TOKYO - Japan's Rigaku, a maker of X-ray testing tools backed by buyout firm Carlyle Group, is preparing for a domestic initial public offering (IPO) in October, two sources familiar with the matter said.

Carlyle is targeting a market value for Rigaku of around 300 billion yen ($2.09 billion) in the IPO, one of the sources and a third source said.

A listing is not certain and, depending on market conditions, may be cancelled or rescheduled, one of the sources said.

Japan's stock market suffered a historic rout in early August sparked by a surprise rate hike and fears of a U.S. recession, before regaining ground.

Nomura, Morgan Stanley and Bank of America are joint global coordinators, two of the sources said.

Rigaku, Carlyle, Nomura, Morgan Stanley and Bank of America declined to comment. The sources declined to be identified as the information is not public.

Carlyle will sell shares in the IPO, the sources said.

Subway operator Tokyo Metro, potentially the largest Japan IPO in roughly six years, and chipmaker Kioxia are also targeting listings in October, Reuters has reported.

Tokyo Metro will launch its IPO on Friday, four sources said. Tokyo Metro declined to comment.

Fifty-four companies are scheduled to list in the nine months to end-September, compared with 66 companies over the same period a year earlier.

Some market participants expect the total for this year to undershoot last year's 96 IPOs, pointing to market conditions following August's slump and more firms looking to mergers and acquisitions (M&A) to build scale.

"It continues to be difficult conditions for stock selection," said Soichiro Saito, head of the private corporate advisory department at SMBC Nikko Securities.

"However, there is solid demand for companies that are properly researched with high growth potential, including from overseas investors, so it's not such a gloomy situation."

 

TESTING DEMAND

Carlyle announced in January 2021 it was acquiring a roughly 80% stake in Rigaku through its fourth Japan buyout fund, with the company's then-CEO Hikaru Shimura holding a roughly 20% stake.

Rigaku said at the time it is targeting growing demand for X-ray equipment due to the miniaturisation of semiconductors and electronic components, and aims to list in the coming years.

The growing complexity of chip manufacturing processes is driving the need for testing with Rigaku's tools, which are offered for research and development, and production.

Rigaku also sells its equipment to industries such as materials science and pharmaceuticals.

Founded in 1951, Rigaku booked revenue of 80 billion yen in 2023, up around a quarter from a year earlier, and makes 70% of its sales overseas.

Rigaku's peers include Spectris-owned Malvern Panalytical, located in Britain, and U.S.-based Bruker.

Jun Kawakami, formerly an executive at General Electric and Arteria Networks, became CEO last year, with Shimura serving as chairman.

Buyout firms are making deals in Japan as companies shed non-core assets, go private, or management grapples with a lack of successors.

Carlyle's other investments in Japan include KFC Japan, Iwasaki Electric and Orion Breweries.

The firm said in May it has raised 430 billion yen in its largest ever investment vehicle for Japan. ($1 = 143.4800 yen)

(Reporting by Miho Uranaka and Sam Nussey in Tokyo and Kane Wu in Hong Kong; Editing by Muralikumar Anantharaman)