By Nadia Damouni and Liana B. Baker
(Reuters) - Avago Technologies Ltd, looking to acquire a fellow chipmaker, has reached out to potential targets including Xilinx Inc (NASDAQ:XLNX), Renesas Electronics Corp and Maxim Integrated Products Inc (NASDAQ:MXIM), according to people familiar with the matter.
Avago is working with investment banks and could spend more than $10 billion on a potential takeover, the people said.
None of the three approaches has yet led to advanced deal discussions, in part because of Avago's fear of overpaying, the people added.
Avago has also spoken to private equity firm Silver Lake Partners LP about partnering in a potential acquisition, the people said. Silver Lake, together with KKR & Co LP, created Avago in 2005 by acquiring Hewlett-Packard Co's semiconductor unit Agilent. Neither Silver Lake nor KKR still own stakes in Avago, but the former provided financing for Avago's $6.6 billion acquisition of LSI Corp last year and has a seat on Avago's board.
The sources asked not to be identified because the talks are confidential. Maxim, Xilinx and Silver Lake declined to comment. Avago and Renesas did not respond to requests for comment.
Even if they prove unsuccessful, Avago's overtures highlight Chief Executive Hock Tan's unquenched thirst for acquisitions following its bid earlier this year for Freescale Semiconductor Ltd. NXP Semiconductors NV (NASDAQ:NXPI) ended up buying Freescale for $11.8 billion after Avago deemed it too expensive, sources told Reuters at the time.
Avago, which develops semiconductor devices for the wireless and industrial markets, has been looking at expanding in areas ranging from analog semiconductors to radio frequency technology. Each of the potential targets could allow Avago to round out its businesses.
San Jose, California-based Xilinx, a dominant programmable chipmaker, competes with Altera Corp (NASDAQ:ALTR), which Intel Corp (NASDAQ:INTC) has been circling in recent months.
Renesas, which makes microcontroller chips used in cars, was created from a merger of the chip units of Hitachi Ltd and Mitsubishi Electric in 2002. Renesas then merged with NEC Electronics Corp in 2010 to create Japan's largest chipmaker. In 2012, when Renesas was running low on cash, it turned to a consortia of Japanese investors to help keep it afloat and also spoke to KKR and other private equity firms.
San Jose, California-based Maxim designs and manufactures analog chips that are used in cars, manufacturing, energy, communications, healthcare and connected devices, according to its website.
Worldwide semiconductor M&A reached $31 billion last year, the most since 2011, according to Thomson Reuters data.