Japan Post share sale an instructive sign for ECM
Don’t expect a flood of IPOs, but there are still placements across Asia Pacific.
News that Japan Post Holdings plans to raise around $9.5 billion equivalent from the sale of shares in its banking unit should be welcomed, not only in Japan but regionally.
It is a sign that, despite continuing global volatility, equity capital markets deals will get away.
We are not yet seeing many IPOs, for the very good reason that there is surely going to be a better time for any private company to face markets for the first time. Instead, a pattern is beginning to emerge: sell-downs by already listed businesses, often linked to specific transactions for which funding can’t wait.
Japan Post’s circumstances are very specific. The group was listed in 2015 in a concurrent three-sided IPO of Japan Post Holdings, Japan Post Bank and Japan Post Insurance, raising nearly $12 billion in the world’s largest IPO that year.
Around Asia Pacific, it is block trades and other secondary structures that are keeping ECM teams busy
Much like the UK, Japan’s post office had adopted as early as the 1870s a model in which savers could deposit funds at local branches, effectively making it the biggest retail bank in the country by savings and deposits as of 2013.
But Japan Post Bank has a very narrow free float: about 89% of it is still owned by Japan Post Holdings. That is out of step with Tokyo Stock Exchange rules issued last year that require companies to have at least 35% of all stock in a tradable form. There is a long-term plan for the parent to sell down its stake in the bank to 50% or less by March 2026 (it has already done so with the insurance unit).
In this initial step, Japan Post aims to sell about 975 million shares in Japan Post Bank, while the banking arm itself plans to buy back up to ¥150 billion of shares and cancel them.
The joint global coordinators in the offering are strikingly similar to those in the 2015 IPO: Goldman Sachs and Mitsubishi UFG Morgan Stanley Securities reappear, as does Nomura, while the only difference on this top tier is the replacement of an international (JPMorgan in 2015) with a local (Daiwa Securities this time).
Around the region, it is block trades and other secondary structures that are keeping ECM teams busy. On March 1, Chinese battery developer Contemporary Amperex Technology sold its stake in Pilbara Minerals, the Australian lithium group, for A$601 million ($404 million) in a block trade underwritten by Goldman and UBS, following an earlier A$250 million sale the same week.
Star Entertainment Group in Australia secured a A$800 million equity recapitalization through Macquarie Capital and new boys Barrenjoey in late February.
Clearly, the biggest of all rights issues – Adani’s planned $2.5 billion deal – was never launched, despite being fully covered. But others are pressing on: Share India Securities has a rights issue in the market. Meanwhile, regionally, headline IPOs are stalled, the latest being the float of Pertamina’s upstream unit Hulu Energi in Indonesia, helmed by Citi, Credit Suisse and JPMorgan with BRI Danareksa and Bank Mandiri.
These are relatively slim pickings for ECM teams at global banks active in Asia Pacific, but at least they are something. So long as there are events and acquisitions, there will be funding requirements, and there is still a case for doing it with stock.