Japanese chip-equipment maker Kokusai Electric Corp. jumped in Tokyo on Wednesday after the largest initial public offering in the country since 2018.
Shares ended 28% higher at ¥2,350, compared with the IPO price of ¥1,840. Kokusai, which supplies chipmaking gear to industry names including Intel Corp., spun out of Hitachi Kokusai Electric Inc. after American private equity firm KKR & Co. bought the company in a tender offer in 2018.
Asked about his reaction to the first day of trading, Chief Executive Officer Fumiyuki Kanai said it gave him confidence.
“The first thing I felt was a sense of security,” he said in a briefing in Tokyo. “I am confident that this is a company that can continue to grow.”
Kanai added that he will pursue mergers and acquisitions if they are beneficial to the business. He added that KKR’s support has been helpful for recruiting talent and scouting deals.
“We never felt inconvenienced by being under KKR as it has always been a good supporter in pursuing strategy and investment,” he said. “We want it to remain as our backbone for the time being.”
Kokusai competes with larger rival Tokyo Electron Ltd. in the specialized field of film deposition machines that’s crucial to producing advanced chips. KKR sold about 58.8 million shares in the company to raise ¥108 billion ($721 million). Shares were sold at the top of a marketed range, in the biggest IPO hosted in Tokyo since SoftBank Corp.’s ¥2.4 trillion listing in December 2018.
The offering comes as activity in the country’s domestic market for new share sales picks up. IPO proceeds this year are about three times higher than the same period in 2022, according to data compiled by Bloomberg. Companies that listed in Tokyo after raising between $500 million and $1 billion over the past five years rose by an average 15% in their first day of trade, compared with 33% across Asia Pacific.
KKR pulled off what many private equity firms have tried — and failed — to do in Japan. It acquired an obscure division of a Japanese conglomerate, overhauled operations and then took the company public for what looks like a sizeable return.
KKR bought the business for ¥257.1 billion, its valuation at the IPO was around ¥424 billion and its first-day closing is about ¥540 billion. That simple calculation probably understates KKR’s return. It already sold off one division of the business and borrowed a portion of the purchase price.
One indication of the original investment may be the strike price for options granted as incentives to management, which is ¥167, according to the documents. That would make KKR’s return on the deal about 14 times. More than 100 employees received options in the transaction.
Kokusai Electric’s debut takes place amid geopolitical tension over chips, with the US government and allies such as Japan tightening controls over the export of chip technology to China, the biggest market in the world.
Read more: KKR Poised for Kokusai Payoff With Biggest Japan IPO Since 2018
--With assistance from Edwin Chan, Yuki Furukawa and Takashi Mochizuki.
(Updates with CEO’s comments from third paragraph)
