Japan’s Mitsui Chemicals to buy chip materials maker for $12b

Mitsui Chemicals, Inc. announced on Monday that it has reached an agreement to acquire chip materials maker JSR from JIC Capital for 1.8 trillion yen, or $11.6 billion. The investment will bolster Mitsui's capabilities in chipmaking technology. The venture capital arm of the Development Bank of Japan will contribute an additional 200 billion yen to the deal.

Mitsui believes that the merger will make the combined entity the largest semiconductor materials producer in Japan based on sales. The firm anticipates generating approximately 40 billion yen in additional profit annually by the year 2035.

Mitsui plans to finance the acquisition via a combination of 1.64 trillion yen in bridge loans from its primary banks and a 200 billion yen equity investment from DBJ. However, the company cautioned that its debt-to-core-earnings ratio will temporarily surpass 4.0 following the acquisition. To maintain a favorable credit rating, Mitsui intends to refinance the bridge loan within one year of completing the deal.

Following the news of the acquisition, Mitsui's shares increased by 1.3% on Monday. The stock had previously declined nearly 12% on Friday after Reuters first reported on the potential deal.