Renesas Electronics, a supplier of advanced semiconductor solutions, and Dialog Semiconductor, a provider of power management, charging, AC/DC power conversion, Wi-Fi and Bluetooth low energy (BLE) technology, announced that they have reached an agreement on the terms of an all-cash acquisition by Renesas of Dialog (the “Acquisition”) for EUR 67.50 per share, for a total equity value of approximately EUR 4.9 billion (approximately 615.7 billion yen).
Dialog is an innovative provider of highly-integrated and power-efficient mixed-signal ICs for a broad array of customers within IoT, consumer electronics and high-growth segments of automotive and industrial end-markets. Centered around its low-power and mixed-signal expertise, Dialog brings a wide range of product offerings including battery and power management, power conversion, configurable mixed-signal (CMIC), LED drivers, custom mixed-signal ICs (ASICs), and automotive power management ICs (PMICs), wireless charging technology, and more. Dialog also offers broad and differentiated BLE, WiFi and audio system-on-chips (SoCs) that deliver advanced connectivity for a wide range of applications; from smart home/building automation, wearables, to connected medical. All these systems complement and expand Renesas’ leadership portfolio in delivering comprehensive solutions to improve performance and efficiency in high-computing electronic systems.
Hidetoshi Shibata, President and CEO of Renesas, believes that the transaction represents their next important step in catapulting Renesas’ growth plan to achieve substantial strategic and financial benefits, following their previous acquisitions. Dialog has a strong culture of innovation along with excellent customer relationships and serves fast growing areas including IoT, industrial and automotive. By bringing Dialog’s talented team and expertise into Renesas, together, they will accelerate innovation for customers and create sustainable value for shareholders.
Dr. Jalal Bagherli, CEO of Dialog comments that they have built a strong foundation of high-performance analog and power efficient mixed-signal expertise, extended their product portfolio and applied its technologies into markets including 5G, wearables, automotive, smart home, connected medical and industrial IoT. This compelling platform combined with Renesas’ embedded compute, analog and power portfolio creates even greater growth opportunities in increasingly connected world. The Dialog team is excited to join forces with Renesas. The combined company will be in an even stronger position to provide innovative products for these markets, building on Renesas’ extensive sales, distribution and customer support capabilities.”
Key Transaction Highlights:
- Acquisition of Dialog’s low-power technologies and connectivity expertise centered around its mixed-signal integrated circuits (ICs) adds complementary product lines, strengthening Renesas’ global footprint across large, high-growth markets in the IoT, industrial and automotive fields.
- Expected to result in incremental revenue growth of approximately 200 million USD (non-GAAP operating income, approximately 21.0 billion yen) from cross selling and access to fast-growing industries alongside continued innovation of solution offerings; expects cost savings from operational efficiencies to result in a financial impact of approximately 125 million USD (non-GAAP operating income per year on a run rate basis, approximately 13.1 billion yen).
- EUR 67.50 per share in cash to be paid for all Dialog outstanding shares (on a fully diluted basis), equivalent to a total equity value of approximately EUR 4.9 billion.
- Expected to be accretive to Renesas’ non-GAAP gross margin, and EBITDA after closing and to close by the end of 2021.
Strategic and Financial Rationale
The acquisition announced demonstrates Renesas’ continued and unwavering commitment to further advance its solution offering. The complementary nature of the companies’ technological assets and the scale of the combined portfolios will enable Renesas to build more robust and comprehensive solutions to serve high-growth segments of the IoT, industrial and automotive markets. Renesas believes there is a compelling strategic and financial rationale for the Acquisition because it:
Scales Renesas’ IoT Sector Capabilities with Dialog’s Low-Power Technologies
Dialog has a differentiated portfolio of low-power mixed-signal products, decades of experience in developing custom and configurable solutions for the world’s largest customers and expertise in low-power connectivity that are highly complementary to Renesas. The acquisition of these low-power technologies enhances Renesas’ product portfolio and expands horizons in addressing high-growth markets in the IoT field.
Unlocks Further Differentiation to Renesas System Solution with Connectivity
Bringing together Renesas and Dialog will extend the combined group’s reach to a broader customer base and open up additional growth potential in the key growth segments: industrial infrastructure, IoT and automotive. Dialog’s BLE, Wi-Fi and audio SoCs are highly complementary to Renesas’ microcontroller (MCU)-based solutions. Combining Dialog’s innovative low-power Wi-Fi and Bluetooth SoCs and expertise with Renesas’ technologies will enable Renesas to further differentiate its system solution offering and extend its footprint in high-growth segments, including contactless IoT applications for smart home/building automation and healthcare. Renesas’ automotive solutions will also be enriched with connectivity for a wide range of security and safety applications.
Adds Engineering and Design Scale and More Effective Go-to-Market Initiatives
The past acquisitions brought diverse talent and management capabilities to expand Renesas’ global operations. The transaction announced extends this effort and enables Renesas to add engineering and design scale in low-power analog and mixed signal. The addition of Dialog’s strong R&D and geographical presence will also allow Renesas to expand its “Winning Combinations” lineup of innovative solutions and make its go-to-market initiatives more effective to provide seamless and borderless services to customers around the globe. These combinations now add up to more than 210 solutions, focusing on verticals including industrial, infrastructure, automotive, and consumer.
Renesas acquired Integrated Device Technology (IDT) in 2019 and Intersil in 2017to expand its analog solution lineup and to strengthen its kit solution offerings that combine its MCUs, SoCs and analog products.
Delivers Earnings Accretion and Cost Savings
Renesas anticipates incremental revenue growth of approximately 200 million USD (non-GAAP operating income, approximately 21.0 billion yen) from cross selling and access to fast-growing industries alongside continued innovation of solution offerings; expects cost savings from operational efficiencies to result in a financial impact of approximately 125 million USD (non-GAAP operating income per year on a run rate basis, approximately 13.1 billion yen). Renesas anticipates the cost savings to realize in approximately 3 years after closing, and revenue growth to realize in approximately 4 to 5 years after closing. Dialog’s underlying EBITDA (non-IFRS measure) for the 12-month period to 25 September 2020 was equivalent to 35.5 billion yen. Had the transaction been effective throughout that period, Renesas’ non-GAAP gross margin would have been approximately 0.6 percentage points higher.