In a significant market debut, Kokusai Electric, a leading chip equipment manufacturer, experienced a remarkable 28% surge in shares during its Tokyo market entry. The private equity firm KKR orchestrated the IPO, generating $724 million, marking Japan’s most substantial initial public offering in half a decade.
Closing at 2,350 yen, the stock’s value reached 541.5 billion yen ($3.61 billion), as eager investors seized the opportunity following the unusual IPO of a pivotal chip tool producer. Kokusai initially priced its shares at 1,840 yen, constituting the largest Tokyo listing since telecommunications giant SoftBank Corp.’s public offering in 2018. This event provided a partial exit for KKR, which reduced its stake from 73.2% to 47.7%.
Tomoichiro Kubota, an analyst at Matsui Securities, remarked, “The market for chip related stocks outside of AI is weak so some were wondering what would happen. In the end, the company had a good start.”
While chip tool manufacturers faced challenges due to a downturn in electronics demand, including smartphones and PCs, Kokusai’s exposure to memory chip demand positions it well for an anticipated market recovery. Additionally, the company has opportunities for expansion in other segments, according to Kazuyoshi Saito, an analyst at Iwai Cosmo Securities.
Although smaller compared to competitors like Tokyo Electron, Kokusai specializes in producing machines for depositing films on silicon wafers. Notably, Samsung Electronics, TSMC, and Micron Technology contribute to over 40% of its revenue.
Kokusai projected an operating profit of 29.1 billion yen for the fiscal year ending in March, signifying a 48% decrease from the previous year. Fumiyuki Kanai, President of Kokusai Electric, acknowledged the current challenges, emphasizing that customer inventory reduction has commenced. He anticipates growth to resume from late next year into 2025.
KKR’s involvement with Kokusai began in 2017 when it acquired Hitachi’s electronic equipment unit. The subsequent spin-off of Kokusai in the following year led to a proposed sale to competitor Applied Materials in 2019. However, the $3.5 billion deal was abandoned due to regulatory hurdles in China. Kokusai anticipates KKR will gradually divest its stake over time.
Notable investors like Capital Research and Management, along with Lazard Asset Management, demonstrated commitment by participating in the IPO. The portion available to foreign investors was oversubscribed by over 10 times. Applied Materials has accumulated a 15% shareholding in Kokusai over the past three years. While the two companies have initiated collaboration, Kokusai does not anticipate further stake-building by Applied.
Kokusai’s debut aligns with a surge in equity offerings in Tokyo, benefiting from favorable interest rates, support from Warren Buffett, and a shift in investor focus away from China.
