Japan's JSR says exit of foreign investors will free it to make deals

JSR

28/07/2023 07:28

By Sam Nussey, Miho Uranaka and Makiko Yamazaki
       TOKYO, July 28 (Reuters) - JSR Corp  4185.T , which
plans a $6.4 billion sale to a government-backed fund, says the
deal to go private will free it from the difficulty of managing
its large foreign investor base and make it easier to pursue
deals in the chip materials sector. 
    The announcement last month that JSR would be bought by
Japan Investment Corp, which is overseen by the trade ministry,
was met with surprise in the materials sector with some analysts
and chip industry executives questioning the need for such an
intervention or scope for meaningful industry change. 
    Eric Johnson, the American-born CEO of JSR, a top
manufacturer of photoresists used in chip making, said going
private should ease concerns from possible partners about the
risk of changes to the company's ownership or strategy. 
    "When we're 50% foreign owned that gives people pause within
Japan," Johnson said in an interview.
    "It's a burden for any public CEO and in the context of
trying to drive strategic M&A within Japan, it's especially
difficult." 
    While hardly a household name, JSR plays a leading role in
the global semiconductor supply chain and is tied to defining
issues for corporate Japan: efforts to strengthen its chip
industry and the increasingly visible role foreign investors are
playing across the world's No.3 economy.  
    Johnson said he previously had "high-level" discussions with
potential partners but believes the new ownership structure will
open doors. 
    "We can enter into these partnering discussions with a much
more stable foundation," Johnson said.  
    JSR, a supplier to chipmakers such as TSMC  2330.TWO ,
Samsung  005930.KS  and Intel  INTC.O , has investors including
ValueAct Capital, which has a seat on the board.  
    JSR management was frustrated by ValueAct intervening in
company strategy and one motivation for the go-private deal was
to exit the activist investor from its shareholder register, two
people familiar with the matter said. 
    Johnson said that was not the case. 
    "The board should challenge and try to drive me to make the
best possible decisions for the company," Johnson said,
emphasising he was not speaking about a specific board member.  
    "It's not true that I'm feeling particular pressure from a
particular shareholder and therefore I want to jettison that
pressure," he said.  
    Companies often view the presence of an activist investor as
a challenge to their strategy or a factor that could delay
execution of their plans. 
    ValueAct declined to comment. The activist investor
previously praised JSR's "fact-based decision making" and said
it supports the sale to JIC. 
    Analysts have questioned how JSR will drive change in
Japan's materials sector, which remains world beating even as
the country has ceded dominance in chip manufacturing. 
    "There are many companies that are already competitive in
the materials industry and it is difficult to see synergies
through consolidation," said Atsushi Ikeda, an analyst at
Goldman Sachs. 
    "However it would lead to cost reductions in areas such as
pooling of development costs and inspection equipment," Ikeda
said. 
    Yuta Nishiyama, an analyst at Citigroup, said that if JSR
can "monopolise technological capabilities" it would boost its
competitiveness.
    "But that doesn't contribute to the Japanese semiconductor
materials industry overall," he said. 
    JSR said there is scope for meaningful deals.
    "I don't think they're being imaginative enough ... there's
a wide range of materials expertise in Japan," Johnson said. 

 (Reporting by Sam Nussey, Miho Uranaka and Makiko Yamazaki;
Additional reporting by Svea Herbst-Bayliss; Editing by Stephen
Coates)
 ((sam.nussey@tr.com;))