* ANA says to raise up to 211 bln yen, including
* Says to issue up to one billion shares, including
* To use funds to buy planes, bolster finances
* Comes ahead of JAL's expected September IPO
* Shares fall 14 pct earlier after media reports plan
By Nathan Layne and Emi Emoto
TOKYO, July 3 All Nippon Airways Co
said on Tuesday it is raising up to $2.6 billion in a share sale
to buy new planes and to bolster its finances as it faces a
resurgent rival in Japan Airlines and increased competition from
The sale process started on Tuesday and the new shares will
be priced on July 18, July 19 or July 20, the company said. Two
sources had earlier confirmed a report by public broadcaster NHK
that the company planned to raise capital, news which sent the
airline's shares tumbling 14 percent.
ANA is raising the funds before Japan Airlines (JAL)
launches its initial public offering, slated for September and
estimated at around $8 billion.
JAL has emerged out of bankruptcy in 2010 with a clean
balance sheet and record profits, raising pressure on ANA to
bolster its financial standing.
"The difference in balance sheet strength between the two
companies is substantial," Nicholas Cunningham, a transport
analyst at Macquarie Capital Securities in Tokyo said before ANA
confirmed the share sale.
"Although we do not consider ANA's balance sheet to be weak,
the difference could impact investor sentiment towards the
company relative to JAL".
ANA's net debt/equity ratio stood at 1.6 times as of the end
of March, including off balance sheet items, compared to 0.2
times for JAL, Cunningham estimated.
The fall in ANA's shares after the reports of its capital
raising plan reduced the firm's market value to around 485
billion yen. ANA issued its statement confirming the plans after
the market had closed.
ANA said it will raise as much as 211 billion yen if an
overallotment of shares is included. On that basis, the sale
will dilute existing shareholder's stakes by 28 percent, Reuters
"The capital raising buys us time, allows us to accelerate
our growth strategy," said an ANA executive, who declined to be
identified because he is not authorised to talk to the media.
ANA has hired Nomura Securities and the Japan securities
arms of JP Morgan and Goldman Sachs to be among the underwriters
for the sale, which would follow a roughly 140 billion yen stock
offering in July 2009, one of the sources said.
Mitsushige Akino, corporate officer at Ichiyoshi Asset
Management, said the upside potential for ANA shares will be
limited because investors will be aware that the JAL IPO is due.
"Investors will have to be selective on their choices
between the two airlines," Akino said. "The new JAL is a
JAL is ANA's chief domestic rival. It applied in June to
re-list its shares in September following its planned IPO, which
would be the second biggest this year after social networking
giant Facebook raised $16 billion.
ANA has started to publicly question whether state support
for JAL is creating an unfair playing field in Japan, pointing
to a massive tax credit. The airline won't have to pay $4.5
billion in taxes on future profits even though it owes its
survival to a taxpayer-funded restructuring.
Still, ANA has not paid corporate tax since 2009 after
falling into loss following the global financial crisis. But if
it stays profitable after swinging back into the black, the tax
credits it has built up could disappear in the next financial
year to March 2014.
ANA, the launch customer for Boeing's 787 Dreamliner, has
ordered 55 of the aircraft, making it the centerpiece of its
fleet plans. It said some of the funds from the share sale would
be used to buy new Dreamliners to its fleet.
The airline had a fleet of 226 planes as of the end of March
and carried 39 million passengers on domestic flights and close
to 6 million on international ones in its last financial year.
The carbon composite plane is designed to be more fuel
efficient and, therefore, cheaper to operate. It also boasts
higher cabin pressure and humidity in order to make flying more
The ANA executive said the competitive environment
surrounding the airline had changed with the emergence in Asia
of budget airlines and the pressures on full-service airlines.
ANA sees a need to bolster its balance sheet by raising new
capital, the executive said. It returned operating profit of 97
billion yen in the year to the end of March 2012.