Banker Fees on Japan Post Deal Are Said to Top Tobacco Sale

Updated on
  • Underwriters face challenge of marketing to retail investors
  • Fees are said to be 0.7% versus 0.5% on JT’s 2013 offering

Japan’s government will pay higher fees to banks managing its sale of a $12 billion stake in Japan Post Holdings Co. than it did when divesting Japan Tobacco Inc. four years ago, reflecting the additional challenge for underwriters, according to people with knowledge of the matter.

Brokerages will get 0.76 percent of the amount sold to retail investors and 0.56 percent offered to institutions, said the people, who asked not to be identified discussing private deal terms. That will earn them as much as 9.3 billion yen ($84 million).

The overall fees work out to about 0.7 percent, more than the 0.5 percent paid by the Ministry of Finance when it sold a stake in JT in 2013, according to Bloomberg calculations. Nomura Holdings Inc., Daiwa Securities Group Inc. and Goldman Sachs Group Inc. are among the 61 firms working on the 1.3 trillion-yen deal, the biggest single equity offering in Japan since 1999.

With about three-quarters of the sale focused on households, brokerages face the costly task of targeting a large number of investors across Japan at a time of lingering market jitters over North Korea. Prospects for the postal and financial-services giant, whose shares have barely risen since listing almost two years ago, are clouded by shrinking mail volumes and low interest rates.

Finance Ministry officials declined to comment on the fees, as did representatives from Nomura, Daiwa and Goldman Sachs, which are joint global coordinators of the deal. Nomura and Daiwa will manage the bulk of the offering, followed by Goldman Sachs, Mitsubishi UFJ Morgan Stanley Securities Co., Mizuho Securities Co. and SMBC Nikko Securities Inc., people with knowledge of the matter said earlier this week.

Brokerages in Japan tend to accept lower fees for underwriting government share sales because of the prestige attached to the transactions. With the Japan Post offering, they are counting on penetrating rural areas to obtain new accounts from people who wish to invest more of their savings.

Underscoring the need to target a wide range of investors, including in rural Japan, underwriters started broadcasting television advertisements this week featuring a girl walking with a goat in the countryside. The roadshow will take in provincial cities such as Sendai and Kumamoto.

Nevertheless, the fees are lower than those paid to managers of Japan Post’s three-pronged initial public offering with its banking and insurance units in 2015. Underwriters of the 1.4 trillion-yen IPO received about 1.6 percent, Bloomberg calculated based on information from people with knowledge of the matter at the time.

The government is divesting its ownership in Japan Post to raise funds for areas devastated by the 2011 earthquake and tsunami in northern Japan. Shares of the holding company have risen less than 1 percent since the listing in November 2015.

The ministry reduced its stake in Japan Tobacco from half to a third in 2013, also for quake relief. More than 40 percent of that offering was aimed at international institutional investors, according to data compiled by Bloomberg. 

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