Asia-Pacific Secondary Equity Issue: Japan Post Holdings’ ¥1.2trn follow-on in Japan Post Bank

IFR Awards 2023
3 min read
Sunny Tse

Weathering the storm

Japan Post Holdings' ¥1.2trn (US$8.13bn) selldown in Japan Post Bank, the largest follow-on globally in 2023, sailed through despite global banking woes at the time.

JPH, which owned 89% of JPB before the share sale, launched the deal on February 27, at a time when the Topix Banks Stock Index had gained more than 20% since Bank of Japan’s surprising policy tweak in December 2022 to relax its yield curve control.

JPH offered 25.26% of its banking unit, plus another 3.79% in the greenshoe, in an indicative discount range of 2%–4% to the share price on March 13.

The parent had outlined plans to reduce its shareholding to 50% or less by the end of March 2026, but banks were able to calm investors' fears about the overhang.

Large indications of interest received from international investors during pre-marketing converted into enough orders to cover the books on the first day of bookbuilding on March 7.

A greater challenge came two hours after JPB closed books on March 10 when Silicon Valley Bank collapsed. Signature Bank then failed on March 12, and the future of Credit Suisse was increasingly in doubt. The Topix Banks Stock Index fell 16% in three days as the two US banks failed.

The nerve-racking news prompted some investors to consider cancelling or downsizing their orders even though books had closed. The leads quickly conveyed the message to investors that the US bank failures were largely irrelevant to the Japanese banking system. The move convinced most international and domestic institutional investors to stand by their orders.

The deal even priced at the tight end of the discount range at ¥1,131, 2.08% below the close of ¥1,155 on March 13.

The institutional portion was finalised, but stabilising manager Daiwa still needed to maintain JPB's shares at or above the placement price during the retail subscription period which was open on March 14–15. Around 79.5% of the deal was earmarked for retail investors.

Daiwa bought JPB shares to stabilise the price between ¥1,131 and ¥1,133 on March 14 and the stock closed at ¥1,131 that day. Daiwa did not purchase any JPB shares on March 15 but the stock still managed to close at ¥1,172.

The international books were around seven times covered with long-only investors and index funds participating, with the same level of coverage on the domestic institutional book. The allocations were concentrated, with the top 20 investors taking about 70% of the deal.

The greenshoe was partially exercised.

JPB shares finished the year at ¥1,436, up 27% from the price of the secondary follow-on, rewarding investors for their faith.

Goldman Sachs, Mitsubishi UFJ Morgan Stanley, Daiwa and Nomura were the joint global coordinators.

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