TOKYO Japan Display Inc, created in a three-way merger of the small liquid crystal display operations of Sony Corp (6758.T), Hitachi Ltd (6501.T) and Toshiba Corp (6502.T), has chosen investment banks to take it public as early as the first quarter of 2014, sources with direct knowledge of the matter said.
The initial public offering (IPO) will be marketed globally and is expected to raise at least 100 billion yen ($1.3 billion) for Japan Display and a state-backed fund that is the firm's top shareholder, the sources said.
Japan Display tapped Goldman Sachs (GS.N), Nomura Securities (8604.T) and Morgan Stanley (MS.N) as global coordinators for the IPO, the sources said, speaking on condition of anonymity because the hiring of underwriters has not been made public.
Japan Display and representatives of the three investment banks declined to comment.
A listing in early 2014 would mark an acceleration of the company's original plans. When Japan Display launched operations in April, chief executive Shuichi Otsuka said he would aim for an IPO by the financial year ending in March 2016.
The move to fast-track the process reflects the company's solid earnings since its launch, boosted by strong demand from Apple Inc (AAPL.O), to which it supplies panels for the iPhone 5, and from other smartphone makers.
The global market for small- and medium-sized displays is set to double in size to $56 billion annually by 2016, according to an estimate by NPD DisplaySearch.
But Japan Display needs to keep investing aggressively in research and new production lines to stay competitive against Asian rivals, including South Korean's Samsung Electronics Co Ltd (005930.KS).
"The favorable environment will last a little while, it's probably got a year or two of breathing room," said one of the sources. "But it needs to keep investing, and for that it needs funds."
The IPO will also create an avenue for the Innovation Network Corporation of Japan (INCJ), a state fund which put 200 billion yen into the company, to sell down some of its 70 percent stake. INCJ declined to comment.
The INCJ's interest values the entire company at about 285 billion yen. Bankers estimated the company's market capitalization could come to around 300 to 400 billion yen at the time of the IPO.
The combined small and medium-sized LCD operations of Toshiba, Sony and Hitachi accounted for 20 percent of the global market in 2011 in monetary terms. That ranked atop the industry, ahead of Sharp Corp (6753.T) and Chimei Innolux Corp (3481.TW) at 16 and 11 percent, respectively, NPD DisplaySeach data shows.
The Japan Display IPO was an actively sought out underwriting mandate, with all major investment banks operating in Tokyo submitting pitches before it was whittled down to the three global coordinators in recent weeks, sources said.
With the exception of Japan Airlines' (9201.T) $8.5 billion re-listing in September, there have been a dearth of new offerings in Japan, a reflection of the sluggishness of the country's economy and stock market. ($1 = 79.8200 Japanese yen)
(Reporting by Emi Emoto and Nathan Layne; Editing by Michael Watson and Muralikumar Anantharaman)