Japan Post Bank jumbo IPO back on track
The privatisation of Japan Post Bank, one of the world’s largest banks, with deposits of ¥174trn (US$2.14trn), is back on track. The prospect of a jumbo IPO of ¥2trn–¥2.3trn – equivalent to the entire Japanese ECM volume in 2011 – provoked excitement among bankers who have seen their equity capital markets teams cut in response to the lacklustre volumes of the past two years. And Japan Post Bank is just one of a long list of potential privatisations. On April 13, the lower house of parliament approved a bill to allow the government to sell its stake in JPB, and the upper house is expected to follow suit later this month. While JPB is the focus of the legal change, the move provides fresh impetus to the whole privatisation agenda.
Total proceeds from the sale of the government’s holdings in various entities could reach ¥22trn, based on the book value applied to assets by the Ministry of Finance. JPB is the jewel in the crown, with a book value of ¥9.9trn, but other assets to be sold include the Development Bank of Japan, valued at ¥2.39trn, and domestic policy bank Japan Finance Corp, at ¥4.4trn. The government’s valuations may be ambitious but even with discounts the numbers are substantial.
With assets valued at more than ¥9trn, JPB’s market capitalisation could be around ¥6trn to ¥7trn, allowing for the fact that Japanese banks trade at a discount to book value, suggested one head of capital markets at a local house. Of that, around a third could be sold in a public offering. However. JPB is not expected to be ready for an IPO until the fiscal year beginning April 2014 at the earliest.
“The Post Bank privatisation has been in the works for a decade and has been a trial of patience,” said one banker. But preparations, including the award of mandates, could start as early as this year, according to a head of IPOs at a Japanese house. “The cash-strapped and highly indebted government needs the money,” he added.
Foreign houses will get a slice of the pie too. Any deal larger than ¥100bn will have to be a global offering to tap international investors. Despite this, historically only around a third of privatisations have been sold abroad, with the rest going to domestic investors.
(Extracted from International Financing Review, 20 April 2012).
