UPDATE 3-Japan Display sets IPO price at bottom of guidance

Mon Mar 10, 2014 1:05pm EDT

* Japan Display IPO priced at bottom of 900-1,100 yen guidance
    * Offering worth $3.08 bln, taps strong Japan equities performance
    * Overseas investor demand was weaker than expected -bankers


    By Reiji  Murai  and Emi Emoto
    TOKYO, March 10 (Reuters) - Japan Display Inc, the world's biggest maker of
screens for tablets and smartphones, set the price of its stock listing at the
bottom of its guidance range after foreign investors gave the offering a cool
reception.
    Japan Display is tapping one of Asia's best-performing stock markets this
past year to raise money for capital investment while a government-backed fund
cashes out part of its investment. The company priced the offering at 900 yen
per share, which puts the offering's total value at 318.5 billion yen ($3.08
billion).
    The company also cut the portion of the offering for overseas investors to
37.5 percent from 45 percent, with bankers noting concerns about its heavy
dependence on Apple Inc's iPhones and iPads, which make up 30 percent
of its business, and declining screen prices.
    
    Small and mid-sized screens are typically tailored to individual supply
contracts, so prices are difficult to track, but NPD Display Search senior vice
president Yoshio Tamura said the average price of five-inch screens for Chinese
smartphone makers fell a steep 34.7 percent from March 2013 to February of this
year.
    He added, however, that the worst appears to be over.
    "Since the drop in the latter half of 2013 was so great, we expect the price
to bottom out," he said.
    Japan Display, formed in 2012 from the merger of struggling display units at
Hitachi Ltd, Sony Corp and Toshiba Corp, last week
set a range of 900 to 1,100 yen for the offering as it prepares for a March 19
listing on the Tokyo Stock Exchange.
    That had already marked a modest retreat from a reference price of 1,100 yen
announced with its original listing plan last month. 
    
    CONCERNS OVER OUTLOOK
    Japan Display is offering nearly 60 percent of its expanded share capital in
the listing, which will also raise 126 billion yen from the sale of new shares,
to fund spending on display manufacturing facilities.
    The offering will also allow state-backed Innovation Network Corp of Japan,
which is selling down its stake to a little over one-third from 86.7 percent, to
roughly double its money on its initial investment of 200 billion yen.
 
    The company may issue an additional 16.2 billion yen in shares as an
over-allotment, bringing the total value of the offering to about 335 billion
yen.
    While foreign investors have shown concern about the outlook, for the
current financial year to end-March the company is forecasting a sharp jump in
operating profit to 30.4 billion yen, up from 1.8 billion yen the year before,
due mainly to the startup of its Mobara factory east of Tokyo.
    Hiroyuki Fukunaga, chief executive of Investrust, was sanguine about the
prospects for the company's business in small screens.
    "That market is still expected to grow, so I do expect their sales and
profits to grow," he said.
    Japan has seen a pickup in share offerings as stock prices have rallied,
buoyed by the reflationary economic policies of Prime Minister Shinzo Abe. The
benchmark Nikkei average has surged nearly three-fourths in the past 17
months.
    Joint global coordinators for the Japan Display IPO are Nomura,
Morgan Stanley and Goldman Sachs.