Japan Airlines Co. (9205), the carrier that exited bankruptcy last year, is planning an initial public offering that may raise as much as 1 trillion yen ($13 billion) as early as September, two people familiar with the matter said.
The government-backed fund that holds about 97 percent of JAL’s voting rights and other investors are considering selling 500 billion yen to 1 trillion yen of shares, said the people, who declined to be identified because the process is private. Taro Namba, a spokesman for Tokyo-based JAL, declined to comment on the size of the planned sale.
Nomura Holdings Inc. (8604) and Daiwa Securities Group Inc. (8601) will lead the offering, Namba said, as JAL prepares for what could be among the two biggest Japanese IPOs since 1998. The airline, which delisted in February 2010, expects to make a profit this fiscal year after cutting a third of its staff, shedding planes and axing loss-making routes.
“JAL should be able to raise the money,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Still, if the European debt crisis becomes a threat to the U.S. economy, there may be a negative impact on cash flow, which could force them to pare it back.”
At 1 trillion yen, the IPO would match that of Dai-ichi Life Insurance Co. in 2010. NTT DoCoMo Inc. raised 2.1 trillion yen in a sale in 1998, according to data compiled by Bloomberg. Nexon Co. held Japan’s largest IPO last year, raising 91 billion yen. The online-game developer has since fallen 11 percent from the 1,300 yen price in its December sale.
The JAL sale could also be the biggest worldwide since General Motors Co. raised $18 billion in 2010. The carmaker went through a similar process to JAL, filing for bankruptcy and then shedding workers and paring operations in a government-backed restructuring.
“This has been a very quick turnaround” for JAL, said Neil Hansford, chairman of Strategic Aviation Solutions, who has advised airlines across the Asia-Pacific region. “It’s also a very optimistic valuation with low-cost rivals coming in.”
If JAL’s shareholders sell their entire stake, the IPO would value the carrier at as much as 8.3 times its 120 billion yen forecast for net income in the year ending March 31. All Nippon Airways Co. (9202), Japan’s largest listed carrier, is valued at 27 times its 20 billion yen forecast for the same period, based on data compiled by Bloomberg.
ANA has a market value of $7.1 billion, the fourth highest worldwide behind Air China Ltd., Singapore Airlines Ltd. and LAN Airlines SA. The Tokyo-based carrier (9202) fell 1.8 percent today to 216 yen. It’s dropped 29 percent in Tokyo trading in the past year, compared with a 19 percent decline for the Topix Index.
JAL plans to submit its IPO filing to the Tokyo Stock Exchange in July, the people said. Nomura, Daiwa, Mitsubishi UFJ Morgan Stanley Securities Co., Mizuho Securities Co. and SMBC Nikko Securities Inc. have been hired as underwriters for the domestic share sale, Enterprise Turnaround Initiative Corp. of Japan, JAL’s biggest shareholder, said in a statement on July 15.
ETIC, which injected 350 billion yen of capital into JAL as part of the turnaround, must sell its stake by January 2013, three years after taking over the carrier. The restructuring has been led by JAL Chairman Kazuo Inamori, the founder of electronics company Kyocera Corp., and Japan’s 28th richest man with a $920 million fortune, according to Forbes.
JAL (9205) raised its forecast for annual operating profit by 85 percent to 140 billion yen in November, as it restructured services and boosted cooperation with partners including Cathay Pacific Airways Ltd. and American Airlines. AMR Corp., American’s parent, is now going through its own restructuring in bankruptcy protection.
British Airways parent International Consolidated Airlines Group SA may be interested in buying a stake in JAL, Chief Executive Officer Willie Walsh said last year. JAL, British Airways, Cathay and American are all members of the Oneworld alliance.
JAL, once the world’s largest international carrier, exited bankruptcy protection in March after grounding 103 planes and discontinuing 49 routes, such as flights to Sao Paulo, Amsterdam and Milan. The cuts included retiring the last of what was once the world’s biggest fleet of Boeing Co. (BA) 747s and shedding more than 14,000 jobs.
The airline is this year set to begin receiving 35 on-order Boeing 787s, as it introduces more fuel-efficient planes to help pare costs and begin new routes. The carrier is also forming a low-cost venture with Qantas Airways Ltd. (QAN) to fend off competition from budget carriers.
Jetstar Japan, also part-owned by Mitsubishi Corp., is due to begin domestic flights this year. ANA is similarly setting up two low-cost carriers, including one with AirAsia Bhd. (AIRA)
JAL, founded in 1951, and two units sought protection from creditors in January 2010, listing 2.32 trillion yen in liabilities. The airline delisted the following month, wiping out shareholders in a company that was worth more than $6 billion less than a year earlier.
The bankruptcy filing followed three losses in four years that were caused by competition from ANA and a slowdown in global air travel. The carrier had also received four state bailouts in nine years.