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American private equity firm KKR is planning to list Japanese chip equipment manufacturer, Hitachi (OTC:) Kokusai Electric, on the Tokyo Stock Exchange by the end of the year. This would mark the largest initial public offering (IPO) on the Japan Exchange since 2018, at a time when the chip industry is experiencing a boom and foreign investors are showing renewed interest in the Japanese stock market.
KKR has proposed a valuation of $2.7 billion for Hitachi Kokusai Electric, which is 60% more than what it paid for the company in 2017. The acquisition from Hitachi was part of the conglomerate’s strategy to streamline its activities. The planned IPO is set to occur in the fourth quarter, traditionally a busy period for IPOs.
This development comes amidst an overall recovery in Japan’s IPO market, with the stock index reaching multi-decade highs after rising more than 28% since the start of the year. Ten companies are scheduled to list their shares in Japan this month, with another nine set for October.
The listing of Hitachi Kokusai Electric is also significant for KKR, which previously failed to sell the chipmaker to U.S.-based Applied Materials (NASDAQ:) in 2019 for $3.5 billion. The deal fell through in 2021 due to lack of approval from Chinese regulators.
The planned IPO follows SoftBank (TYO:)’s listing of its telecoms unit in 2018 with a market value of ¥7.2tn ($52bn), and its upcoming listing of chip designer Arm in New York this month. KKR’s decision to list Kokusai comes at a time when global private equity groups are demonstrating increased enthusiasm for opportunities in Japan, as funding for deals has become costlier in the U.S. and Europe but remains low in Japan due to the central bank’s ultra-loose monetary policy.
However, KKR has faced challenges in Japan recently. Marelli, a car parts company it bought and rebranded from Nissan (OTC:), entered court-led restructuring last year after suffering a substantial sales collapse during the pandemic, which raised concerns among Japanese banks and damaged KKR’s reputation in the country.
Despite these setbacks, people close to the IPO plans have stated that KKR intends to list Kokusai between November and December, traditionally seen by bankers as an optimal period for new issuance pitches to investors.
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