Kioxia, known as Toshiba Memory when it was acquired from Toshiba by a Bain-led consortium in 2018 for 2 trillion yen ($13.4 billion), ditched the October IPO plan, Reuters reported last month, citing sources.
That decision came after global investors wanted a market value of around 800 billion yen for the chipmaker, said the two sources, compared to Bain’s target of 1.5 trillion yen.
The valuation gap complicates the buyout firm’s effort to exit its six-year-old investment in Kioxia. It reflects concerns investors have over the strength of the memory chip market, the sources said.
Details of the valuation sought by investors, who met with Kioxia in August and September, have not been reported previously.
“An IPO this year looks difficult given NAND market conditions although it may be possible by the end of the financial year,” said a fund manager at an Asian hedge fund who met with Kioxia, referring to the memory chips in which Kioxia specialises.
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Kioxia has undergone years of upheaval, including its carve-out from scandal-hit Toshiba and stalled merger negotiations with partner Western Digital due to opposition from investor SK Hynix. Memory chipmakers have been hit by lacklustre demand for smartphones and PCs, with Kioxia also facing tough competition from South Korean and U.S. rivals.
While NAND prices have improved this year due to the spread of artificial intelligence, price rises have plateaued, said Akira Minamikawa, senior analyst at Omdia.
The implementation of AI in smartphones and PCs is expected to drive replacement demand next year onwards, he said.
Kioxia is focused on NAND flash memory, which it invented in the 1980s. SK Hynix, by contrast, also makes DRAM chips and is in the ascendant due to demand for its high bandwidth memory used in AI tasks.
“I don’t want to buy shares when the NAND market is peaking out in the short term,” said a portfolio manager at a Western fund who met with Kioxia.
The sources declined to be named as the information is not public.
Bain declined to comment. Kioxia did not respond to a request for comment.
Exit timing
The Japanese stock market has been volatile following a surprise rate hike and change of Prime Minister. The benchmark index is up 18% year-to-date.
The attempt to list Kioxia is closely watched as a test case for buyout firms in Japan where more companies are selling non-core assets or going private.
“Private equity usually does not buy semiconductor companies, because capital needs are high, and finessing the timing of exit is hard given the industry cycle,” said Damian Thong, head of Japan research at Macquarie Capital Securities.
The Japanese government, which hopes to revive its once-mighty semiconductor industry, has pledged to extend subsidies totalling as much as 242.9 billion yen to Kioxia and Western Digital to expand production in Mie and Iwate prefectures.
Kioxia is important due to its location in Japan and as a source of memory chips for AI, a government source said.
“It would be reasonable to have Kioxia IPO at a lower valuation first, and let the true value be discovered as it rerates in the market,” said Macquarie’s Thong.
($1 = 149.2500 yen)
