Kokusai Electric shares jump 28% in Tokyo debut

By Sam Nussey and Miho Uranaka

TOKYO (Reuters) -Kokusai Electric shares jumped 28% in their Tokyo market debut on Wednesday after private equity firm KKR sold shares in the chip equipment maker for $724 million in Japan’s largest initial public offering (IPO) in five years.

The stock closed at 2,350 yen, valuing the company at 541.5 billion yen ($3.61 billion) as investors grabbed shares following the rare IPO of a key chip tool manufacturer.

Kokusai had priced its shares at 1,840 yen in the largest Tokyo listing since telco SoftBank (TYO:) Corp went public in 2018, providing a partial exit for KKR, which has cut its stake to 47.7% from 73.2% without overallotment.

“The market for chip related stocks outside of AI is weak so some were wondering what would happen,” said Tomoichiro Kubota, analyst at Matsui Securities.

“In the end the company had a good start,” he said.

Chip tool makers have suffered from a downturn in the market for electronics such as smartphones and PCs, with early euphoria over advances in generative artificial intelligence also cooling.

While Kokusai is exposed to slumping demand for memory chips, that market is expected to rebound, and the tool maker will also able to expand in other segments, said Kazuyoshi Saito, an analyst at Iwai Cosmo Securities.

A minnow compared to rivals such as Tokyo Electron, Kokusai makes machines for depositing films on silicon wafers, with Samsung Electronics (KS:), TSMC and Micron Technology (NASDAQ:) accounting for more than 40% of its revenue.

The company forecast an operating profit of 29.1 billion yen in the year ending March, a 48% drop compared to a year earlier.

“The situation is still difficult and some question if we have hit bottom but it is a fact that customer inventory has started to decrease,” Kokusai Electric President Fumiyuki Kanai said, adding he sees growth returning from the end of next year into 2025.

KKR agreed to buy Hitachi (OTC:)’s electronic equipment unit in 2017 in a deal valuing the business at 257 billion yen ($1.72 billion) as the conglomerate streamlined operations.

The private equity group then spun off Kokusai the following year and sought to sell Kokusai to competitor Applied Materials (NASDAQ:) in 2019, but the $3.5 billion deal was terminated after failing to obtain regulatory approval in China.

Kokusai expects KKR to gradually reduce its stake over time.

Capital Research and Management and Lazard (NYSE:) Asset Management committed to buy shares in the IPO, with the portion available to foreign investors more than 10 times oversubscribed, Reuters reported previously.

Applied Materials has built a 15% shareholding in the company over the last three years.

The two companies have begun cooperating but Kokusai does not expect Applied to continue building its stake, Kanai said.

Kokusai’s debut comes as equity offerings in Tokyo have surged with Japan benefiting from lower interest rates than other countries, backing from billionaire Warren Buffett and rotation by investors out of China.

($1 = 149.8500 yen)