Japan Gives Nod to Future IPO of Massive Tokyo Subway Operator

(Bloomberg) -- Japan’s Transport Ministry approved the idea of a share sale of Tokyo’s subway-system operator, setting the stage for one the country’s largest privatizations and exchange listings in recent years.

A report supporting the government divesting part of its stake in Tokyo Metro Co., which operates nine subway lines in the world’s largest metropolitan area, didn’t specify any timeframe or offering size. Still, the recommendation paves the way for it to join sales of Japan Tobacco Inc. and Japan Post Holdings Co. to help the government fund debt repayment.

“A listing of Tokyo Metro is the best way to maximize the effects of a privatization,” a ministry panel said in a report released on Thursday. Transport Minister Kazuyoshi Akaba said his agency would proceed with the necessary steps to carry out the sale.

Tokyo Metro is currently 53.4% owned by the national government and 46.6% by the Tokyo Metropolitan Government. Each should retain half of their current stakes, and any sales should be simultaneous and to the same degree, the report concluded. An exchange listing could value the subway firm at more than 1 trillion yen ($9.1 billion), the Asahi-affiliated Aera magazine reported last year.

Legislation requires the national government to sell shares in Tokyo Metro by March 2028, to repay debt sold in the aftermath of the 2011 earthquake and tsunami. Kyodo News reported Thursday that Akaba and Tokyo Governor Yuriko Koike both agreed on a sale.

A privatization of the subway, which carries an average of 7.56 million riders per day, has been keenly awaited for years, especially among retail investors. Still, not all listings of state-controlled firms are successful investments. Kyushu Railway Co. currently trades 18% below its 2016 IPO price.

Tokyo Metro posted a 53 billion yen net loss in the most recent fiscal year through March, as ridership and advertising sales dropped amid the pandemic. It had net profit of 51 billion yen on sales of 433 billion yen a year earlier.

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