Japan Post Group is to launch its long-awaited initial public offering (IPO) in the second halfof this year, including a parallel partial flotation of its two huge banking and insurance main
subsidiaries – Japan Post Bank and Japan Post Insurance – although the group’sloss-making postal business seems likely to remain largely in government hands.By listing the insurance and bank units at the same time as the holding company, the group aimsto ensure a fair valuation for the whole company as well as its two giant financial businesses.Japan Post Bank Co Ltd is the nation’s biggest bank and Japan Post Insurance Co isits biggest insurance company.
Ranked as one of the world’s biggest financial institutions with net assets estimated at around13.8 trillion yen (US$115 billion), the state-owned postal group said it planned to eventually cutits stakes in the two banking and insurance units to around 50%.
Government officials reportedly said the IPO could raise as much as Y4tn ($33bn) in severaltranches starting in the second half of the year. The government plans to use the proceeds to fundthe reconstruction of areas damaged by the 2011 earthquake and tsunami, although some fund managershave raised concerns about whether there will be sufficient market appetite to absorb the massiveunleashing of shares.
Japan Post president Taizo Nishimuro declined to comment on the potential scale of theoffering, saying this would be determined by market conditions at the time of the IPOs. He said theIPOs could happen sometime between August and December.
“We are finally taking the first real step towards postal privatisation,” Nishimuro told a newsconference. In the early 2000s, former prime minister Junichiro Koizumi began pushing for abreak-up of the postal operator, but the momentum was lost in subsequent years and it became ahighly divisive issue with members of both ruling and main opposition parties objecting to it.
With deposits of up to Y178 trillion, the group’s banking operations are among the biggest inthe world, according to the Financial Times. But its businesses are primarily domestic, its assetsare concentrated in low-yielding Japanese government bonds, and the regulator has forbidden it fromentering lucrative areas such as loans or mortgages.
According to the Nikkei business daily, the government plans to initially list 10% ofoutstanding shares for each of the three companies. It reported that the group’s other main unit –the national postal service, with more than 20,000 post offices – would not be listed.
The postal business has seen steep declines in earnings over the past decade with the growth ofemail and web billing. For the April to September period, the postal group booked a net profit ofY217.1bn, but its postal-service business was lossmaking.
“The business outlook is tough with the population declining. The company will need to enter newbusiness areas or seek growth overseas, but those efforts will also be tricky,” Naoki Fujiwara,fund manager at Shinkin Asset Management told the FT.
He said the company was expected to outline its growth strategies ahead of the IPO, butinstitutional investors were unlikely to come on board unless bankers priced the deal cheaply.
Nishimuro commented: “We need to fix these businesses where profitability is very low, but westill need to maintain the postal-service network.”
Last autumn, Japan Post made an important international expansion move by sealing aninternational alliance with La Poste subsidiary GeoPost. Under this strategic agreement, Japan Postwill buy into Hong Kong-based firm Lenton, which is partly owned by the French group. Japan Postwill buy a 14.9% stake in Lenton Group while GeoPost will retain a 34.7% stake in the expressdelivery firm.
In addition, Japan Post agreed to use GeoPost’s network for international delivery, in order totarget growing e-commerce demand in Asia for Japanese products. The new export shipping servicelaunched on October 30, covering 49 countries in Asia Pacific and Europe and Japan Post hopes toship some one million parcels a year through the new service. The company expects better deliveryquality than through the traditional postal network, including more precise delivery times andbetter tracking of shipments.
