* Govt fund to inject 180 bln yen for two-thirds stake
* Renesas rescue to be finalised and announced early
* Shareholders Hitachi, NEC to provide 1 bln yen each-Nikkei
* Renesas: nothing has been decided
By Maki Shiraki and Mari Saito
TOKYO, Nov 26 Shareholders of Japan's embattled
Renesas Electronics Corp are close to approving a
government-led bailout, sources familiar with the talks said,
sending the firm's shares 17 percent higher on relief that the
$2.4 billion rescue was being finalised.
The deal is set to keep the world's biggest maker of
microcontroller chips afloat for the next few years, but
analysts say that despite job cuts and planned plant closures,
Renesas still faces many challenges including the restructuring
of its loss-making system chip division.
The state-backed Innovation Network Corp will spend 180
billion yen ($2.2 billion) to take a two-thirds stake in
Renesas, which has been hit by fierce overseas competition,
production cuts by clients and fragile finances that have
prevented it from upgrading infrastructure.
As part of the bailout, eight manufacturers including key
clients such as Toyota Motor Corp and Nissan Motor Co
Ltd will provide another combined 20 billion yen.
Shareholder approval of the deal, while expected, had been
delayed for several weeks and an announcement is now likely in
early December, said the sources, who declined to be identified
as the matter is not public.
A Renesas spokesman said nothing had been decided.
Investors jumped to cover short positions in the stock, said
Makoto Kikuchi, chief executive officer of Myojo Asset
Management, noting that unlike some other troubled Japanese
electronics firm such as Sharp Corp, the company's
expertise in chips for cars meant it was worth investing in.
The bailout was put together to counter an earlier bid by
U.S. private equity firm KKR & Co LP amid worries that
the firm's technology would fall into foreign hands.
"As soon as stock investors see signs that the company is
working hard to return to profit, they will be prepared to
invest long-term," Kikuchi said.
Shares in Renesas closed 16.6 percent higher at a two-month
high but are still down 42 percent since the beginning of April,
the start of Japan's fiscal year.
Recent history has been brutal for Japan's chipmakers and
Renesas, formed from the struggling chip divisions of its major
shareholding companies Hitachi Ltd, Mitsubishi Electric
Corp and NEC Corp, will be keen not to repeat
the mistakes of now-bankrupt fellow chipmaker Elpida Memory Inc
Elpida, formed from the merger of several big companies'
DRAM chip making operations, succumbed to slumping prices and
relentless competition from South Korean rivals and is being
acquired by Micron Technology Inc of the United States.
Japan's tech sector has also seen the creation of Japan
Display Inc, a firm formed from the divisions of three TV makers
which make small liquid crystal displays and which the
Innovation Network Corp has also invested in.
The bailout comes on top of 161 billion yen in syndicated
loans from four Japanese banks in September, and before that a
separate 97 billion yen Renesas previously received from the
banks and its major shareholders.
In return, the company has slashed more than 7,000 jobs this
year and pledged to sell or close eight out of its 18 domestic
plants within three years.
Renesas, which competes with Samsung Electronics Co Ltd
and U.S.-based Freescale Semiconductor Inc,
has predicted a net loss of 150 billion yen for the year to
The Nikkei newspaper also said on Monday that Renesas will
receive an additional 1 billion yen each in support from Hitachi
and NEC. Sources said the two firms will not take in Renesas
employees, while Mitsubishi Electric is considering taking in
some workers from the chipmaker.