Dentsu Inc. (4324), the Japanese advertising company that bought Aegis Group Plc, will raise as much as 120.1 billion yen ($1.2 billion) in a public share sale to help pay for the deal. The stock slumped the most in a month.
The company will offer as many as 29 million shares it owns and 8 million new shares to investors in Japan and overseas, Tokyo-based Dentsu said in a statement yesterday. The proceeds will be used to repay part of its 200 billion yen short-term debt from the acquisition that was completed in March, it said.
Dentsu paid 3.16 billion pounds ($4.8 billion) for Aegis as Japan’s biggest agency competes with global firms including WPP Plc (WPP) and Omnicom Group Inc. (OMC) With Japan’s benchmark Topix index on pace for its best result since 2005, the 112-year-old company is tapping an equities boom to fund the deal that added the largest independent buyer of advertising space and reduced its reliance on the domestic market.
“The stock market’s recovery trend since last November is helping Dentsu to go for the sale, which will lead to an improvement of its capital base,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “Shares will probably react negatively on dilution concern.”
Dentsu fell 9.2 percent, the biggest drop since May 30, to 3,155 yen at the close in Tokyo. The stock has climbed 37 percent this year. The Topix has gained 36 over the same period.
Companies have raised $26.5 billion in share sales in Japan this year, compared with $22.8 billion for all of 2012, according to data compiled by Bloomberg. This year’s figure doesn’t include Dentsu’s share sale.
Suntory Beverage & Food Ltd., which listed its shares yesterday on the Tokyo Stock Exchange, raised 388 billion yen in an initial public offering, Asia’s largest this year. Aeon Mall Co. and Dena Co. (2432) are also among the companies that raised funds through share sales, the data show.
“There probably will be more financing deals using shares by various Japanese companies,” said Ichiro Takamatsu, a fund manager at Bayview Asset Management Co. “Companies including Dentsu need funding for expansion overseas as it’s hard to look for growth opportunities in Japan.”
About 80 percent of Aegis’s 2011 revenue of 1.14 billion pounds came from outside the Asia-Pacific region, according to data compiled by Bloomberg. The home market accounted for 86 percent of Dentsu’s sales last year, the data show.
Nomura Holdings Inc. and five other firms will help arrange the sale and the offering price will be set between July 22 and 24, according to a separate statement.
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