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Shares in Kokusai Electric jumped as much as 32 per cent on its stock market debut in Tokyo on Wednesday, valuing the chip equipment maker at $3.6bn and making it Japan’s biggest initial public offering in five years.
Kokusai was bought by US private equity firm KKR in 2017 from Japan’s Hitachi, which was selling off non-core assets in an effort to streamline its business. The deal had valued Kokusai at ¥257bn, or roughly $1.7bn.
On Wednesday, Kokusai raised ¥108bn, after the IPO was priced at ¥1,840 a share, allowing KKR to reduce its stake in the chip tool maker from 73.2 per cent to 47.6 per cent.
As investors flooded the market with buy orders in the first 26 minutes of trading, Kokusai shares opened at ¥2,116, before surging as high as ¥2,436.
The IPO comes after valuations of chip companies and their suppliers took off, with the tech’s strategic importance in the supply chain highlighted by US efforts to restrict Chinese access to advanced semiconductors. However, the industry is suffering from weakening demand in the short term.
Kazuyoshi Saito, an analyst at Iwai Cosmo Securities, said the opening share spike was “reasonable” considering that investors were hopeful that the market for memory chips would recover next year.
“There is also strong demand expected with large-scale national chips projects in the US and Europe” as countries try to build their own semiconductor supply chains owing to the US-China dispute, Saito added.
Kokusai has a significant global market share in machines that can deposit thin films on silicon wafers, which are then used to form electronic circuits for the chips cut from the wafers.
The Kokusai IPO is the biggest since SoftBank listed its telecoms unit with a market value of ¥7.2tn in 2018 and comes after the tech conglomerate listed chip designer Arm in New York last month at a valuation of more than $50bn.
The listing also comes on the back of a broader recovery in Japan’s IPO market, with the Topix stock index trading near a 33-year high and as the country has surpassed China as a driver of investment banks’ revenues from equity fees for the first time in almost 25 years.
Japan is currently riding a wave of interest from foreign investors who are attracted by low interest rates, pressure on companies to improve corporate valuations and the fact that investors increasingly want to diversify their positions away from China.
The IPO 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. Applied Materials still has a 15 per cent position in the company.