KKR to list chip equipment maker as Tokyo experiences IPO revival

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US private equity group KKR is planning an initial public offering for a chip equipment maker on Tokyo’s exchange in the fourth quarter, in what would be the market’s biggest IPO since 2018.

KKR aims to float Hitachi Kokusai Electric at a level that values the company at ¥400bn ($2.7bn), according to two people familiar with the buyout group’s plans. The valuation is about 60 per cent more than what KKR paid for the company when it was bought from Hitachi in 2017 as part of the industrial conglomerate’s shedding of non-core businesses.

Since then, valuations of chip companies and their suppliers have taken off, with the technology’s strategic importance in the supply chain highlighted by US efforts to restrict Chinese access to advanced semiconductors.

The Kokusai IPO is set to be the biggest since SoftBank listed its telecoms unit with a market value of ¥7.2tn in 2018 and would come after the tech conglomerate lists chip designer Arm in New York this month, with a target valuation of up to $52bn.

KKR’s acquisition of Kokusai came at a time when global private equity groups were stressing their enthusiasm for opportunities in Japan — a sentiment that has since intensified as funding for deals has become more expensive in the US and Europe but remain low in Japan because of the central bank’s determination to stick with an ultra-loose monetary policy.

KKR suffered a recent setback with Marelli, a car parts company it bought and rebranded from Nissan. Marelli last year entered court-led restructuring after suffering a huge sales collapse during the pandemic. The suddenness of the Marelli crisis raised red flags among Japanese banks and hurt KKR’s reputation in the country.

People close to the IPO plans said the group intended to list Kokusai during a window between November and December, traditionally the busiest time of the year for listings and seen by bankers as the period in which efforts to pitch new issuance to investors has the strongest following wind. KKR declined to comment.

The listing would come on the back of a broader recovery in Japan’s IPO market, with the Topix stock index at a multi-decade high after rising more than 28 per cent since the start of the year.

Ten companies are scheduled to list their shares in Japan this month, and another nine are set to list in October. The biggest IPO so far this year, of Rakuten Bank, raised $625mn in April.

Bankers said they expected more listings in Tokyo towards the end of the year after companies were forced to put off their IPO plans last year due to geopolitical uncertainties related to US-China tensions.

The IPO also follows an earlier attempt by KKR to sell the chipmaking equipment business to US-based Applied Materials in 2019.

The $3.5bn deal fell apart in 2021 after it failed to gain approval from Chinese regulators.

Additional reporting by Nicholas Megaw in New York