Japan's Government to Sell $12 Billion of Japan Post Shares

(Bloomberg) -- Japan will sell about 1.3 trillion yen ($12 billion) of shares in Japan Post Holdings Co., the country’s biggest public offering this century, as the government continues its privatization of the postal and financial-services giant.

The Ministry of Finance will sell 990.1 million shares in the holding company, including an overallotment, it said in a statement on Monday. That amounts to 1.3 trillion yen, based on the most recent closing price. The offering will be priced as soon as Sept. 25, almost two years after Japan Post was listed along with its banking and insurance units.

Most of the shares will be sold to individuals, as the government bets that they will shrug off the stock’s underperformance and market anxiety over North Korea. Brokerages including global coordinators Daiwa Securities Group Inc., Goldman Sachs Group Inc. and Nomura Holdings Inc. will start a television advertising campaign as soon as this week, people with knowledge of the matter said earlier.

Japan Post will also buy back 100 billion yen of shares, meaning the government may raise as much as 1.4 trillion yen as it seeks to fund reconstruction of areas devastated by the March 2011 earthquake and tsunami in the northeast. 

Japan's Government to Sell $12 Billion of Japan Post Shares

The deal may be the largest public offering of a single company in Japan since Nippon Telegraph & Telephone Corp.’s 1.59 trillion-yen sale in 1999, data compiled by Bloomberg show. The government raised 1.4 trillion yen when Japan Post and its banking and insurance arms debuted in 2015.

Facing a recent slump in their retail businesses, brokerages are counting on the deal to obtain new accounts from households who still have more than half of their 1,800 trillion yen of financial assets parked in cash. Finance Minister Taro Aso said last week that his ministry will monitor any impact on share prices stemming from the crisis over North Korea’s nuclear weapons program.

“Markets globally are taking a downturn given the concerns over North Korea, which will be negative,” Mitsushige Akino, an executive officer with Ichiyoshi Asset Management Co. in Tokyo, said before the announcement. “Active market participants -- momentum players who invest in the short term -- won’t buy the stock. But individuals who are relatively wealthy and have bank deposits will.”

Other details of the deal:

  • 731.2 million shares will be sold in Japan, and 182.8 million offered abroad
  • As many as 60.9 million additional shares may be offered domestically, and 15.2 million outside Japan
  • Bookbuilding will be conducted from Sept. 15
  • Japan Post’s buyback is set to take place between Sept. 13 and Sept. 22 in an off-auction repurchase

Share Slump

Shares of Japan Post closed 1.7 percent lower at 1,321 yen before the announcement. The stock has slid 5.6 percent since it began trading in November 2015, compared with a 5.6 percent gain in the benchmark Topix index. The average 12-month target price of nine analysts is 1,501 yen, according to data compiled by Bloomberg.

Japan Post had a 29 billion-yen loss in its first full year of operation since the listing, after booking a 400 billion-yen writedown on its investment in Australian logistics company Toll Holdings Ltd. Profit at its banking arm fell as the central bank’s monetary easing crimped interest income.

“Investors’ interest in Japan Post is not that strong because the company relies on its banking and insurance units for most of its profit, and there are risks regarding negative interest rates,” said Masaharu Hirokane, an analyst at Nomura. Still, he added, “the structure of profitability is steady, and it can pay stable dividends.”