Japan Seeks $3.8 Billion From This Year’s Second-Biggest IPO

  • Government sets 2,450 yen indicative price for Kyushu Railway
  • Company is fourth former Japan Railways company to be sold

Japan’s government is aiming to raise as much as 392 billion yen ($3.8 billion) selling shares of Kyushu Railway Co. in an initial public offering poised to be the world’s second-biggest this year.

The Japan Railway Construction, Transport and Technology Agency, which fully owns the company, also known as JR Kyushu, is offering 160 million shares at an indicative price of 2,450 yen apiece, according to a statement in Tokyo Thursday. The agency is selling all of its shares and plans to list them on Oct. 25 on the Tokyo Stock Exchange and the following day on the Fukuoka Stock Exchange, according to the statement.

The state asset offering is part of a plan started in the 1990s to privatize the nation’s train operators created from the breakup of Japan Railways in 1987. JR Kyushu is the fourth of those firms selling shares to the public and the IPO would be the biggest for 2016 after Postal Savings Bank of China Co., which is seeking as much as $8.1 billion in a Hong Kong share sale.

“This will be a big issue,” said Senri Sasahara, an individual investor who is also chief executive officer of Innovative Advisor Corp., which advises on takeovers and mergers. “JR Kyushu is quite innovative. That will be appreciated by investors.” He said he will consider buying the shares.

Bullet Trains, Hotels

A record number of visitors to Japan is benefiting companies such as JR Kyushu, which operates bullet trains along with the regular ones, and runs hotels and restaurants on the nation’s third-largest island. JR Kyushu is based in Fukuoka City, about 890 kilometers (550 miles) west of Tokyo.

The government will set the price range on Oct. 6 and the final price on Oct. 17, according to the statement. Line Corp., Japan’s most popular mobile messaging service, which announced an IPO in June had set an indicative price of 2,800 yen initially and before selling them at 3,300 yen apiece.

The government’s asset sales are aimed at encouraging citizens to invest more of their household savings in the stock market. It sold shares in Japan Post Holdings Co., Japan Post Bank Co. and Japan Post Insurance Co. last year in the biggest program since 1987.

Nomura Holdings Inc., Mitsubishi UFJ Morgan Stanley Securities Co. and JPMorgan Chase & Co. are global coordinators for the company’s IPO, while SMBC Nikko Securities Inc. and Goldman Sachs Group Inc. will also lead the global offering.

One-Time Cost

JR Kyushu expects net income of 38.2 billion yen in the year ending March 31, with sales forecast to increase 0.2 percent to 379 billion yen. The train operator had a net loss of 433 billion yen last fiscal year, as it booked a one-time 479 billion yen cost for depreciation of railway assets.

The company got about half of its sales from railways last fiscal year, according to the company. About a quarter of revenue came from its construction business, while the rest came from its train station, real estate, retail and restaurant businesses and other operations, according to the company.

JR Kyushu has more than 9,000 employees and over 30 group companies. It will join East Japan Railway Co., Central Japan Railway Co. and West Japan Railway Co., which operate trains in other areas around Japan and were sold by the government in the 1990s.

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