Japan Post’s share sale raises $11bn, but demand weaker than for IPO
September 25 2017 09:19 PM
Pedestrians walk past a post office in Tokyo. A government sale of Japan Post Holdings Co stock raised $11bn in the world’s second-biggest share sale this year.


A government sale of Japan Post Holdings Co stock raised $11bn in the world’s second-biggest share sale this year, with the postal and financial giant’s attractive dividend yield helping drum up sufficient, albeit subdued demand.
The stock priced at a 2% discount to its yesterday closing price, compared with an indicative range of a 2-4  discount.
But underscoring the waning fortunes of the postal giant, which has been criticised for M&A missteps and a lack of clear growth prospects, its coverage ratio slipped when compared with its IPO two years ago. 
The share sale also priced at a 6% discount to its IPO price.
Koji Taki, heads of sales at Imamura Securities Co, noted that for domestic retail investors, the postal firm’s dividend yield of about 3.7% compared favourably with the average Japanese bank deposit rate of 0.001%.
“Our customers buy stocks to hold as long-term assets. Japan Post is a stock our conservative customers like,” he said.
The value of the deal could later be bumped up to ¥1.3tn ($11.6bn) if an over-allotment of shares — to be determined tomorrow — is fully taken up.
The sale, aimed at helping fund reconstruction efforts after the 2011 earthquake and tsunami, was the first since the 2015 triple initial public offerings for the postal firm and its two units both of which are major financial firms — Japan Post Bank Co and Japan Post Insurance Co. The government offered 929mn shares at ¥1,322, according to a filing by Japan Post, with the offering gaining a coverage ratio of 1.6 times.
That compares with a coverage ratio of 5 times for its IPO, according to information from market sources at the time.
Similar to the IPO, the bulk of the offering — 76% — was allocated to domestic retail investors, with another 20% going to overseas investors and the rest to domestic institutional investors.
A certain level of demand from institutional investors had been expected, as passively managed funds need to buy Japan Post shares for portfolios that track market benchmark indexes, said investment banking sources involved in the offering.
Japan Post has seen a gradual decline in earnings in recent years as the two financial units, which together have nearly ¥290tn ($2.6tn) in assets and make up about 90% of its profits, have been hit by diminishing returns amid an ultra-low interest rate environment. To make up for that, it turned to M&A with little success.
It bought Australian logistics firm Toll Holdings for A$6.5bn ($4.9bn) but had to write down much of the acquisition.
Talks to buy Nomura Real Estate Holdings Inc ended earlier this year after failing to agree terms.
Goldman Sachs, Nomura Securities and Daiwa Securities were global coordinators for the offering, which is second only to Italian bank UniCredit’s $13.7bn share issue in February for share sales this year.
Separately, Japan Post also bought back ¥100bn worth of its own shares from the government this month.
The Japanese government originally flagged some ¥4tn in sales of shares in Japan Post firms by the 2022 fiscal year when it first began privatising the firm.
That implies a further ¥1.2tn of further share sales sometime in the next five years.

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