Japan fund eyes JSR buyout as Tokyo ramps up chip intervention (updated)

JSR

26/06/2023 02:39

(Recasts, adds analyst comments, share reaction)
    By Sam Nussey and Tim Kelly
       TOKYO, June 26 (Reuters) - Semiconductor materials maker
JSR Corp's  4185.T  board will meet on Monday to discuss a
potential multi-billion dollar buyout by a government-backed
fund that would mark an acceleration of Japan's efforts to
strengthen its chip industry.
    JSR's market capitalisation was 677 billion yen ($4.73
billion) at Friday's market close. Its shares were untraded with
a glut of buy orders on Monday after the maker of photoresists
for global chipmakers said on Saturday it was considering a deal
to be acquired by Japan Investment Corp (JIC), which is overseen
by the powerful trade ministry. 
    An acquisition by JIC would be the latest in a series of
increasingly muscular moves by Japan to juice up its chip
industry, which has an edge in materials and equipment but has
lost overall global market share in recent decades. 
    JSR is a top supplier of photoresists, which are
light-sensitive chemicals used to print patterns on wafers. 
    "Japan has a monopoly, with China and others yet to develop
this technology," said Kazuhiro Sugiyama of research firm Omdia.
"The Japanese government is probably moving to prevent the
outflow of sensitive technology overseas." 
    JSR's local peers include Tokyo Ohka Kogyo  4186.T ,
Shin-Etsu Chemical  4063.T  and Sumitomo Chemical  4005.T .
Tokyo Ohka shares jumped 15% on the news. 
    JIC would spend about 1 trillion yen on the JSR acquisition,
the Nikkei newspaper reported, injecting 500 billion yen into a
new company to make the purchase and borrowing 400 billion yen
from Mizuho Bank. 
    JSR approached JIC about potential backing, an industry
ministry official said. 
    The company needs to invest heavily in research and
development and to expand capacity as demand grows, said the
official, who declined to be named because they are not
permitted to speak with media. 
    Countries around the world are moving to tighten control
over the supply of semiconductors, which are essential to the
functioning of the defence, electronic and automotive
industries, amid elevated tensions between China and the United
States. 
    "JIC is starting here. It would surprise me quite a bit if
that is where they stopped," Travis Lundy of Quiddity Advisors
wrote in a note on Smartkarma. 
    While Japan has a long and mixed record of intervening to
save floundering industrial players, a move to take private a
profitable company that has already undergone restructuring
risks criticism for potential overreach.
    JSR, which was set up in 1957 as a government-backed
producer of synthetic rubber, reported a 20% jump in sales to
408.9 billion yen in the year ended March, while operating
profit declined 33% to 29.4 billion yen. 
    Shares in JSR, which unusually for a Japanese company has a
foreign-born CEO, have gained 25% year-to-date. Activist
investor ValueAct Capital is a major shareholder and has an
executive on the board. 
($1 = 143.2600 yen)

 (Reporting by Sam Nussey, Tim Kelly and Miho Uranaka; Editing
by Jamie Freed)
 ((sam.nussey@tr.com;))