INCJ-backed Japan Display agrees $2.1b foreign bailout

Taiwanese touchscreen maker TPK Holding will contribute about $1.4 billion to the refinancing. Harvest and TPK will take a combined 65.4% stake in Japan Display via an entity known as Suwa Investment Holdings, while INCJ will see its position fall from 25.3% to 8.7%. INCJ will also provide bridge loans worth up to JPY107 billion to meet the company’s funding needs until the transaction has closed.

According to a filing, the transaction will allow the company to expand its business in both liquid crystal display (LCD) and organic light-emitting diode (OLED) technologies. Japan Display, which was formed in 2012 by Sony, Toshiba, and Hitachi, has been criticized for failing to effectively transition its LCD-focused operations toward the more advanced OLED segment.

Sales were down 19% in 2018 to JPY717.5 billion, with the company citing lower demand for LCDs as smart phone makers transitioned to OLED systems. Japan Display posted a net loss of JPY411.1 million in 2018 versus a loss of JPY52.6 million the prior year. The stock spiked 16% to JPY88 following the announcement of the deal and was trading at JPY81 as of late morning on April 15.

The deal marks the second foreign takeover of a significant but struggling Japanese tech manufacturer since last year, when a consortium led by Bain Capital Private Equity acquired chip maker Toshiba Memory Corporation for JPY2 trillion. The deal, which included participation by INCJ, was the largest ever PE-backed transaction in Asia by enterprise value.

OLEDs are recognized as brighter, thinner, more energy efficient, and more physically flexible than LCDs, which has encouraged rapid adoption by major electronics manufacturers and increased investment interest in upstream suppliers. Last week, INCJ led a JPY25.5 billion round for JOLED, a company set up by Sony and Panasonic launching two OLED panel production facilities.

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• Topics
• North Asia
• Technology
• Buyouts
• Japan
• Innovation Network Corp. of Japan (INCJ)
• Harvest Fund Management
• Distress