Former Toshiba Memory eyes October IPO; will SK Hynix take profit?

Global memory-chip maker Kioxia Holdings Corporation is poised for listing on the Tokyo Stock Exchange in October, set to be Japan's biggest initial public offering (IPO) of the year with market cap near 22 trillion won ($18.5 billion), according to The Nikkei on August 26.

The IPO process will kick off shortly, after receiving approval from the Japanese bourse. Further details regarding the IPO process have not been disclosed.

The world's second-largest NAND flash memory chip maker was spun off from its parent company Toshiba Corp in 2017. Toshiba decided to sell off its prized semiconductor division after its US nuclear power subsidiary filed for bankruptcy.

Kioxia was acquired by a consortium led by US-based private equity firm Bain Capital in 2017. SK Hynix, the semiconductor arm of SK Group, invested about 4 trillion won ($3.37 billion) in the consortium, of which 2.7 trillion won was injected into the Bain Capital-led fund and the remaining 1.3 trillion won was used to buy convertible bonds to secure up to a 15% stake in Kioxia.

Currently, Kioxia’s shares are held by the Bain Capital consortium (49.9%), Toshiba (40.2%), and Hoya (9.9%).

Bain Capital and Toshiba are likely to sell off some of their existing shares once Kioxia is listed, meaning that the SK Group will also have a chance to pull out. However, as the SK Group invested in Kioxia not seeking capital gains but to beef up its own memory chip technology, the group's exit is highly unlikely.

Meanwhile, new shares will be issued during the IPO process, which will dilute shares held by existing shareholders. Toshiba said earlier that it would return half of the proceeds to shareholders.

The company posted 267.5 billion yen ($2.5 billion) in sales, 14.7 billion yen ($138.3 million) in operating profit, and 1.7 billion yen in net income during the first quarter of 2020.

Kioxia’s name was changed in October 2019, combining the Japanese word for memory (kioku) and the Greek word for value (axia).

By Hugh YH Jeong in Tokyo

hugh@hankyung.com