Japan’s Recruit plans IPO worth $1.8bn
September 10 2014 08:08 PM
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The logo of Recruit Holdings is seen on its headquarters building in Tokyo.  Japan’s largest recruitment company Recruit Holdings said it is planning an initial public offering worth $1.8bn, which will test investor appetite for big Tokyo listings after a string of disappointing debuts this year.

Reuters

Tokyo

 Japan’s largest recruitment company Recruit Holdings said it is planning an initial public offering worth $1.8bn, which will test investor appetite for big Tokyo listings after some weak debuts this year.

The IPO will help Recruit pay for future acquisitions as the company, one of the world’s top five staffing firms, seeks to become the world’s biggest by 2020. It has snapped up a slew of foreign rivals in recent years, including US online job search site Indeed.com.

The size of the offering, set to be Tokyo’s second-biggest this year after a $3.2bn listing by smartphone screenmaker Japan Display, came in at the lower end of expectations. But some investors were optimistic about its prospects, particularly as it has a range of businesses.

“Recruit has a leading position in several areas, whether it’s recruiting or publishing real estate information and bridal information. It has growth potential,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.

The company plans to raise up to ¥100bn ($938mn) through the issue of new shares, the sale of treasury stock and a potential over-allotment portion. The rest of the funds raised will go to existing shareholders.

Some 69mn shares will be offered in total, around 40% of which will target overseas investors.

Recruit said it could have some 574mn outstanding shares at the time of its October 16 listing, which at an indicative price of 2,800 yen would give it a market value of roughly $15bn. Final pricing is set for October 6. A market cap of $15bn would put it ahead of Adecco, the world’s biggest staffing firm by sales, which has a market value of around $13.3bn.

In terms of just staffing revenue, Recruit ranked No 5 in the world in 2012 with 1.5% market share compared to 6.5% for Adecco, according to Staffing Industry Analysts.

A potentially higher market cap for Recruit may lie in its higher profit margins. Its margin for earnings before interest, taxes, depreciation and amortization in the last financial year was 15%, compared to around 5% for Adecco.

Founded in 1960 by Hiromasa Ezoe, a Tokyo University student, Recruit grew rapidly but stumbled in the late 1980s, when it became the centre of a famous shares-for-favors corruption scandal that brought down the Japanese government.

In recent years, it has aggressively bought overseas rivals, seeking to offset a shrinking market in Japan, whose population is rapidly ageing. It has acquired US staffing service CSI, Advantage Resourcing, Staffmark Holdings as well as Indeed.com.

Recruit made ¥1.2tn in operating revenue in the past financial year, an increase of 13.6%, helped by its Indeed.com unit and a favourable exchange rate. But net income declined 9% as operating expenses increased.

Recruit will, like restaurant operator Skylark Co which is planning an IPO of up to $1.1bn, come to market at an uncertain time for Tokyo offerings.

Earlier big listings this year have flopped. Some of that is due to company-specific reasons. Japan Display’s shares, for example, have skidded 35% from their IPO price as investors fret about its ability to compete with Asian rivals

Euphoria over Prime Minister Shinzo Abe’s growth policies has also given way to more cautious views.

Although Tokyo stocks have recently recovered from a sell-off earlier this year, they are still down 3% for the year to date despite a weaker yen. Bourse data also shows foreign investors have sold a net 1tn yen in Japanese stocks, including the cash and futures markets, so far this year.

Joint global co-ordinators for the offering are Nomura Securities, Morgan Stanley MUFG, Mizuho Securities and SMBC Nikko Securities.

 

 

 

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