Exclusive-Japan fund JIC plans to sell JSR to Mitsui Chemicals, sources say

The Japan Investment Corp (JIC), a state-backed fund, is set to sell chipmaking materials company JSR to Mitsui Chemicals, sources reveal. The transaction could surpass 1.3 trillion yen ($8.20 billion), with a potential decision emerging within the next month, according to two well-informed individuals. Both sources have requested anonymity due to the unpublicized nature of the information.

JIC, JSR, and Mitsui Chemicals have not provided responses to inquiries for comment. This acquisition is poised to reshape Japan's semiconductor supply chain, as the government aims to bolster the nation's competitiveness. However, market observers view it as a substantial acquisition for Mitsui Chemicals to manage financially. Mitsui Chemicals' shares declined by 13% following Reuters' initial report on the matter.

JIC had acquired JSR for approximately 900 billion yen two years ago, intending to leverage the business to consolidate the semiconductor materials sector. The fund is capitalizing on the rising valuation of chip-related firms due to the surge in AI investment, thus opting to sell JSR to a domestic chemical giant. Established in 1957, JSR is a prominent manufacturer of photoresists, which are essential for transferring circuit patterns onto semiconductor wafers.

Mitsui Chemicals, which is also bolstering its chip materials business, boasts a market capitalization of around 800 billion yen. Concerns over the considerable funding required have surfaced, as noted by Tsutomu Yamada, an analyst at Mitsubishi UFJ eSmart Securities, regarding the share decline. The deal might be among the largest in Japan's chemicals sector, surpassing the 2020 merger between Showa Denko and Hitachi Chemical, which formed Resonac Holdings.

With 217.8 billion yen in cash and cash equivalents and 876.4 billion yen in interest-bearing debt as of June, Mitsui Chemicals possesses a debt-to-equity ratio of 0.75. Yamada suggests that integrating JSR's semiconductor expertise could enhance Mitsui Chemicals' standing in the sector and trigger a re-rating. JIC, overseen by the trade ministry, was established in 2018 to invest in companies aimed at enhancing Japan's competitiveness.

Notable investments of JIC include medical equipment manufacturer Topcon and private equity firm KKR.