Convertible bonds held by SK hynix have not yet been converted into shares Must still pass antitrust reviews in each country Japanese side says it is concerned if voting rights are exercised

[SK hynix] ė‚Žė§„ 확대 [SK hynix]

Bain Capital, once the largest shareholder in Japanese semiconductor company KIOXIA Corporation, has sold off a large block of shares, leaving SK hynix as the de facto second-largest shareholder.

According to Nikkei on the 26th, Bain Capital said it sold most of its KIOXIA shares through a large-shareholding report and other filings last month, generating proceeds of about 250 billion yen, or roughly 22 trillion won. That is the largest investment return ever recorded for a fund in Japan.

As Bain Capital sold off most of its shares, Toshiba Corporation once again became KIOXIA’s largest shareholder, while SK hynix became the de facto second-largest shareholder.

However, SK hynix has not yet converted its convertible bonds into shares, and it must pass antitrust reviews in each country before becoming a shareholder with actual voting rights.

Bain Capital acquired Toshiba Memory, now KIOXIA, in April 2018 through four special purpose companies. Apple, Dell Inc. and SK hynix also participated in the investment through those entities. At KIOXIA’s listing in December 2024, the four special purpose companies held about 55% of the company and were the largest shareholder group. The second-largest shareholder was Toshiba, which had reinvested and held about 40%, while Japanese company Hoya held about 3%.

As KIOXIA’s share price rose from around last summer, Bain Capital and Toshiba began selling their stakes in earnest. Bain sold all of the shares held by three of the four special purpose companies over the course of about a year. It is estimated to have generated 250 billion yen in proceeds.

That figure includes not only gains from Apple and Dell, but also returns on SK hynix’s investment of 266 billion yen. By a simple calculation, SK hynix is estimated to have earned about 750 billion yen, or roughly 700 billion won, from the sale.

Toshiba also recently reduced its stake from 40% to 15%. As of March, it was estimated to have earned about 800 billion yen from share sales, more than twice its original investment.

As a result, KIOXIA’s shareholder structure has changed significantly. Toshiba, with a 15% stake, is now the largest shareholder. The second-largest shareholder is a special purpose company holding 14%. However, the effective owner of that special purpose company is SK hynix, because it holds convertible bonds with warrants that can be exchanged for shares in the entity.

When SK hynix invested 395 billion yen in 2018, it put 266 billion yen into a special purpose company for the purpose of selling shares later, and the remaining 129 billion yen into another special purpose company aimed at management control.

Although it currently has no voting rights, SK hynix could become a KIOXIA shareholder with voting rights if it converts the CB into shares after receiving approval under competition and antitrust laws in each country. In particular, Toshiba has said it plans to sell KIOXIA shares in the future and return the proceeds to shareholders. If Toshiba completes its exit, SK hynix would rise to become the largest shareholder. However, SK has promised not to hold more than 15% of the company’s total voting rights until 2028.

The problem is that SK hynix and KIOXIA are direct competitors in the NAND flash memory market. Not only KIOXIA, but also the Japanese government is watching this issue closely. In a report released in June, KIOXIA noted that because the two companies are in a competitive relationship, SK hynix’s exercise of voting rights could differ from the interests of ordinary shareholders. SK hynix holds about 20% of the global NAND market.

There is also speculation that the Japanese government will find it difficult to simply allow ownership of a key domestic semiconductor company to pass to another country.

As a result, concerns are reportedly spreading within the SK Group that a de facto conversion into shares may be difficult.

Still, there is also a possibility that SK hynix has already begun the process of converting the CB into shares.

In its latest report, KIOXIA said, “Although SK hynix has not currently converted the bonds into shares, it may already have begun the necessary procedures under antitrust laws, foreign exchange laws and external transaction laws in various countries.”

This article has been translated by GripLabs Mingo AI.