Renesas Electronics is in talks to acquire Apple supplier Dialog for €4.9bn in the latest deal by the acquisitive Japanese group aimed at expanding its semiconductor portfolio beyond cars.

Shares in Renesas, one of the world’s largest suppliers of automotive chips, fell as much as 6.9 per cent on Monday on concerns about its stretched balance sheet after a $10bn buying spree during the past four years.

In a statement, Renesas confirmed its interest in the Anglo-German semiconductor specialist after the Frankfurt-listed company said on Sunday that it was in advanced talks about an all-cash offer priced at €67.50 a share — a 20 per cent premium to Dialog’s closing price on Friday.

Dialog, whose clients also include Samsung, Xiaomi and Panasonic, added “there can be no certainty that any firm offer will be made for the company”. The talks were first reported by Bloomberg.

In recent years Renesas, which generates about half its revenue from automotive semiconductors, has been investing aggressively to broaden its footprint beyond cars to areas such as data centres and consumer devices.

In 2019 it bought US rival Integrated Device Technology for $7.2bn, on the heels of the $3.2bn purchase of US chipmaker Intersil in 2017.

After those two deals, the company’s interest-bearing debt stood at ¥717.1bn ($6.8bn) as of the end of September.

“The deal may fit with the company’s broader strategic direction to expand its product portfolio, but for now the financing concerns are weighing heavily,” said Naoki Fujiwara, a fund manager at Tokyo-based Shinkin Asset Management.

Dialog, whose global headquarters are in Reading but whose research locations are dotted across Europe and the US, has also been attempting to diversify its portfolio. In particular it is seeking to become less reliant on Apple, which accounted for two-thirds of its $1.4bn in total sales in 2019.

Last year it acquired Industrial Internet-of-Things specialist Adesto for $500m as part of efforts to branch out into automotive components and battery management systems.

The Renesas-Dialog talks come at a time of heated deal activity in the global semiconductor industry, after Nvidia agreed last year to buy UK chip designer Arm from SoftBank for a price tag of as much as $40bn.

However, the Arm deal is facing intense regulatory scrutiny, with the EU and the UK set to open in-depth competition investigations.

Renesas was formed in 2010 by a Japanese government-orchestrated merger of the chip units of Hitachi, Mitsubishi Electric and NEC.

Following the 2011 Fukushima earthquake and tsunami, Renesas was bailed out by the state-backed Innovation Network Corporation of Japan and customer companies including Toyota, Nissan and Panasonic as it also sought to fend off a takeover from KKR, the US private equity firm. INCJ remains its biggest shareholder.