Japan fund eyes JSR buyout as Tokyo ramps up chip intervention

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)