UPDATE 1-Japanese government offers smallest discount on tobacco shares

Mon Mar 11, 2013 4:29am EDT

(Adds amount to be raised, details)

TOKYO, March 11 (Reuters) - In the run-up to the completion of a planned $10 billion stock sale, the government of Japan has given investors the smallest discount available after it priced shares in Japan Tobacco at 2,949 yen per share, a 2.02 percent discount from Monday's close. The government had been expected to price the shares within a range of between 2 percent and 4 percent.

The Ministry of Finance, which owns just over 50 percent of the world's No.3 tobacco company, said on Monday it expects to raise 742.8 billion yen ($7.72 billion) from the public sale in addition to the 230.6 billion yen it has already received after Japan Tobacco bought back 80 million shares from the ministry to reduce the impact of the sale on its stock price.

The ministry will sell total of 333 million shares to cut its stake in Japan Tobacco to one-third. The proceeds will be used to fund the reconstruction of areas devastated by the 2011 earthquake and tsunami.

Shares in Japan Tobacco have outperformed rival Philip Morris International Inc and British American Tobacco Plc since the bill approving the sell-down was approved in 2011, Thomson Reuters data shows, with investors welcoming reduced state control. (r.reuters.com/guz26t)

($1 = 96.1850 Japanese yen)

(Reporting by Junko Fujita; Editing by Shinichi Saoshiro)

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