Mitsubishi Motors to Raise Up to $2.3 Billion in Stock Sale

Mitsubishi Motors Corp. (7211) plans to raise as much as 241.6 billion yen ($2.3 billion) in a share sale that’s designed to help the company resume dividend payments for the first time in more than 15 years.

Pricing of the common shares -- as many as 241 million -- will be determined as soon as Jan. 22, the Tokyo-based company said in a regulatory filing today. The company said last year it plans to use the proceeds to repurchase preferred stock held by other Mitsubishi companies before resuming dividends for common shareholders.

Mitsubishi Motors hasn’t been able to pay dividends since 1998 after accumulating billions of dollars of losses. The company has been seeking to restore confidence in its cars for more than a decade after saying it covered up safety defects and customer complaints, alienating consumers to the point that it required to be bailed out by other Mitsubishi companies almost a decade ago.

Bailouts in 2004 and 2005 left Mitsubishi UFJ Financial Group Inc. (8306), Mitsubishi Heavy Industries Ltd. (7011) and Mitsubishi Corp. (8058) with billions of dollars of preferred shares -- convertible into common stock -- that never generated any dividends.

Though independent, the companies are among the hundreds of Mitsubishi-named businesses that trace their roots to a shipping firm founded by Yataro Iwasaki in 1870, making them the oldest business collective in Japan. Of those, 28 members form an informal group known as the Kinyokai.

Mitsubishi Bailouts

The Mitsubishi companies that bailed out their car affiliate have been seeking to convert their preferred stock because the carmaker’s inability to pay dividends rendered them pointless as preferred shares don’t carry voting rights.

Mitsubishi Motors has said it plans to eliminate all outstanding preferred shares before the fiscal year ends in March 2014.

Although Mitsubishi Motors has been profitable for years -- it’s forecasting record net income this fiscal year ending March -- those earnings weren’t sufficient to offset the accumulated losses stuck in its balance sheet.

That prompted the company last year to decrease its capital by 75 percent and cancel all of its 433.2 billion yen in capital reserves in August to erase more than 900 billion yen in accumulated losses. Japanese companies in Japan can’t pay dividends if they have no retained earnings on their balance sheet.

Mitsubishi Motors shares rose 0.4 percent to close at 1,131 yen before the announcement. The stock climbed 27 percent last year, underperforming the Nikkei 225 Stock Average’s 57 percent gain.

To contact the reporter on this story: Taku Kato in Tokyo at tkato6@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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