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Wednesday October 4, 5:03 PM
Cerberus to set IPO for Japan's Aozora Bank(Adds comment, update share prices) By Alison Tudor and Sachi Izumi
The initial public offering of a 30 percent stake would raise at least $3 billion, one source familiar with the matter said, marking the biggest IPO in Japan since the $3.4 billion IPO of J-Power in 2004 and the third big private equity sale of a Japanese bank. The IPO would hand Cerberus, which now owns 62 percent of Aozora, at least a five-fold return on its investment. Cerberus picked up most of its stake when it bought a 49 percent stake from Softbank Corp. for 101.1 billion yen ($850 million) in 2003. Leasing firm Orix and insurance company Millea Holdings each have 14.99 percent stakes in Aozora. Orix shares rose 1.5 percent by the close, while Millea slipped 0.7 percent after gaining earlier in the day. Shares of rival lenders Shinsei Bank and Tokyo Star Bank fell 1.5 percent and 2.2 percent, respectively. Toru Kitani, senior investment manager at Sompo Japan Asset Management, said some investors may buy Aozora shares after comparing the bank's prospects with those of a group of lenders smaller than Japan's three top-tier "mega-banks". The likes of Shinsei and Sumitomo Trust & Banking Co. Ltd. are in that group. "Upon Aozora's listing, some investors may reallocate their investments in the second group of Japanese banks. Expected changes in weightings in the TOPIX index would also encourage such a reallocation," Kitani said. Cerberus teamed up with other investors to buy Aozora's predecessor, Nippon Credit Bank (NCB), in 2000. Aozora returned to profit following its relaunch, but it has lagged the two other collapsed banks bought by foreign investors, Shinsei and Tokyo Star, in pursuing retail customers. The IPO could value Aozora at as much as $12 billion, the source familiar with the matter said. Even at $10 billion, Aozora would be more valuable than its rivals. Shinsei, which was turned around by U.S. fund Ripplewood Holdings and other investors, has a market value of $9.3 billion based on Wednesday's closing share price. Tokyo Star, rebuilt by U.S. private equity firm Lone Star [LS.UL], is valued at $2.2 billion. Shinsei's offering in 2004 was worth $2.37 billion and Tokyo Star raised $796 million in 2005, according to research firm Dealogic. Cerberus was not immediately available for comment. Orix spokesman Shigeru Fujii and Millea spokesman Toshihiko Aizawa both declined to comment. An initial plan to relist Aozora by March was delayed in part because of an unstable ownership situation. Cerberus only took control in 2003 after beginning with a 5 percent stake. Aozora's net profit rose 34 percent to 120.1 billion yen in the year ended in March on revenue of 171.9 billion yen. It has forecast profit to drop 33 percent this business year to 81 billion yen, while revenue is expected to rise 20 percent to 206.7 billion. With a $10 billion price tag, Aozora would be valued at around 15 times the bank's forecast earnings for this business year. That compares with Shinsei's 12 and Tokyo Star's 16. "Once it goes public, the fact that the bank was turned around by foreigners will not be enough," said a Tokyo-based bank analyst, who declined to be named. "But rather, investors will likely look if the bank can add extra value to its services." Aozora has ditched a corporate-loan-centred business model in favour of investment and retail banking, and it has formed a tie-up with Yahoo Japan Corp. in online banking. The planned IPO would come at the time when Japanese banks are returning to health after a decade-long bad-loan crisis, which prompted the government to inject more than 10 trillion yen ($85 billion) in emergency capital into the industry in the late 1990s. (Additional reporting by Aiko Hayashi, Nathan Layne, Aiko Wakao, Risa Maeda, and Edwina Gibbs)
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