Japan Post Holdings to be privatised in bid to deliver $30bn

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Japan is to privatise its state-owned postal operator, Japan Post Holdings, in the country’s biggest flotation in more than 30 years.

The state-owned company employs 200,000 staff and controls both Japan’s largest bank and insurance firm – critical offerings that the government hopes will win over retail investors and boost the stock market.

About 80% of the IPO allocation will go to domestic investors. A finance ministry official said on Thursday that 95% of the domestic offering will be sold to individuals while all of the overseas portion will go to institutional investors.

Final pricing for the bank and insurance units will take place on 19 October, and for the holding company on 26 October. All three will make their market debuts on 4 November.

The offerings will be the first of three tranches that together are intended to generate more than $30bn (£19bn) for reconstruction after the 2011 earthquake and tsunami.

About 10% of outstanding shares in each company will be offered, with Japan Post Holding’s offering aiming to raise $5.5bn, while the bank and insurance IPOs will seek $4.8bn and $1.2bn respectively.

A government spokesman said the share offers were an opportunity to encourage the shift of household money from bank deposits to equity market investment.

“We are hopeful it will lead to a virtuous economic cycle,” the chief cabinet secretary, Yoshihide Suga, told a news conference.

The debut of Japan Post Bank will subject one of the world’s biggest institutional investors to market forces. The bank has already pledged to overhaul the management of its $1.7trn portfolio, potentially having a considerable impact over fund flows into stock and bond markets.

But scepticism abounds over growth prospects for all three companies, with both the bank and Japan Post Insurance heavily regulated to protect private sector rivals, while mail services are suffering from declining volume in a digital age.

“I don’t imagine managers of active funds will rush to buy shares of Japan Post companies,” said a fund manager.

“Rather, depending on the dividend yield, those focused on value stocks are likely to be interested,” said the fund manager, who declined to be identified because his company is owned by a direct competitor to the bank.

Japan Post Bank will have an indicative price of 1,400 yen and have the largest market capitalisation of the three at $52bn.

The holding company would have a market value of about $50bn at its indicative price of 1,350 yen. The insurance unit’s tentative price of 2,150 yen would give it a market value of about $11bn.

Keenly aware of the need for strong growth to lure investors, the Japan Post president, Taizo Nishimuro, orchestrated the acquisition of the Australian freight and logistics firm, Toll Holdings, for A$6.5bn (£3bn) this year.

But underscoring concerns about growth, Japan Post Holdings said it expected net profit to slide 20% to 370bn yen this financial year.

The bank said it forecast annual net profit to fall 13% while the insurance unit said net income is likely to edge up 3%.

In a move likely to help attract retail investors, the holding company said it plans to double its annual dividend to 23 yen per share.

Eleven companies have been hired as lead underwriters for the offerings, with Mitsubishi UFJ Morgan Stanley, Nomura, Goldman Sachs and JP Morgan chosen as global co-ordinators.