Seibu Holdings Inc., owner of Japan’s biggest hotel chain, reduced the size of its initial public offering by at least 73 percent with its largest shareholder opting out after investors balked at the valuation.
Seibu’s owners are seeking as much as 50.1 billion yen ($491 million) from a sale of 27.8 million shares, according to a filing from the hotel and railway operator yesterday. They will offer the shares at 1,600 to 1,800 yen each, lower than the 2,300 yen indicative price announced last month.
The company is going public after Japan Display Inc. (6740) and electronics maker Hitachi Maxell Ltd. sank on their trading debuts in March. Japan’s Topix index dropped 7.6 percent in the first three months of the year, the worst quarterly performance since the second quarter of 2012.
“The price was definitely too expensive,” Senri Sasahara, chief executive officer of merger advisory firm Innovative Advisor Corp., said by phone in Tokyo. “It might be easier to get enough demand from the market now.”
Cerberus Capital Management LP, the company’s largest investor with a 35.5 percent holding, won’t sell any stock in the offering, the statement shows. Seibu’s owners were originally planning to raise about $1.8 billion from a sale of as many as 80.9 million shares, according to a prospectus last month.
Seibu is returning to the Tokyo Stock Exchange after a nearly 10-year hiatus. It has sold hotels and cut costs after receiving a bailout from Cerberus in 2006.
The company cut the price range for the offering after meetings with overseas investors, who considered the indicative price very high, two people familiar with the situation said. Japanese institutions also didn’t show enough appetite for Seibu to sell shares at that price, said the people, who asked not to be identified as the talks were private.
The price range takes into account recent changes in the domestic and overseas markets, as well as the sentiment toward new issues, Seibu said in a statement. An official at Cerberus Japan, who asked not to be named citing company policy, directed queries to the firm’s New York headquarters. Calls to U.S.-based spokesmen for Cerberus weren’t answered outside regular business hours.
Japan Display, a supplier of screens for Apple Inc. devices, slumped 15 percent on its March 19 Tokyo trading debut after a $3.1 billion initial public offering. The day before, Hitachi Maxell tumbled 14 percent below its IPO price on its first day of trading. Both are still trading below their offer prices.
Seibu owns the Prince Hotel group with 42 hotels in Japan and seven properties overseas, including the Hawaii Prince Hotel Waikiki. The company has eight hotels in Tokyo, including its 3,679-room Shinagawa Prince Hotel. In November, the Prince business was ranked as the biggest hotel chain by sales in Japan by the Nikkei Marketing Journal.
Cerberus said last March it is willing to wait as long as three years for a listing of Seibu as it wants to take more steps to improve the company’s value. Seibu has been getting ready for an IPO as soon as possible, with President Takashi Goto saying at the time the company was already “financially prepared” for a listing.
Seibu’s net income for the year ended March probably rose 4.8 percent to 16.4 billion yen, the company said April 2. Based on the high end of the IPO price range, that would value the company at about 38 times earnings.
Imperial Hotel (9708) Ltd., which runs one of Tokyo’s largest hotels, trades at 57 times earnings while East Japan Railway (9020) Co., the nation’s biggest train line operator, is valued at 15 times, according to the earnings forecasts released by the companies in January.
Seibu will set the final price for the IPO on April 14, and shares will begin trading on April 23, according to an earlier statement from the company.