Japan’s Hoya Corp offered to spend as much as ¥147.7bn ($1.35bn) for NuFlare Technology Inc, seeking control of the Toshiba Corp affiliate in a rare hostile takeover bid among Japanese companies.
Hoya is seeking a minimum of 66.7% of the chip-equipment manufacturer and plans a tender offer of 12,900 yen a share, trumping Toshiba’s own earlier bid to buy out public shareholders at 11,900 yen a share.
Hoya said it hasn’t discussed the bid with NuFlare and doesn’t know whether the target will support its offer.
Toshiba affiliates own more than half of NuFlare’s shares.
Toshiba has stumbled from disaster to fiasco in recent years, paying a record fine in an accounting scandal and then losing billions on a foray into nuclear power.
It sold off a chunk of its crown jewel memory chip business last year to help pay for the losses.
The Hoya offer comes just weeks after Toshiba said it would spend about ¥200bn to take three affiliates private, including NuFlare.
“From a supply chain point of view, it makes sense for Hoya to add NuFlare’s equipment which uses semiconductor blanks the company already makes,” said Masahiko Ishino, an analyst at Tokai Tokyo Research Centre. “For Toshiba, on the other hand, semiconductors are no longer a core business.”
Blanks are glass squares slightly bigger than a CD case that act as a stencil for chip designs.
Hoya and AGC Inc are the only companies in the world that make the blanks used in next-generation extreme ultraviolet lithography, a technology being adopted by Samsung Electronics Co, Taiwan Semiconductor Manufacturing Co and Intel Corp.
NuFlare makes electron beam lithography equipment. “Our proposal has merits for all the parties involved,” said Hoya spokesman Taishi Arashida. “We see potential for synergy, while NuFlare could benefit from a boost to its business. For Toshiba, it’s an attractive price.”
Daiwa Securities Group Inc is advising Hoya, while Nomura Holdings Inc is working with Toshiba.
NuFlare’s shares had more than doubled this year before the Hoya bid and jumped as much as 12% to ¥13,410 in Tokyo on Friday, the biggest intraday gain in a month.
Toshiba was little changed, while Hoya was up 2.3%.
“The best way for NuFlare to maximise its value is as a fully-owned subsidiary of Toshiba,” said Midori Hara, a Toshiba spokeswoman.
There is no change in its plans to complete the deal and the price offered is appropriate, Hara said.
Toshiba will ultimately have control over what happens, but it may decide to let NuFlare management decide which option would be better for its business, said Travis Lundy, a special-situations analyst who publishes on Smartkarma.
“NuFlare would have to agree,” he said. “Toshiba wouldn’t sell the child to the stranger if the child is holding onto Toshiba’s pant legs saying ‘I don’t want to go!”’ This isn’t Hoya’s first brush with Toshiba.
The company owns 9.9% of the Toshiba chip unit that was spun out last year, which is now called Kioxia.
Hoya’s participation in the deal was crucial to regulatory approval because together with Toshiba’s 40.2% stake it gave Japanese companies a majority stake in the flash memory company.
The country’s government had expressed concern about the crucial technology falling into foreign hands.
The NuFlare bid could be Hoya’s biggest deal to date.
The company acquired Pentax Corp for ¥112bn in 2007 and paid $476mn for Performance Optics in 2017.
It invested ¥27bn in Kioxia.
Hoya, named after the West Tokyo neighbourhood where it was founded in 1941, is a glass maker with more than 37,000 employees worldwide and about $5bn in annual revenue.
The company gets about half of its sales from contact lenses and glasses, while a quarter comes from glass substrate used in the manufacturing of semiconductors and hard disk drives.
Complicating matters is the participation of Yoshiaki Murakami, one of the country’s highest profile activist investors.
Minami Aoyama Fudosan, a fund linked to Murakami, earlier this month reported it had a 5.02% stake in NuFlare and said it may give advice or make proposals to management.
Murakami, who is considered one of the pioneers in Japan’s battle for shareholder rights, quit his career as a bureaucrat in 1999 to establish his own fund.
He made headlines the following year with the first hostile takeover bid by a Japanese investor, then demanded companies including the operator of the Osaka stock exchange increase shareholder returns.
In 2007 he was convicted for insider trading and sentenced to two years in prison, which was suspended on appeal. Hoya has been eyeing NuFlare for more than two years already, with overtures to the company and its parents dating back to April 2017, according to the statement.
In March 2018, it sought to initiate discussions about a capital alliance, but received no response.
Toshiba’s plan to take NuFlare private, announced on November 13, prompted the most current offer, it said.
“It might be too soon to call this a hostile bid,” Tokai Tokyo’s Ishino said. “In these types of deals, insider information leaking out is a major concern.
So it makes sense that Hoya had to make its offer without consulting with Toshiba first.”
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