SK hynix is now Kioxia's biggest shareholder, but taking control won't be easy
Kioxia said that BCPE Pangea Cayman2, known as SPC2, owned 14.19% of its shares as of July 31. Toshiba's stake fell to 14.12% after it sold shares in the market last month, putting SPC2 in the top position. Read Entire Article
SK hynix has emerged as the largest shareholder in Kioxia, but gaining control over the Japanese flash-memory company is not a straightforward task. A SK hynix investment vehicle holds 14.19% of Kioxia's shares as of July 31, surpassing Toshiba's 14.12% stake. However, SPC2, owned by SK hynix, can convert its convertible bonds into Kioxia common shares at any time, potentially making SK hynix the largest direct shareholder.
This shift in ownership does not automatically grant SK hynix the ability to influence Kioxia's management. Kioxia has warned that a larger stake held by SK hynix could create conflicts of interest between the two NAND flash suppliers. Additionally, both companies are major players in the market, with Samsung Electronics leading in global NAND flash revenue and SK hynix and Kioxia following closely.
The investment agreement between SK hynix and Kioxia, established in 2018, restricts SK hynix from holding more than 15% of Kioxia's voting rights until 2028. Despite reaching this threshold, SK hynix would still need approval from the Japanese government before converting the bonds and securing voting rights. Furthermore, any such move would face scrutiny from competition authorities in multiple countries.
The stakes in the NAND market are significant, with SK hynix and Kioxia holding 18% and 14% of the global NAND flash revenue, respectively. SK hynix's investment in Kioxia amounted to $2.75 billion, with SK hynix itself providing 3.9 trillion won through two Bain Capital special-purpose companies. Although one of the special-purpose companies, SPC1, exited Kioxia in June, SK hynix has not disclosed the earnings from this investment.
Kioxia's share price peaked at 112,700 yen in June before plummeting over 50% to around 49,000 yen, following a patent lawsuit loss, concerns over NAND demand slowdown, and Bain Capital's July exit. SK Group Chairman Chey Tae-won stated that no decision has been made regarding SK hynix's potential sale of its Kioxia investment or using it as strategic leverage.
Experts suggest that SK hynix will likely seek to leverage its stake in other ways rather than gaining full management control.
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