Shuichi Otsuka, president of Japan Display, is seen at the company’s office in Tokyo. The company yesterday gained approval from the Tokyo Stock Exchange for a listing of around $3..8bn.
Reuters/Tokyo
Japan Display, the world’s biggest maker of screens for tablets and smartphones, gained approval from the Tokyo stock exchange for a listing of around $3.8bn as the company taps one of Asia’s best performing equity markets in the past year.
The sale next month will allow a government-backed fund, which spent ¥200bn ($1.96bn) on a controlling stake in Japan Display, to recoup its investment. Japan Display will also issue new shares to help fund investment in equipment as it builds capacity to meet rising orders from markets including China.
The offering by the supplier to Apple Inc and Samsung Electronics Co is part of an expanding pipeline of Japanese listings. Companies are increasingly venturing into equity markets after the reflationary policies of Prime Minister Shinzo Abe boosted Tokyo stock prices by more than 60% since November 2012.
At ¥389.3bn, the Japan Display listing is on par with Suntory Beverage and Food’s ¥388bn initial public offering last July. At a touch more at the current price, it would be the biggest since Japan Airlines Co’s $8.5bn in September 2012. Japan Display said it may issue an additional 18mn shares as over-allotment, bringing the total to ¥409bn.
The company was formed from the ailing display units of Hitachi, Sony Corp and Toshiba Corp in 2012. Its majority shareholder, the government-backed Innovation Network Corp of Japan, has since engineered a turnaround.
The company has managed to stage a sharp earnings recovery on booming worldwide consumer demand for mobile devices, claiming the top share of the small and midsize panel market in 2013. Japan Display said yesterday that it expects operating profit to grow more than 17 times to ¥36.4bn in the year ending March against sales of ¥623.4bn. Net profit will expand more than nine times to ¥36.6bn, while EBITDA, or earnings before interest, tax, depreciation and amortisation, will reach ¥370.17 per share, it said.
Japan Display set a tentative IPO price of ¥1,100 and plans to list on March 19. That price would give it a market capitalisation of ¥681.3bn.
Existing shareholders are selling 213.9mn shares. The Innovation Network Corp of Japan will reduce its stake from 86.7% to 34.5%, enough to give it a veto right at board meetings.
Other shareholders Sony, Hitachi and Toshiba will reduce their individual stakes from 4.3% to 1.7%.
Japan Display will issue 140mn new shares to raise a further ¥154bn as it expands capacity, with 63mn of those offered to overseas investors.
Of that, ¥17bn will go towards increasing production of modules for mid-tier smartphones for the Chinese market while ¥2.5bn will be invested in a factory in central Japan that makes LCD panels used in cars.
Companies raised $10.4bn from IPOs in Japan in 2013, with deal volumes down 19% from the previous year, Thomson Reuters data showed. Consulting firm EY forecasts the number of deals in 2014 to rise to about 80 from 60 last year, buoyed by Prime Minister Abe’s economic policies.
Hitachi said yesterday that it would relist its battery and recording media subsidiary Hitachi Maxell, selling shares in an offering worth up to $750mn. Railroad operator Seibu Holdings and Line Corp, operator of the free messaging app Line, currently owned by South Korea’s Naver Corp are other major listings that are considered possible in Tokyo this year.
Goldman Sachs, Morgan Stanley and Nomura were hired as joint global co-ordinators of Japan Display’s IPO, with 13 other banks also helping to underwrite the deal, according to the term sheet.