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(Bloomberg) -- Taiyo Holdings Co. is exploring a potential combination with larger peer DIC Corp. in a move that would consolidate two major Japanese chemical companies, according to people familiar with the situation.

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Taiyo is considering teaming up with private equity firm Japan Industrial Partners Inc. for the potential deal, the people said, asking not to be identified because the matter is private. The Tokyo-based companies are working with advisers as they take preliminary steps in evaluating a possible deal, the people said.

Taiyo shares jumped as much as 17% to a record high Tuesday following the Bloomberg News report on the deliberations. Taiyo shares rose 32% in 2024. The company has a market value of about $1.6 billion.

DIC, Taiyo’s biggest shareholder with a stake of more than 19%, climbed as much as 6.8% Tuesday in Tokyo, the biggest intraday gain in about five months. DIC has a market value of $2.1 billion. Hong Kong-based activist investor Oasis Management Co. is its second-biggest shareholder with an 11.5% holding.

Considerations on the tie-up are ongoing and may not result in a deal, the people said. Taiyo said in a statement Tuesday that it hasn’t made any announcement on the topic and “nothing has been decided,” without elaborating. DIC hasn’t received any proposal, it said in a filing. A representative for JIP declined to comment.

DIC bought a 19.5% voting rights stake in Taiyo in 2017 as part of an equity offering and alliance between the two companies.

Taiyo makes chemical products used in the electronics industry, including printed circuit boards, according to its website. It has also expanded into pharmaceuticals and other areas. DIC specializes in printing inks, organic pigments and resins.

--With assistance from Hideki Suzuki, Koh Yoshida, Takako Taniguchi and Kana Nishizawa.

(Updates with company statements in fifth paragraph)

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