July 3, 2013 / 8:41 AM / in 6 years

Suntory in modest debut, may be Japan's last big IPO this year

TOKYO (Reuters) - Suntory Beverage and Food Ltd (2587.T) managed a modest rise in its debut on Wednesday after a $4 billion IPO, as investors shrugged off volatile markets and rich valuations to buy up what may be Japan’s last big corporate listing of 2013.

A woman purchases a Suntory beverage from a vending machine in Tokyo September 10, 2009. REUTERS/Yuriko Nakao

Suntory’s offering, Asia’s biggest IPO so far this year and aimed at building up a warchest for overseas acquisitions, is part of a surge in Japanese equity issuance as companies cash in on higher valuations from a rallying stock market.

The rally stalled in mid-May and the market has turned volatile but Prime Minister Shinzo Abe’s reflationary policies continue to support less high-profile equity issuance, with advertising firm Dentsu Inc (4324.T) announcing on Wednesday it would tap the market for $1.2 billion in a secondary offering to pay down debt.

“I believe the market can digest more share offerings easily,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. “The market has regained confidence in the long-term upward trend in stock prices.”

Suntory Beverage rose to 3,145 yen in its maiden session, up 1.5 percent from the IPO price of 3,100 and defying weak signals from the grey market, where it traded last week at 2,900 yen.

Japan’s second-biggest soft drinks company, whose brands include Orangina, attracted retail investors with its high-profile brands while institutional players shifted from rival drinks makers to balance their sector holdings.

Rival Kirin Holdings Co Ltd (2503.T) fell 2 percent and Asahi Group Holdings Ltd (2502.T) dropped 0.5 percent. The benchmark Nikkei average .N225 was down 0.3 percent.

But investors remained cautious about the shares’ outlook given their high valuations, considered overly generous even for a venerable Japanese brand and despite the recent share rally.

“I thought even 3,000 yen was too expensive and decided not to participate (in the IPO),” said one fund manager, noting that Suntory Beverage’s price-book ratio was around 15 times at 3,000 yen per share, compared with 12 times for Kirin.

DEARTH OF BIG DEALS

Japanese equity issuance jumped to $27.8 billion in the first six months of this year, quadruple the year-ago volume according to Thomson Reuters data. That was nearly one-fourth of deals in Asia, up sharply from a 7 percent share in 2012 and a 15 percent average over the past five years.

In addition to Suntory, real estate investment trusts have been major fund-raisers this year, including a $1.8 billion offering by Nomura Real Estate Master Fund 3285.T and a $1.1 billion offering by Nippon Prologis REIT Inc (3283.T).

Supermarket operator Aeon Co Ltd (8267.T) also plans a REIT offering this year, which is expected to be one of Japan’s largest REITs for retail property.

Most of the heft in Japan’s IPO market is with multibillion dollar deals such as privatizations, private equity deals, and listing plans by a handful of major companies such as Suntory that have long been privately held but now want to go public to help with M&A and expansion abroad.

There are, however, few such deals on the immediate horizon and one of the most promising, for Seibu Holdings, is mired in a shareholder squabble as leadership at the railroad and real estate conglomerate battles with top shareholder Cerberus Capital over management control.

The president of Recruit Co, a large staff placement and publishing firm, said last year that it plans to list its shares within the next few years.

The Japanese government has also floated the idea of eventually selling some of its shares in Tokyo Metro Co, which operates a vast subway network stretching across the nation’s capital, in a public offering as it tries to shore up Japan’s tattered public finances. ($1 = 100.4050 Japanese yen)

Additional reporting by Nathan Layne, Emi Emoto, Dominic Lau and Tomo Uetake in Tokyo and Elzio Barreto in Hong Kong; Editing by Edwina Gibbs

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