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A takeover bid from Germany’s Merck prompted JSR, a Japanese chip materials maker, to seek a buyout from a state-backed fund, in a deal that has sparked investor scrutiny on rising government intervention in the country’s semiconductor industry.
Four people with direct knowledge of the talks said it was Merck’s bid for JSR, which was not disclosed to shareholders, that led to the $6.4bn tender offer in June from the Japan Investment Corporation, a fund overseen by the Ministry of Economy, Trade and Industry.
JSR commands a third of the global market share of photoresists, specialist chemicals used to print circuit designs on chip wafers. Its clients include the world’s biggest chipmakers Samsung, TSMC and Intel.
Merck, a healthcare to life sciences group, submitted a takeover offer for JSR in the autumn of 2022, according to the four people familiar with the situation.
The people added that Merck’s formal offer — which was considered and rejected by JSR’s management — was followed by similar approaches from at least two private equity houses. One of the buyout funds presented ideas including carving out JSR’s non-core businesses and taking the company private, according to two of the people. JIC declined to comment on the offers.
Immediately afterwards in November 2022, JSR approached JIC, leading to the $6.4bn take-private deal in June. The offer has shocked JSR investors and clients as a bold move, even at a time when countries are battling for technological supremacy and control over the global semiconductor supply chain.
However, the deal has yet to move ahead. The fund has since pushed back the planned launch of its tender offer from late December to at least late February, blaming the delay on a Chinese antitrust review.
Shares in JSR have fallen nearly 7 per cent since hitting a 2023 high in late June over concerns about whether JIC’s offer would get clearance from global antitrust authorities, and the company’s weak financial performance.
Three JSR shareholders questioned whether there had been a fair market check before the company agreed to a deal with JIC. The deal leaves a “big question mark” over when the government might next intervene in the private sector to ensure economic security, said one investor.
Senior trade ministry officials have said that the government would not intervene in the management of a listed company and would have been open to considering any rival offer to JIC’s bid.
JSR’s chief executive Eric Johnson has consistently stressed that the company had initiated discussions with JIC, saying its backing would help to accelerate both the restructuring of the company as well as the industry.
“Going private with JICC will provide JSR with more flexibility and agility in the management decision making that is critical to the medium and long-term growth strategies required in the industries in which we operate,” the company said in a statement to the Financial Times.
In a previous interview, Johnson said that the company had not received any offers from private equity firms. “There were no discussions with anybody else,” he said. JSR declined to comment when asked whether there was a takeover offer from Merck.
However, people with knowledge of the deal said JSR wanted JIC to set a sufficiently high premium — offering ¥4,350 per share or a 35 per cent premium to the previous day’s closing price — to scare off rival bids and satisfy activist fund ValueAct, a partner of which sits on JSR’s board.
Merck has been pushing to bulk up its performance materials unit as chipmakers and their suppliers seek to profit from an explosion of demand for data centre chips that power generative AI services.
The family-backed company bought London-listed speciality chemicals group AZ Electronic Materials for £1.6bn, including debt, in 2014. In October 2019, Merck also completed a €5.8bn acquisition of US-based Versum Materials, which makes critical components used in semiconductors.
Merck declined to comment.
