Japan Tobacco stock hit as $10 billion stake sale nears
Japan's government is set to launch the sale of part of its stake in Japan Tobacco <2914.T>, a move that hit the company's stock as investors sold ahead of the $10 billion offering.
Shares in the world's third-largest tobacco company tumbled as much as 5.9 percent on Wednesday, after Reuters reported that the sale would launch in the coming days.
The offering, the largest such deal since the U.S. Treasury's $20.7 billion sale of American International Group Inc shares in September, comes as Japanese equities hover near their highest levels in more than four years.
Japan Tobacco shares were down 3.2 percent at 2,832 yen in late morning, having fallen to a three-week low of 2,752 yen. The sale of a large block of shares usually prompts a fall in the price because it will increase the supply of publicly traded stock in the market.
Banks, including the four underwriters hired to manage the offering, met on Tuesday to iron out details of the deal, sources told Reuters.
Conditions for a sell-down in the government's stake in the $62 billion dollar company have improved, with Japan's Nikkei share average <.N225> up nearly 25 percent over the past three months to its highest level since September 2008.
Japan Tobacco shares rose about 21 percent over the same period, part of a broad market rally that began in mid-November after the calling of an early election that put Prime Minister Shinzo Abe in power a month later.
Abe has promised aggressive monetary and fiscal policies to tackle prolonged deflation.
APPETITE FOR BIG OFFERINGS
Japan's large and liquid stock market is used to digesting big offerings, such as the $8.5 billion IPO of Japan Airlines Co Ltd <9201.T> in September and a $2.3 billion follow-on deal by All Nippon Airways Co <9202.T>.
Last month U.S. private equity firm Cerberus Capital Management LP raised about $1.7 billion by selling shares in Japan's Aozora Bank Ltd <8304.T>.
Overall, equity issuance in Japan rose 16.8 percent in 2012 from a year earlier to $26.4 billion, driven by large IPOs and a flurry of activity that made it the busiest year for deals since 2008, Thomson Reuters data showed.
But the Japan Tobacco sale would be extraordinary.
The sale process is expected to be helped by both Tokyo's stock market rally of recent months and a promise by the company to buy back $3.1 billion of its shares.
"At the moment, appetite for Japanese stocks seems to be quiet smart," said a Tokyo trader, who did not want to be named.
JPMorgan Chase & Co , Daiwa Securities Group Inc <8601.T>, Goldman Sachs Group Inc and Mizuho Securities were hired last June as underwriters for the Japan Tobacco offering. Japan's biggest brokerage, Nomura Holdings Inc <8604.T>, was not selected as an underwriter after its involvement in an insider trading scandal.
The mandated banks invited other banks playing lesser roles in the sale at Tuesday's meeting, which was called to inform them of the planned schedule for the offering, the sources said.
(Reporting by Dominic Lau and Elzio Barreto; Editing by Michael Flaherty and Alex Richardson)