Applied Materials revises offer for Japan's Kokusai Electric

US-listed Applied had expected the deal to close by the end of 2020. The deadline has now been extended to March, allowing more time to secure regulatory clearance from the Chinese authorities, according to a filing. The increase in the offer price was driven by “a more favorable long-term outlook for the overall semiconductor equipment market, including positive trends in the memory segment” and “higher valuations for companies like Kokusai Electric that help enable the semiconductor industry.”

The company specializes in high-productivity batch processing systems and services for memory, foundry and logic customers. Batch processing systems feature in the coating and thermal part of the semiconductor manufacturing process. The thinner the film, the greater the functionality of the semiconductor. Kokusai Electric employs approximately 1,900 people in Japan and Korea. Key customers include Samsung, TSMC, and Intel. Revenue came to $1.48 billion in 2018, up from $1.18 billion in 2017.

Applied, which supplies equipment and software used to produce semiconductor chips that feature in a range of electronics devices, expects Kokusai Electric to complement its existing capabilities in single-wafer processing systems.

KKR completed its purchase of Kokusai Electric from controlling shareholder Hitachi in December 2017 through a tender offer that valued the business at JPY322 billion ($2.9 billion). The initial proposal was submitted eight months earlier, but the deal had to be sweetened in response to strong financial performance by the underlying business and pressure from activist fund Elliott Management.

Kokusai Electric repurchased a 51.67% stake held by Hitachi and the company was then split in two, with KKR owning 100% of the thin-film division and 60% of the video and communication division. Hitachi and Japan Industrial Partners (JIP) each hold 20% of the latter business.

Kokusai Electric was the second announced exit from KKR's third pan-regional fund. The first – which has closed – was the sale of Korean copper foils manufacturer KCF Technologies. Last year, the private equity firm secured an exit for Fund II in Japan as AlphaTheta Corporation – a DJ equipment manufacturer carved out from Pioneer Corporation – was sold to Noritsu Koki for an enterprise valuation of JPY65 billion.

KKR’s other PE activity in Japan in 2020 included an equity cure and refinancing for Marelli, a global automotive components supplier formed when Calsonic Kansei Corporation merged with Europe-based Magneti Marelli. It also agreed to buy a majority stake in Seiyu, a supermarket operator controlled by Walmart, at a valuation of JPY172.5 billion. The objective is to reposition the company, which has more than 300 stores nationwide, as an omnichannel retailer with a stronger online presence.

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• Topics
• North Asia
• Trade sale
• Industrials
• Japan
• KKR
• manufacturing
• semiconductor