3: In accordance with Art. 124 §4 of the Corporation Law, Hitachi and Mitsubishi Electric, the new shareholders of the Integrated Company after the Business Integration, will be entitled to vote at the ordinary shareholders meeting of the Integrated Company which is scheduled to be held in June 2010.

 (4) Reinforcement of capital
As a condition to the Business Integration, Renesas will issue shares of Renesas common stock to Hitachi and Mitsubishi Electric, the sole shareholders of Renesas, in exchange for an aggregate of 78 billion yen before the effective date of the Business Integration. In addition, on the effective date of the Business Integration (scheduled to be April 1, 2010), the Integrated Company will issue shares of its common stock to NEC, Hitachi, and Mitsubishi Electric in exchange for an aggregate of approximately 122 billion yen.

Note: Depending on the business result of NEC Electronics for the first half of the fiscal year ending March 31, 2010, the amount of the Pre-merger Capital Injection could be reduced and the amount of the Post-merger Capital Injection could be increased keeping the Integration Ratio as 1:1.189.  

(5) Notes on share acquisition rights and bonds with share acquisition rights of Renesas
: None

3. Basis and Process of Calculation of Integration Ratio and Relationship with Financial Advisors
: Please refer to Exhibit 1 “Basis and Process of Calculation of the Integration Ratio” hereto.

4. Outline of NEC Electronics and Renesas

(1)

Company Name

NEC Electronics Corporation
(Surviving entity)

Renesas Technology Corp.

 

(2)

Major Operations

R&D, manufacture, sale, and servicing of semiconductor devices mainly on system LSIs

Development, design, manufacture, sale, and servicing of SoC products such as MCUs, logic devices, and analog devices; discrete semiconductor products; and memory products such as SRAM

(3)

Established

November 1, 2002

April 1, 2003

(4)

Headquarters

Kawasaki City,
Kanagawa Prefecture, Japan

Chiyoda-ku, Tokyo, Japan

(5)

Representative

Junshi Yamaguchi,
President and CEO

Katsuhiro Tsukamoto, Representative Director, Chairman
Yasushi Akao,
Representative Director, President

(6)

Capital

¥85.955 billion
(As of March 31, 2009)

¥77 billion
(As of March 31, 2009)

(7)

Number of Stocks Issued

123.5 million
(As of March 31, 2009)

5.54 million
(As of March 31, 2009)

(8)

Net Assets

¥128.130 billion (As of March 31, 2009)

¥176.888 billion (As of March 31, 2009)

(9)

Total Assets

¥482.545 billion (As of March 31, 2009)

¥682.937 billion (As of March 31, 2009)

(10)

End of FY

March 31

March 31

(11)

Employees

22,476 (Consolidated,
As of March 31, 2009)

25,000 (Consolidated,
As of March 31, 2009)

 

(12)

Major Customers

Electronic equipment manufacturers,
Semiconductor production equipment manufacturers, Semiconductor materials manufacturers

Electronic equipment manufacturers,
Semiconductor production equipment manufacturers,
Semiconductor materials manufacturers

 

(13)

Major Stockholders and  Ownership Ratios

NEC Corporation: 65.02%
Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account): 5.02% 
(Note 1)

Hitachi, Ltd.: 55%
Mitsubishi Electric Corporation: 45%

(14)

Main Banks

Sumitomo Mitsui Banking Corporation

The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd.

(15)

Present Relationship between Corporate Parties

 

Capital Ties

Renesas owns 100 shares of stock in NEC Electronics.

 

Personal Ties

No relevant items

 

Business Relationship

NEC Electronics outsources some production processes to Renesas Northern Japan Semiconductor, Inc., a consolidated subsidiary of Renesas.

 

Relevant Circumstances of Related Parties

No relevant items

(16)

Business Performance for the last three years            
(Unit: ¥1 million except for otherwise expressly stated herein)                   

 

NEC Electronics
(Consolidated, US-GAAP)
(Note 2)

Renesas
(Consolidated, Japan-GAAP)

Fiscal Year Ending

March 31, 2007

March 31, 2008

March
31, 2009

March
31, 2007

March
31, 2008

March
31, 2009

 

Net Sales

692,280

687,745

546,470

952,590

950,519

702,739

 

Semiconductor  Sales

659,733

653,275

521,735

-

-

-

 

Operating Income (Loss)

-28,557

5,094

-68,355

23,644

43,480

-96,573

 

Ordinary Income (Loss)

15,931

29,215

-102,799

 

Income (Loss) before Income Taxes

-35,375

-3,252

-89,335

13,275

28,171

-136,656

 

Net Profit (Loss)

-41,500

-15,995

-82,625

8,738

9,468

-203,257

 

Net Income (Loss) Per Share (¥)

-336.04

-129.52

-669.04

1,747.52

1,893.64

-40,627.31

 

Dividend Per Share (¥)

0

0

0

0

0

0

 

Net Assets Per Share (¥)

2,146.32

1,839.20

1,037.51

65,735.31

66,623.71

31,497.69

Note 1: 5.02% of shares which are owned Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account) were shares that were contributed by NEC as severance indemnities trusts. The voting rights of such shares will be exercised at the instruction of NEC.

Note 2: NEC Electronics’ consolidated financial information until FY 09/3 is in accordance with U.S. GAAP. However, the figure for operating income shown above represents net sales minus the cost of sales, research and development expenses, and selling, general and administrative expenses. The figure for net assets per share shown above represents shareholders’ equity per share.

5. Outline of the Integrated Company

(1)

Company Name

Renesas Electronics Corporation (Tentative name)
Note: Please refer to the attached exhibit 2 for the corporate logo of the new company.

(2)

Headquarters

Kawasaki City, Kanagawa Prefecture, Japan

(3)

Representative

Junshi Yamaguchi, Chairman
Yasushi Akao, President
Note: Please refer to the attached exhibit 3 for the representative of the new company.

 

(4)

Major Operations

Research, development, design, manufacture, sale, and servicing of semiconductor products

(5)

Capital

To be determined

(6)

End of FY

March 31

(7)

Net Assets

To be determined

(8)

Total Assets

To be determined

(9)

Accounting Method

To be informed upon determination

(10)

Business Prospects

To be informed upon determination

6. Outline of the third-party allotment of new shares after Business Integration

(1) Outline of Post-merger Capital Injection

(1)

Issuer

Renesas Electronics Corporation (Tentative name)

(2)

Date of issuance

April 1, 2010 (Note 1)

(3)

Number of new shares to be issued

133,042,532 of common shares

 

(4)

Issue price

917 yen

(5)

Total proceeds

122,000,001,884 yen

(6)

Purchaser

Third-party allotment
(NEC: 54,525,628 shares,
Hitachi: 43,184,297 shares,      Mitsubishi Electric: 35,332,607 shares)

(7)

Others

None

Note 1: The new shares will be issued at the same date as the effective date of Business Integration. The schedule is subject to change based upon the effective date of the Business Integration.

Note 2: The figures of number of shares issued, number of allotted shares, and total proceeds are subject to increase based on the business results of NEC Electronics for the first half of the fiscal year ending March 31, 2010.

Note 3: In accordance with Art. 124 §4 of the Corporation Law, on the day of the ordinary shareholders meeting of the  Integrated Company which is scheduled to be held in June 2010, NEC, Hitachi and Mitsubishi Electric will acquire voting rights of the new Integrated Company.

(2) Major stockholders and ownership ratio of Renesas Electronics Corporation after the execution of the Business Integration and the third-party allotment

NEC Corporation                                                      33.42%
Hitachi, Ltd.                      30.73%
Mitsubishi Electric Corporation                                 25.14%
Japan Trustee Services Bank, Ltd. (Note)               1.54%
(Trust Account from The Sumitomo Trust and Banking Co., Ltd. for retirement benefit Trust Account of NEC Corporation)

Note: 1.54% of shares which are owned by Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd./NEC Corporation pension and severance payments Trust Account) were shares that were contributed by NEC as severance indemnities trusts. The voting rights of such shares will be exercised at the instruction of NEC.

7. Changes in significant parent company and major stockholders at NEC Electronics and changes in significant subsidiaries at NEC
: Please refer to “6. Outline of the third-party allotment of new shares after Business Integration” for major stockholders and ownership ratio of NEC Electronics after the execution of the Business Integration (i.e. Renesas Electronics Corporation) and the third-party allotment of new shares. NEC will no longer be the parent company of NEC Electronics, as it is no longer the majority stockholder. NEC, Hitachi, and Mitsubishi Electric will become the major stockholders of NEC Electronics.

About NEC Electronics

NEC Electronics Corporation (TSE: 6723) specializes in semiconductor products encompassing advanced technology solutions for the high-end computing and broadband networking markets, system solutions for the mobile handset, PC peripheral, automotive and digital consumer markets, and multi-market solutions for a wide range of customer applications. NEC Electronics Corporation has subsidiaries worldwide including NEC Electronics America, Inc. and NEC Electronics (Europe) GmbH. For additional information about NEC Electronics worldwide, visit http://www.nec.com.

About Renesas Technology Corp.

Renesas Technology Corp. is the world's No.1 supplier of microcontrollers and one of the world's leading semiconductor system solutions providers for mobile, automotive and PC/AV (Audio Visual) markets. It is also a leading provider of Power MOSFETs, Smart Card microcontrollers, RF-ICs, High Power Amplifiers, Mixed Signal ICs, System-on-Chip (SoC), System-in-Package (SiP) and more. Established in 2003 as a joint venture between Hitachi, Ltd. (TSE:6501, NYSE:HIT) and Mitsubishi Electric Corporation (TSE:6503), Renesas Technology achieved consolidated revenue of 702.7 billion JPY in FY2008 (end of March 2009). Renesas Technology is based in Tokyo, Japan and has a global network of manufacturing, design and sales operations in 16 countries with 25,000 employees worldwide. For further information, please visit http://www.renesas.com

About NEC Corporation

NEC Corporation is one of the world's leading providers of Internet, broadband network and enterprise business solutions dedicated to meeting the specialized needs of a diversified global base of customers. NEC delivers tailored solutions in the key fields of computer, networking and electron devices, by integrating its technical strengths in IT and Networks, and by providing advanced semiconductor solutions through NEC Electronics Corporation. The NEC Group employs more than 150,000 people worldwide. For additional information, please visit the NEC website at: http://www.nec.com.

About Hitachi

Hitachi, Ltd., (NYSE: HIT / TSE: 6501), headquartered in Tokyo, Japan, is a leading global electronics company with approximately 400,000 employees worldwide. Fiscal 2008 (ended March 31, 2009) consolidated revenues totaled 10,000 billion yen ($102.0 billion). The company offers a wide range of systems, products and services in market sectors including information systems, electronic devices, power and industrial systems, consumer products, materials, logistics and financial services. For more information on Hitachi, please visit the company's website at http://www.hitachi.com.

About Mitsubishi Electric

With over 80 years of experience in providing reliable, high-quality products to both corporate clients and general consumers all over the world, Mitsubishi Electric Corporation (TOKYO: 6503) is a recognized world leader in the manufacture, marketing and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation and building equipment. The company recorded consolidated group sales of 3,665.1 billion yen (US$ 37.4 billion*) in the fiscal year ended March 31, 2009. For more information visit http://global.mitsubishielectric.com
*At an exchange rate of 98 yen to the US dollar, the rate given by the Tokyo Foreign Exchange Market on March 31, 2009.

Media Contacts

NEC Electronics Corporation
Kyoko Okamoto
+ 81-44-435-1676
kyoko.okamoto@necel.com

Renesas Technology Corp.
Yoichi Kobayashi
+81-3-6756-5555
kobayashi.yoichi2@renesas.com

NEC Corporation
Kosuke Yamauchi
+ 81-3-3798-6511
k-yamauchi@ce.jp.nec.com

Hitachi, Ltd.
Atsushi Konno
+81-3-5208-9325
PR@hdq.hitachi.co.jp

Mitsubishi Electric Corporation
Yurika Fujimoto
+ 81-3-3218-3380
prd.gnews@nk.MitsubishiElectric.co.jp