Mitsui Chemicals said on Monday it will acquire chipmaking materials maker JSR from state-backed fund Japan Investment Corp for 1.84 trillion yen ($11.61 billion), with the Development Bank of Japan also investing.
The deal is the largest in Japan's chemicals sector and stands to reshape the chip supply chain as the government moves to boost its competitiveness. It exceeds Showa Denki's $4.55-billion acquisition of Hitachi Chemical in 2020.
While acquiring JSR will significantly expand Mitsui Chemicals' chip materials business, market participants are questioning the business rationale and the heavy debt load the price will entail.
Buying JSR is "not simply about strengthening our semiconductor materials business, but a strategic deal to accelerate the transformation of our portfolio," Mitsui Chemicals CEO Satoshi Ichimura told a press conference.
Mitsui Chemicals will sell shares worth up to 150 billion yen to help finance the transaction, according to a filing, and take out a bridge loan of 1.64 trillion yen, to be partially paid back through the equity raise.
In addition, it will take out bank loans, issue debt and use mezzanine financing to shore up its capital base to fund the transaction.
DBJ will invest 200 billion yen. Its stake will be converted into non-voting preferred shares.
Shares of Mitsui Chemicals slumped 8.5% on Monday, extending their slide when Reuters reported it was the final buyer for JSR last week.
Mitsui Chemicals' market capitalisation stood at 664.6 billion yen, LSEG data showed, based on Friday's closing price.
When JIC, which is overseen by Japan's finance ministry, bought JSR for 900 billion in 2024, it said it planned to use the business to drive consolidation in the semiconductor materials sector.
The fund is instead selling JSR to a domestic chemical major as it takes advantage of a lift in the valuation of chip-related firms fuelled by the AI boom.
The companies have strengths in different materials, but "simply having these materials does not mean they can immediately generate significant synergies," said Shogo Ikeuchi, CEO of JIC Capital.
By leveraging each other's technology, talent and business foundations they "could create significant new growth opportunities," he said.
Mitsui Chemicals plans to sell off JSR's life sciences unit and other non-core businesses to raise JSR's value, aiming to regain a sound financial position within three years, it said.
JST makes the photoresists used to transfer circuit patterns onto semiconductor wafers. Mitsui Chemicals is expanding its chip materials business and aims for additional annual profit of 40 billion yen through the JSR buy, it said.
Ikeuchi said seven or eight potential buyers were considered in talks held since spring. Reuters first reported JIC was considering selling JSR in May.
"We placed the greatest importance on whether (the buyer) could become a semiconductor materials platform that supports Japan five or 10 years from now," Ikeuchi said.
($1=158.4500 yen)
(Reporting by Anton Bridge and Miho Uranaka; Writing by Sam Nussey; Editing by Clarence Fernand and Christopher Cushing)
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