State-owned Japan Post Holdings received approval Thursday for an initial public offering that could raise ¥1.4 trillion ($11.6 billion), which would make it the country’s biggest IPO in nearly two decades. The Tokyo Stock Exchange said Japan Post Holdings and units Japan Post Bank Co. and Japan Post Insurance Co. are all scheduled to list Nov. 4. Japan Post Holdings aims to raise about ¥1.4 trillion from the simultaneous listings, based on the indicative prices. That would be the biggest IPO since telecommunications provider NTT Docomo Inc. went public in 1998, raising ¥2.1 trillion, and the largest sale of a government-owned company since Nippon Telegraph & Telephone Corp. raised ¥2.4 billion in 1987.
A Japan Post IPO has been a goal of the Japanese government since then-Prime Minister Junichiro Koizumi first called for it nearly a decade ago. The listing took on additional importance after the government decided to use ¥4 trillion raised from Japan Post share sales—the November listings along with future planned sales of Japan Post Holdings shares—to help pay for reconstruction of areas hit by the March 2011 earthquake and tsunami. In November, Japan Post Holdings will offer about 11% of its outstanding shares, which would raise ¥668 billion at the indicative price. Japan Post Bank and Japan Post Insurance also will each offer 11% of their outstanding shares, raising about ¥577 billion and ¥142 billion, respectively. The government plans to sell as much as two-thirds of Japan Post Holdings in phases beginning with the IPO. It also has plans to sell as much as 50% of Japan Post Bank and Japan Post Insurance in multiple tranches, and it eventually expects to sell the full 100%. Japan Post Holdings has set an indicative price of ¥1,350 a share, while Japan Post Bank has a price of ¥1,400 a share and Japan Post Insurance ¥2,150 a share. Based on these prices, Japan Post Holdings could be valued at around ¥6.1 trillion ($50.6 billion), Japan Post Bank at ¥5.2 trillion and Japan Post Insurance at ¥1.3 trillion. Final share prices will be set in late October after meetings with investors.
Japan has privatized several former state-owned monopolies in recent decades, including a state railway, telephone company and cigarette maker. The publicly listed descendants of those monopolies generally have held their own, giving the government the confidence to move ahead with a listing of Japan Post Holdings. The long-awaited offerings received approval at a time of global market volatility following a stock-market collapse and currency devaluation in China that have raised fears of a deepening economic slowdown there. The Japan Post deal could test Prime Minister Shinzo Abe’s push for households to invest more of their savings in risk assets. The Ministry of Finance, which currently owns Japan Post Holdings, said it plans to sell around 80% of the shares to domestic investors and the remaining 20% to overseas institutional investors. About 95% of the shares sold domestically would go to individuals.
“Everyone in Japan knows the name of Japan Post so that familiarity might have reflected such an allocation of shares,” a government official said. The three companies’ business operations are mostly limited to domestic markets, where they face limited growth prospects. This might deter experienced investors, but many Japanese retail investors may take comfort in the familiarity of the companies’ names, said Tomoichiro Kubota, a senior market analyst at Matsui Securities. “Shares of Japan Post Holdings and its two financial units will likely be more popular among beginner investors than experienced ones,” he said.
Japan Post Holdings has been seeking growth outside Japan. Earlier this year it bought Australia’s leading logistics company, Toll Holdings, for 6.49 billion Australian dollars ($4.56 billion). To attract investors, it is also considering offering a bigger-than-average dividend. Japan Post Bank, which oversees roughly ¥200 trillion in deposits collected through 24,000 post offices across the nation, recently started taking a more aggressive investment stance, shifting more to foreign bonds from Japanese government bonds. Nearly a dozen underwriters, including Nomura Securities, will start surveying investors and holding information sessions across Japan. Tentative offering prices will be proposed in early October, with final prices set later in the month.