As with Sabre last week, the IPO prices started low and underwhelming, and improved as the day progressed.
Seibu Holdings Inc., operator of Japan’s biggest hotel chain, rose on its Tokyo Stock Exchange debut, bucking the trend of first trading-day declines for initial public offerings this year.
The hotel and railway operator gained 11 percent to 1,770 yen at the close of trading in Tokyo today. The stock opened at the 1,600 yen offering price set last week.
Seibu, which had disagreed with its biggest shareholder Cerberus Capital Management LP over the offering’s timing, had sold the shares at 30 percent less than an indicative price after two IPOs flopped in Japan last month. The hotel operator stands to benefit from rising tourism to Japan and expectations that Tokyo’s hosting of the 2020 Olympics will boost demand for accommodations.
“It’s a surprise they rose,” said Kazumi Tanaka, an IPO analyst at DZH Financial Research. “The whole market is up today, which is helping give it a boost. People are most likely looking at Seibu’s assets and have great expectations about how they can be used with the upcoming Olympics.”
Takashi Goto, president of the hotel and rail operator, pushed ahead with his plans for the sale while Cerberus had said it wanted to wait for a higher price and ultimately decided not to offer any shares in the sale.
Demand for share offerings has been weak amid a 10 percent decline in Japan’s broader Topix index this year. Japan Display Inc. dropped 15 percent in its Tokyo debut last month and Hitachi Maxell Ltd., an electronics and memory storage manufacturer, fell 14 percent below its IPO price a day earlier.
Seibu’s net income for the year ended March probably rose 4.8 percent to 16.4 billion yen, or 47.81 yen a share, the company said April 2.
The hotel operator’s 44.5 billion-yen ($434 million) IPO valued the company at 547.4 billion yen, about 33 times projected profit for the year ended March. The company sold an 8 percent stake held by its other main shareholders.
The 1,600 yen price compares with the 1,400 yen a share Cerberus paid to buy stock from shareholders last year when it boosted its stake to 35.5 percent. Seibu had planned on a price of 1,600 yen to 1,800 yen a share.
Seibu, which delisted in 2004, is returning to public markets after Goto prevailed in a fight with New York-based Cerberus last year over strategy and board representation.
Cerberus’s bid to have executives, including former U.S. Vice President Dan Quayle and former U.S. Treasury Secretary John Snow, elected to the company’s board was voted down at a June shareholder meeting. The two sides brought in lawyers after discussions broke down and only resumed direct talks in December, according to two people familiar with the situation.
Cerberus had suggested the company sell its professional baseball team and some less-used train lines. Goto rejected the ideas. He got public support from Prime Minister Shinzo Abe’s Chief Cabinet Secretary Yoshihide Suga, who said in March last year that Seibu plays an important role in public transport and its baseball team has “a lot of fans.”
Seibu is betting on growth at its hotel and real estate businesses as a weaker yen unleashes a tourism boom and the capital prepares to host the 2020 Summer Olympics.
Goto focused his pitch to institutional investors on the domestic hotel business, which accounted for 17 percent of operating profit in the latest reporting period. The group’s larger transportation business, which generates almost half of total operating income, is the slowest-growing division.
To contact the reporters on this story: Chris Cooper in Tokyo at email@example.com; Kiyotaka Matsuda in Tokyo at firstname.lastname@example.org. To contact the editors responsible for this story: Anand Krishnamoorthy at email@example.com.
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Photo credit: Tokyo Prince Hotel, one of Seibu's holdings. WikiMedia Commons