Japan Post units said to be poised for high-end pricing in IPO

[TOKYO] Japan's government may raise close to the maximum sought in the initial public offering of Japan Post Holdings Co's banking and insurance units, according to people with knowledge of the matter.

Shares in Japan Post Bank Co and Japan Post Insurance Co will probably be priced toward the top end of marketed price ranges after investor orders exceeded the amount of stock on offer, said the people. The government and Japan Post won't make a final decision on pricing until Monday, they said, asking not to be named because the deliberations are private.

The companies are being sold as part of a three-pronged IPO that could raise 1.44 trillion yen (S$16.7 billion) in Japan's biggest privatisation since 1987. The sale of the bank and insurance units would reap 743 billion yen if the top-of-range prices are applied, according to Bloomberg calculations. The holding company will be priced a week later, on Oct 26.

While demand is strong enough for shares in both companies to be sold at the top end of their ranges, the government may opt for slightly lower pricing to ensure gains once the units start trading, one of the people said. Demand for the shares augurs well for the Nov 4 triple listing, after Japanese equities were battered by the global market turmoil stemming from China.

Spokesmen for the bank and insurer declined to comment, as did officials from the Ministry of Finance.

Shares of the bank are being offered for 1,250 yen to 1,450 yen apiece, and the insurer is being priced at 1,900 yen to 2,200 yen. The holding company is being offered at a range of 1,100 yen to 1,400 yen.

Japan's government is selling shares in the postal service, whose origins date back to 1871, mostly to citizens as part of Prime Minister Shinzo Abe's goal to get people to invest more of their savings. Some of the proceeds will be used for reconstruction efforts following the 2011 earthquake and tsunami in the northeast.

Japan Post Bank is the biggest holder of deposits in the country and Japan Post Insurance is the nation's largest insurer by assets. A decade ago, Mr Abe's mentor Junichiro Koizumi first drove the sale plans, arguing the assets would be deployed more efficiently in private hands.

About 60 firms are working on the IPO. Nomura Holdings Inc, Goldman Sachs Group Inc, Mitsubishi UFJ Morgan Stanley Securities Co and JPMorgan Chase & Co are the global coordinators.

BLOOMBERG