TOKYO (Reuters) - SoftBank Group Corp has won approval to conduct a 2.4 trillion yen ($21.04 billion) initial public offering (IPO) of its Japanese telecoms business, in a deal that will seal the group’s transformation into a top global technology investor.
The following are details of the planned IPO.
SoftBank Group has shifted its focus from being mainly a Japanese telecoms operator to a major investor in global technology startups.
By listing the domestic carrier business, SoftBank is seeking to concentrate on its global investments and give investors a choice to decide between a stable mobile business and a more risky investment business.
The parent group’s founder and chief executive, Masayoshi Son, has said the IPO proceeds will also enable SoftBank to pay down debt and provide a supply of cash for further investment.
“By spinning off the mobile unit, we have a company with relatively stable cash flow on one hand and a big private equity fund on the other,” said a top executive at one of SoftBank’s major creditor banks.
The total size of offering could rise by 240.6 billion yen if an overallotment is exercised, taking the total fundraising closer to the $25 billion that Alibaba Group Holding Ltd raised in 2014 in the world’s biggest-ever IPO.
While IPOs usually offer opportunities with relatively young companies with big growth potential, SoftBank’s offering will provide investors with access to an established business with stable cash flow generated from its 40 million mobile subscribers.
SoftBank Corp forecasts net profit to grow 4.8 percent to 420 billion yen in the business year through March 2019.
But some analysts fear its growth will be limited due to government support for more competition and lower prices, while e-commerce firm Rakuten Inc aims to enter the market in October.
“The domestic market is mature, so growth will be tough. Rakuten’s entry will also increase competition,” said Takashi Nakamura, senior strategist at Tokai Tokyo Research Institute.
“Without growth in the top line, and expectations of price competition ahead, one cannot be optimistic.”
Based on a tentative offering price of 1,500 yen per share, SoftBank Corp’s market value will be about 7.2 trillion yen, making it the eighth-largest listed firm in Japan, immediately above Uniqlo clothing chain operator Fast Retailing Co Ltd.
Japan’s biggest mobile phone network provider, NTT Docomo Inc, has a market capitalisation of 9.6 trillion yen and second-ranked KDDI Corp is at 6.2 trillion yen.
SoftBank plans to offer 89 percent of the shares on sale to domestic investors, nearly all of which will be targeted at retail investors, people familiar with the matter have told Reuters.
Japanese households are an attractive target with their 1,800 trillion yen in financial assets. But they are famously risk-averse, holding over 50 percent of assets in cash and deposits and only around 11 percent in stocks. By comparison, Americans hold 13 percent of their assets in cash and deposits, and 36 percent in stocks.
SoftBank is wooing individual investors with a pledge to return 85 percent of its income to shareholders. That is well above Docomo’s around 57 percent payout ratio expected in the current fiscal year and KDDI’s 39 percent.
Banking industry sources have said SoftBank’s wide brand recognition should also prove popular with individual investors, including those new to stocks.
The triple IPOs by Japan Post Holdings Co Ltd and its two financial units in 2015, which raised combined 1.4 trillion yen, helped attract record numbers of retail investors to stocks, data by the Tokyo Stock Exchange and other bourses showed.
Nov 30: Indicative price range set
Dec 3-7: Book-building period
Dec 10: Offering price set
Dec 19: Trading starts
Nomura Holdings Inc, Mizuho Financial Group Inc, Deutsche Bank AG, Goldman Sachs Group Inc, JPMorgan Chase & Co and SMBC Nikko Securities Inc are joint global coordinators.
($1 = 114.1700 yen)
Reporting by Taiga Uranaka; Additional reporting by Kentaro Sugiyama; Editing by Miyoung Kim and Christopher Cushing