Japan Air Said to Get Orders for All of $8.5 Billion IPO

Japan Air Said to Get Orders for All Shares in $8.5 Billion IPO
JAL’s IPO, if successful, would complete a state-sponsored turnaround since it filed bankruptcy protection in 2010. Photographer: Tomohiro Ohsumi/Bloomberg

Japan Airlines Co.’s 663 billion yen ($8.5 billion) initial public offering, the largest since Facebook Inc., drew orders for all the stock being sold, said two people with knowledge of the transaction.

International investors, which will be allocated about 25 percent of the IPO shares, already put in orders for about twice that amount, said one person, who declined to be identified because the information is private. The other 75 percent, set to be sold to Japanese institutional and retail investors, is also covered, the person said.

JAL is returning to the stock market after a two-year state-backed turnaround that shed a third of its workforce, scrapped routes and retired older, less fuel-efficient planes and transformed it into the world’s most profitable airline. The Tokyo-based carrier’s government-backed parent is offering 175 million shares for as much as 3,790 yen apiece, which is about five times forecast earnings, compared with 15 times for All Nippon Airways Co., Japan’s largest airline by sales.

“It’s reasonably priced so it’s popular,” said Senri Sasahara, chief executive officer of Innovative Advisor Corp., which provides advice on mergers and acquisitions. “The brokers seem to be getting reasonable requests from buyers.”

Sasahara was approached today for the first time by a broker trying to sell Japan Airlines shares, while he typically gets “lots of” calls from securities companies wanting to market a single company’s stock, he said.

Sze Hunn Yap, a spokeswoman at the carrier, said she had no knowledge of the sale’s demand.

Government Turnaround

The final price for the IPO, Japan’s second-biggest in 14 years, will be decided on Sept. 10, according to a company statement in August. The shares will start trading on Sept. 19.

The turnaround was supported by a 350 billion yen investment from state-backed Enterprise Initiative Turnaround Corp. of Japan. The fund, which can only invest in companies for three years, is selling its 97 percent stake in the IPO.

Companies have raised more than 130 billion yen in 24 IPOs priced in Japan this year, led by Activia Properties Inc.’s 94 billion-yen sale in May. That’s little changed from a year earlier, according to data compiled by Bloomberg. Facebook raised $16 billion in its New York IPO in May. The shares have since fallen more than 50 percent from the sale price.

JAL’s share offering will be the largest in Japan since Dai-Ichi Life Insurance Co. raised 1 trillion yen in March 2010, according to data compiled by Bloomberg. That was Japan’s biggest since 1998 when NTT DoCoMo Inc. raised 2.1 trillion yen.

Record Profit

Japan Airlines posted a record profit of 187 billion yen in the year ended March, more than twice that of Air China Ltd., which had the largest net income among listed carriers worldwide, according to data compiled by Bloomberg. The Japanese airline is predicting a profit of 130 billion yen this fiscal year, compared with 40 billion yen at ANA.

JAL is set to surpass ANA as Japan’s biggest carrier by market value and become the fourth-largest worldwide behind Latam Airlines Group SA, Singapore Airlines Ltd. and Air China.

ANA rose 0.6 percent to 168 yen as of 11:14 a.m. in Tokyo trading today. The carrier, which completed an additional share sale last month, has fallen 22 percent this year, compared with a 3 percent gain for the Nikkei 225 Stock Average.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE