World Economy

Japan’s Biggest Privatization in 3 Decades

Japan’s Biggest  Privatization in 3 DecadesJapan’s Biggest  Privatization in 3 Decades

State-owned Japan Post on Monday set prices for separate initial public offerings of its bank and insurance arms at the top of their ranges, indicating strong demand from retail investors in what will be Japan's biggest privatization in three decades, Reuters reported.

The two companies, worth a combined $65 billion at the listing prices, and their parent Japan Post Holdings Co are seeking to raise a combined 1.4 trillion yen ($11.8 billion) in a triple IPO set for Nov. 4. Book-building for the Japan Post Holdings sale continues, with pricing due on Oct. 26.

Successfully privatizing the national mail company - squarely marketed at the country's mom-and-pop investment community - is a key plank of a campaign by Prime Minister Shinzo Abe to unlock massive stockpiles of household savings. While proceeds will help fund reconstruction after Japan's 2011 natural disasters, Abe is keen to stoke domestic stock investments, boosting the Tokyo bourse.

"It's not a surprise," said Ikuo Mitsui, a fund manager at Aizawa Securities, referring to the top-of-range pricing for businesses seen as stable and low-risk. "There is relatively solid demand."

The deals are the latest in a string of national postal service listings as debt-burdened countries sell assets to raise funds. Italy is now seeking up to $4.2 billion from the sale of close to 40 percent of Poste Italiane in a Milan market debut set for late October.

The Japan Post companies didn't disclose details of subscription levels in regulatory filings on Monday announcing the IPO prices. The firms simply cited a "significant number" of subscriptions at the top of the book-building ranges.

Attractively Safe

Even though the businesses don't offer dynamic future growth potential, said Shingo Ide, chief equity strategist at NLI Research Institute, investors see them as an attractive safe-haven alternative to utility stocks. That broad appeal should also bolster price and demand for Japan Post Holdings, market watchers say.

Monday's filings showed Japan Post Bank Co priced shares in its listing at 1,450 yen apiece, compared with a book-building range of 1,250-1,450 yen. The sale is worth 600 billion yen, and values all of Japan Post Bank at 6.5 trillion yen.

Japan Post Insurance Co set its IPO price at 2,200 yen, compared with its book-building range of 1,900-2,200 yen. At that price, Japan Post Insurance's IPO is worth 145 billion yen, while the firm's total valuation is 1.3 trillion yen.

The triple listings make for Japan's biggest privatisation since the 1987 IPO of the Nippon Telegraph and Telephone Corp (NTT) in the heyday of Japan's economic bubble.

NTT's IPO offers a cautionary tale for some retail investors: Shares rocketed on listing and more than doubled in value, only to hurtle back to earth as Japan's bubble burst. The stock currently trades at 30 percent below its IPO price.

"I think Japan Post companies' shares will be like NTT's, shooting up and then making a nosedive," said Toshihiko Takeshima, a 60-year-old taxi driver in the western coastal city of Kanazawa. "I have a friend who wants to sell NTT shares but cannot to this day."

Taizo Nishimuro, president of Japan Post Holdings, said his company and its owner, the Ministry of Finance, are keenly aware of the need to prevent NTT history reoccurring.

"I think the NTT stock move is a big lesson. We should not repeat it," Nishimuro said, speaking at a news conference last month.

Eleven companies have been hired as lead underwriters for the offerings with Mitsubishi UFJ Morgan Stanley, Nomura Securities, Goldman Sachs and JPMorgan chosen as global coordinators.