Sony to Raise 332 Billion Yen in Insurance Unit IPO (Update4)

Sept. 4 (Bloomberg) -- Sony Corp. will sell about 332 billion yen ($2.9 billion) of shares in its insurance unit in Japan's biggest initial public offering this year, raising funds for the consumer electronics and games divisions.

The world's second-largest consumer electronics maker will sell 725,000 shares, or 34.5 percent of Tokyo-based Sony Financial Holdings Inc., and the unit will offer 75,000 new shares, according to a statement today. The stock may be sold for about 415,000 yen, with pricing set on Oct. 1. Trading starts on the Tokyo Stock Exchange on Oct. 11.

The initial public offering of the unit, formed in 2004, will test demand for financial stocks roiled by losses in the U.S. subprime mortgage market. The proceeds may help Chief Executive Officer Howard Stringer increase production of Bravia televisions and channel funds to its unprofitable PlayStation unit.

``Sony could use the funds for various options to strengthen its electronics and game businesses,'' said Mitsuhiro Osawa, a Tokyo-based analyst at Mizuho Investors Securities Co. ``A cut in the price of the PlayStation 3 is one option,'' said Osawa, who rates Sony ``outperform.''

Shares of T&D Holdings Inc., Japan's only publicly traded life insurer, fell 16 percent this year, compared with a 4.7 percent decline in the Nikkei 225 Stock Average. The Topix banking index that tracks 85 banking shares slid 21 percent.

``Investors are still concerned about the losses from subprime loans,'' said Wataru Kasatani, a financial analyst at Meiji Dresdner Asset Management Co., which holds about $2.5 billion in Japanese equities. ``The question for the Sony Financial IPO is how it can persuade investors that it is free from that concern.''

JPMorgan, Nomura

JPMorgan Chase & Co. and Nomura Holdings Inc. are managing the sale, Japan's biggest since Aozora Bank Ltd.'s 351 billion yen offering last November. Nomura Real Estate Residential Fund Inc., an real estate investment trust, raised 31.4 billion yen in February, the largest IPO this year before Sony Financial.

The sale can be increased by as many as 70,000 shares, depending on demand, Sony said.

Mitsubishi UFJ Financial Group Inc., Japan's largest bank, and six other lenders have reported combined losses of 18.7 billion yen linked to investments backed by subprime loans. The disclosures represent less than 0.2 percent of their combined holdings of asset-backed bonds as of March 31, according to documents on their Web sites.

Shares of Mitsubishi UFJ fell 26 percent this year; Mizuho Financial Group Inc., the second-largest, dropped 15 percent; and Sumitomo Mitsui Financial Group Inc., the third largest, fell 27 percent in the same period.

Sony stock rose 1 percent to the equivalent of 5,667 yen at 12:08 p.m. in German trading, from the close of 5,610 yen in Tokyo. The Japanese stock gained 10 percent this year, compared with a 4.7 percent decline in the Nikkei 225 Stock Average.

Falling Earnings

Sony Financial will get about 31.1 billion yen from the sale and plans to invest 16.5 billion yen in a venture with Aegon NV, the second-largest Dutch insurer.

The unit comprises Sony Life Insurance Co., automobile insurer Sony Assurance Inc., and online bank Sony Bank Inc. The company first started business in 1979 as an insurance venture of Sony Corp. and Prudential Insurance Co. of America, according to its Web site.

Net income dropped 13 percent to 10 billion yen for the year ended March 31 as the life-insurance unit increased policy reserves to pay future claims.

Samsung Electronics Co., which has a panel-making venture with Sony Corp., last month said it may build a second production line at their South Korean factory to tap demand for larger TVs.

In the games business, sales of the PlayStation 3 have lagged behind Nintendo Co.'s Wii game console, partly because of a cheaper price tag and Nintendo's easy-to-play games.

The Wii has outsold PlayStation 3 and Microsoft Corp.'s Xbox 360 since its introduction last year on the success of ``Wii Sports'' and the ``Mario'' games.

To contact the reporters on this story: Junko Fujita in Tokyo at jfujita@bloomberg.net; Hiroshi Suzuki in Tokyo at hsuzuki5@bloomberg.net

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net