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Japanese semiconductor equipment maker JSR has received a multibillion-dollar takeover offer from a state-backed fund in what investors say is a potentially “shocking” move by the government to interfere in the country’s chip industry.
JSR’s board is scheduled to meet on Monday to discuss the proposal from Japan Investment Corporation, a government-backed fund overseen by Japan’s Ministry of Economy, Trade and Industry.
The proposed deal would value the company at as much as 1 trillion yen ($7 billion), two people familiar with the matter said. The offer would represent a significant premium to JSR’s $4.7 billion market capitalization at Friday’s close. The company’s shares were not traded Monday morning due to an oversupply of buy orders.
As the U.S. and China face off in an emerging “chip war” through increasingly aggressive industrial policy initiatives, the Japanese government has been doing all it can to protect and nurture the country’s semiconductor industry.
Tokyo-based JSR has a 30% global market share for photoresists, chemicals used in the process of printing circuit designs on chip wafers. The company’s clients include Intel, Samsung and Taiwan’s TSMC.
Government officials have highlighted the company’s importance in Japan’s industrial policy as Japan seeks to revive the semiconductor industry to shore up economic security and supply chains for key technologies.
JSR may be seeking participation from a government-backed fund, the people said, as the company looks to streamline non-core units to focus on expanding its main photoresist business. They also warned that the company would study options beyond JIC’s acquisition.
A trade ministry official said the deal negotiations were being led by the JSR, not the JIC.
Damian Thong, a semiconductor analyst at Macquarie in Tokyo, said JIC could become a buyer of a profitable company, in line with the changing role of the fund under the trade ministry.
“The government has gone from bailout failure to support success,” Tong said.
A person close to JSR’s senior management said the proposed deal came as a surprise to some executives and did not appear to be led by JSR itself.
A fund manager with investments in Japan that includes JSR shares said: “This deal seems to have popped up and it will be very interesting to hear how the government justifies pumping taxpayers’ money into a profitable company. If we’re looking for interventionism That would be an amazing approach for the new era.”
Under the currently proposed deal, JIC would create a new company with at least $3 billion of JIC’s own capital injection, according to a person familiar with the matter. Banks led by Mizuho Bank will provide at least $2.5 billion in financing. Mizuho, already among JSR’s top 10 shareholders, declined to comment. JIC also declined to comment.
JSR’s largest shareholder is the US rights protection fund ValueAct, which holds about 9% of the shares. It has previously held major positions in Olympus and Seven & i Holdings.
In 2021, ValueAct successfully nominated partner Robert Hale to its Board of Directors. JSR said at the time that Hale would “help the company make key strategic decisions,” and people close to the company said ValueAct has since been discussing various strategic issues behind the scenes with management.
JSR is unusual among Japanese companies in that its chief executive, Eric Johnson, an American, is a foreigner.
In an interview with the Financial Times last year, Johnson expressed doubts about China’s ability to master cutting-edge chip-making technology, in which JSR’s products play a vital role.
He said he wanted to strike a balance between being able to serve Chinese clients “respectfully” and “responsibly” with “concerns about the U.S. government and protecting Japanese interests”.