The Japanese government has announced a deal to buy out and privatise JSR Corp., the world leader in chip-making compounds, for $6.3bn. The government-backed Japan Investment Corp. plans to offer $30.40 per share to shareholders in a tender offer that is expected in December. This is roughly a 35% premium to JSR Corp.’s closing amount on Friday, and JSR believes that shareholders could receive up to $8.1bn through the deal.
JSR Corp. is the world's leading maker of photoresists, compounds essential to the manufacture of advanced semiconductors and is one of only three companies, along with Shin-Etsu Chemical Co. and Tokyo Ohka Kogyo Co., to control the global supply of fluorinated polyimide and hydrogen fluoride. These compounds are needed to make semiconductors used in supercomputers, AI-harnessing data centers, missile control systems, and popular gadgets such as Apple iPhones.
Direct control of the critical materials needed for pioneering chips would give Japan significant leverage in a world divided by the escalating US-China technological rift. Japan is keen to regain some of its lost leadership in semiconductors and the Japanese government is offering billions of dollars in subsidies to triple domestic production of chips by 2030.
JSR Corp. CEO Eric Johnson believes that the move will help the Japanese materials sector consolidate and pool resources to develop new technologies as competition intensifies among clients. Moreover, he believes that both the government and JSR Corp. have the same goal, namely the need to drive scale.
Growing tech protectionism is pushing policymakers globally to go upstream in the supply chain to find additional chokepoints by which to control technologies. The US spearheaded a push in October to limit China's access to advanced semiconductors, and other countries have since followed suit to curb exports of equipment and technology. German policymakers also discussed plans to restrict China's access to chip chemicals.
Investors reacted positively to the news, with shares in JSR Corp. rising by 22%, the most seen since 1999. Shares in JSR Corp.’s peers, Shin-Etsu Chemical Co. and Tokyo Ohka Kogyo Co., rose by 1.5% and 9.1% respectively, while other Japanese chip materials suppliers also experienced gains.
According to SMBC Nikko analyst Go Miyamoto, "The semiconductor materials business is becoming increasingly important as a matter of national policy." Valuations for other semiconductor materials stocks are expected to rise "if investors start to price in similar possible acquisitions." Johnson indicated that JSR Corp. plans to relist in five to seven years.