Japan Post’s IPO Fully Subscribed After Two Days; at Least $10B to Be Raised

By Takahiko Hyuga and Kyoko Shimodoi | October 14, 2015

Japan’s government received orders for all the shares it’s offering in Japan Post Holdings Co. and its banking and insurance units after the first two days of bookbuilding, people with knowledge of the matter said.

Investor orders through Oct. 9 for shares in the holding company and the bank exceeded the number being offered, while the insurer was several times covered, one of the people said, asking not to be identified because the information is confidential.

The early interest indicates Japan Post will raise at least 1.19 trillion yen ($10 billion) from the IPO, based on the low end of price ranges announced last week, according to Bloomberg calculations. The demand may make it easier for the postal group to price the offering at the top end of the range, which would raise 1.44 trillion yen and amount to the country’s biggest privatization since 1987.

Japan’s government is selling shares in the postal service, whose origins date back to 1871, mostly to citizens as part of Prime Minister Shinzo Abe’s goal to get people to invest more of their savings. The IPO, the culmination of privatization plans driven by Abe’s mentor Junichiro Koizumi a decade ago, comes at a volatile time for Japanese stocks, which have been rocked by the global market turmoil stemming from China.

Quake Rebuilding

The Nikkei 225 Stock Average has fallen 14 percent since Aug. 11, when China devalued its currency. The Ministry of Finance is offering 80 percent of the IPO to investors in Japan and 20 percent to overseas institutions. Some of the proceeds will be used for reconstruction efforts following the 2011 earthquake and tsunami in the northeast.
A spokeswoman for Japan Post said the company has no comment on the IPO. Finance Ministry officials declined to comment.

Final prices for the bank and insurer will be released on Oct. 19, and the holding company will be priced a week later. The stocks will be listed on Nov. 4. A total of 973 million shares are being offered, including 495 million in Japan Post Holdings, 412 million in the bank and 66 million in the insurer.

Company Valuations

Investors may be attracted to the companies’ valuations. Even based on the top of the price range, Japan Post Bank Co. would be valued at 0.47 times book, according to calculations based on the prospectus, compared with an average of 0.7 times for the nation’s three largest lenders. Japan Post Bank has more deposits than any other financial institution in the country, which it mostly invests in assets such as government bonds because it’s largely restricted from lending. Japan Post Insurance Co., the nation’s biggest insurer by assets, is valued at as much as 0.67 times book.

Tomeo Kawasaki, a 70-year-old pensioner, said he will tell a securities firm on Wednesday that he wants to purchase 100 shares each in the holding company and the bank.

“I wanted to invest in the insurer too, but I couldn’t afford to,” Kawasaki said, adding that he’ll use his savings to buy the stock. “I’m a bit concerned that the shares may fall and the business might not perform well, but I’m betting on Japan Post’s network, reliability and stability.”

Growth Obstacles

The postal group has more than 24,000 branches nationwide, more than the number of convenience stores operated by Seven-Eleven Japan Co.

The three businesses each have obstacles clouding their growth prospects. The postal service, facing a decline in mail volume, is expanding abroad by acquiring companies such as Australian logistics provider Toll Holdings Ltd. The bank is focusing on boosting returns from its deposits by shifting them out of low-yielding Japanese government bonds. The insurer is also looking overseas as the shrinking population crimps premium income.

About 60 firms are working on the IPO. Nomura Holdings Inc., Goldman Sachs Group Inc., Mitsubishi UFJ Morgan Stanley Securities Co. and JPMorgan Chase & Co. are the global coordinators.

–With assistance from Shigeru Sato and Gareth Allan in Tokyo.

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