Mitsubishi Motors to Raise Up to $2.5 Billion in Share Sale

Mitsubishi Motors Corp. (7211), the Japanese automaker bailed out by affiliates a decade ago, will raise as much as 257.1 billion yen ($2.5 billion) net of fees through a share sale as it plans to resume dividend payouts.

The carmaker will issue as many as 241 million shares, including an overallotment of 23.25 million shares, for 1,120 yen each and use the proceeds to buy back preferred stock held by companies that rescued the Tokyo-based carmaker, according to a filing yesterday. The amount is about 6 percent more than the 241.6 billion yen target the carmaker set on Jan. 7.

The issuance is part of President Osamu Masuko’s reorganization of Mitsubishi Motors as sales recover and as the company purchases preferred stock back from affiliates such as Mitsubishi UFJ Financial Group Inc., which extended loans to stop the automaker from collapsing a decade ago. Mitsubishi Motors received bailouts in 2004 and 2005 as revenue slumped following the company’s admission that it covered up defects.

Mitsubishi Motors “should be included in a list of investable stocks once the equity offering is finished and dividends are paid at the end of this fiscal year,” Koji Endo, senior analyst at Advanced Research Japan in Tokyo, wrote in a report dated Jan. 17. “The Mitsubishi group, mainly Mitsubishi Heavy Industry and Mitsubishi Corporation, have expressed their intention to continue supporting Mitsubishi Motors, which is certainly one of the benefits.”

Share Performance

The automaker’s shares climbed 27 percent last year, underperforming the Nikkei 225 Stock Average’s 57 percent gain. The stock fell 0.6 percent to 1,160 yen as of the close in Tokyo trading today.

The carmaker last declared a dividend in September 1997, according to data compiled by Bloomberg.

Net income will probably more than double to 100 billion yen as sales climb 16 percent to 2.11 trillion yen in the year ending March 31, Mitsubishi Motors said Dec. 20.

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 in the carmaker, 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.

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 ending in March.

To contact the reporter on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net

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

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