For a very long time it was unheard of for a Japanese corporation to make an unsolicited offer to acquire another publicly listed Japanese corporation. With the corporate governance reform, this taboo began to soften around five years ago, particularly in situations where the target company was already “in play” – ie: where it had agreed to sell itself to another buyer. Nitori outbidding DCM for control of Shimachu was one such case, Daiichi Life outbidding M3 for control of BenefitOne was another.
Despite the changes, however, an unsolicited approach amongst the establishment is still very rare, and should be viewed as a major move. Especially when it has a US$8bn price tag!
Denso is the key parts supplier within the Toyota Group, supplying electronics, powertrains, and semiconductors into Toyota Motor. Rohm makes a range of semiconductors including LSI’s and power semi’s. It also happens to own 14% of Toshiba which it acquired when it partnered with Japan Industrial Partners to take Toshiba private, and which is held on the books at only ¥100bn.
Thanks to the AI-driven memory boom since the deal was completed, Toshiba’s stake in publicly-listed Kioxia, which was formerly a Toshiba subsidiary, is alone currently valued at ~¥2.5trn. Look-through to Rohm of that stake is ¥350bn, and Toshiba still owns valuable power semi-conductor, elevator, and hard drive businesses. The valuation of the hard drive business is likely also benefitting from the AI boom, if not quite to the same extent as Kioxia.
As an aside, Bain Capital still owns ~29% of Kioxia. The carried interest on that investment will have made quite a few members of the Bain team extremely wealthy. Bain reportedly contributed around US$1.3bn (at today’s exchange rates) of equity into the original acquisition of Kioxia. Bain’s remaining stake and amounts sold amount to more than US$30bn. Assuming a round $30bn equity profit, the carried interest on that is $6bn, and the employee share of that likely $2.4bn-$3bn. Bain’s entire Tokyo office is 44 people per its website. Do the math on that!
Denso’s bid likely significantly undervalues Rohm – perhaps to the point of placing no value on Rohm’s core business. I would not be surprised to see Elliott or another large activist emerge as a Rohm shareholder in the not-too-distant future.
Strategically, Rohm brings more power semiconductor capacity and know-how into the Toyota Group as Toyota prepares to push more aggressively into the full electric vehicle market, having mostly relied on hybrids until this point. Rohm has particular strength in silicon carbide power semi’s, which is likely attractive to Toyota. The acquisition would also serve to further consolidate Japan’s fragmented chip sector, strengthening it to face global competition.
The companies have had a strategic alliance for semiconductor development since 2025, but Rohm has also been pursuing greater integration with Toshiba’s power semi business. If Denso succeeds in acquiring Rohm, the result could ultimately be a 3-way merger that includes Toshiba’s power-semis, and concludes with the establishment of a much stronger Japanese competitor in the space.
