In Japan’s biggest privatization in three decades, the national postal and savings firm priced the third of a trio of share sales at the top of its range as mom-and-pop investors scrambled for a piece of one of the most trusted names in the country.
Japan Post Holdings Co (6178.T) on Monday followed the pattern set by its banking and insurance arms, setting the maximum available price after book-building targeted squarely at retail investors across the nation. The sale of just over 10 percent of the firm at 1,400 yen per share will raise $5.7 billion.
Privatizing Japan Post is an acid test for Prime Minister Shinzo Abe that goes beyond seeking a total of 1.4 trillion yen ($11.6 billion) in proceeds to help fund reconstruction after 2011’s massive earthquake and tsunami. The IPOs are key to Abe’s plans to coax the nation’s savers to shift money into shares, creating a “virtuous economic cycle”, according to government spokesman Yoshihide Suga on Monday.
“There are many retail investors who are attracted to Japan Post’s relatively high dividend yield,” said a fund manager at a Japanese asset management firm, speaking on condition of anonymity. “I don’t hear much demand from overseas investors, but demand from domestic investors looks solid.”
Japan Post hasn’t disclosed subscription levels for the three offers, referring only to “significant demand”. But along with 11 lead underwriters, some 50 smaller brokerages across the country have been hired to sell shares, many complaining their allocations were too small to meet demand from investors looking for safe, if unspectacular, alternatives to utilities.
With only around 10 percent of each firm now on offer, Japan also hopes to extend strong retail interest into tranches to be sold off in future, eyeing about $33 billion in reconstruction funds.
The Japan Post deals are also the latest in a string of national postal service IPOs as debt-burdened countries sell assets. Italy raised about $3.8 billion from the sale of close to 40 percent of Poste Italiane [PSTIT.UL] in a Milan market debut set for Tuesday.
Japan Post Holdings’ listing price, disclosed in a regulatory filing, is the top of a book-building range set at 1,100-1,400 yen. The holding firm’s Japan Post Bank Co (7182.T) and Japan Post Insurance Co (7181.T) arms previously also priced offers at top-of-range levels, with all three due to begin trading on Nov. 4.
The target for Prime Minister Abe and Japan Post is a slice of some $14.3 trillion in financial assets owned by Japanese households.
Bank of Japan data shows more than half of those assets are held in cash and savings deposits, with mutual funds and stock investments accounting for only 16.3 percent. By comparison, just 13.2 percent of U.S. households’ assets are held in cash and deposits, with mutual funds and stock investments accounting for nearly half.
Yet in setting IPO prices, Japan Post and the finance ministry have been at pains to create a stable investment basis, sidestepping potential sharp fluctuations, sources familiar with the matter told Reuters. The sell-off is Japan’s biggest since the IPO in 1987 of Nippon Telegraph and Telephone Corp (NTT) (9432.T), which went on to see shares slide as the country’s economic bubble burst.
Eleven companies acted as lead underwriters for the offerings, with Mitsubishi UFJ Morgan Stanley, Nomura Securities, Goldman Sachs and JPMorgan chosen as global coordinators.
While coordinators received millions of shares in their allocations, local brokerages like Kimura Securities in Nagoya, central Japan, said they received just a few thousand, leaving many potential investors disappointed.
“We have to apologize to clients,” said Toshiyuki Imai, director at Kimura Securities. The broker’s allocation of shares in Japan Post Insurance, for instance, ran to just 2,700, to be sold in bundles of 100 for each investor.
City neighbor rival Okachi Securities described a similar shortage. “The number of shares we need is at least a digit short,” said Hideaki Honda, director of the brokerage.
He said his firm received orders about 120 times bigger than its allocation for Japan Post Insurance, and 30 times over for Japan Post Bank. The potential over-subscription ratio for the insurer reflects the fact that fewer of its shares are on offer than for Japan Post Bank.
“Privatization deals are really good ones to attract new clients,” he said. “I hope more shares are allocated to small brokerages like ours,” he said.