By Dow Jones Business News, February 25, 2013, 02:15:00 AM EDT
TOKYO--Japan's government will sell about $10 billion worth of shares in Japan Tobacco Inc. (2914.TO) next month to
raise natural disaster reconstruction funds, in what will be the largest share offering in Japan since 2010.
The Ministry of Finance Monday said it plans to sell 333.33 million shares of the world's third-largest tobacco
company by sales volume, or 16.6% of JT's outstanding shares. The price will be set on March 11-13.
JT will buy up to 118.0 million of the shares, or 6.2% of the total outstanding, for as much as 250 billion yen ($2.7
billion) from Feb. 27 to March 8. The government will offer the remainder to the public.
Various factors were taken into account in deciding the timing of the sale, including market direction and daily
trading value and volume, said a ministry official at a news conference.
"Our overriding concern was minimizing market impact and ensuring a smooth sale, rather than maximizing the proceeds."
The sale would be the government's fourth since privatizing JT in 1985, and first since June 2004. It currently holds
50% of JT, which is ranked after Philip Morris International Inc. (PM) and British American Tobacco PLC (BTI).
The government had planned the share sale last year but postponed it because of market conditions. Conditions have
since improved, with the yen quickly weakening on hope of massive government spending and more monetary easing under the
administration of Prime Minister Shinzo Abe of the Liberal Democratic Party. Mr. Abe assumed office in December
promising to curb the yen's strength and end deflation.
The weakening yen has been a catalyst for stronger shares, with the Nikkei Stock Average gaining 35% since mid-
November. It closed at 11,662.52 Monday, crossing 11,600 for the first time since Sept. 29, 2008.
JT shares have risen about 33% over the same period to Y2,901. At that price, 16.6% of JT shares would be worth about
Japanese law requires the government to hold more than one third of JT's outstanding shares.
JT wants to compete on an "equal footing" with fully privately owned rivals such as Philip Morris and British American
Tobacco, JT officials have said, and is seeking larger shares of overseas markets with brands such as Winston and Camel.
Full privatization is necessary for management freedom, JT officials contend. For instance, JT is having difficulty
issuing new shares for strategic purposes such as mergers or acquisitions because of the stake the government must hold;
and the government is unlikely to buy more shares to maintain its stake.
JT will hold the bought-back shares as treasury stock, which is needed for strategic purposes. U.K.-based activist
shareholder Children's Investment Fund had proposed canceling them.
The finance ministry has chosen as underwriters Daiwa Securities Group Inc. (8601.TO) unit Daiwa Securities, Goldman
Sachs Group Inc. ( GS ), Mizuho Financial Group Inc. (8411.TO) unit Mizuho Securities, and JPMorgan Chase & Co. ( JPM ).
The offering would be slightly short of the $11 billion value of Dai-Ichi Mutual Life Insurance Co.'s (8750.TO) April
Write to Hiroyuki Kachi at Hiroyuki.Kachi@dowjones.com
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