Japan’s government plans to privatize Kyushu Railway Co. through a share sale that may fetch about 500 billion yen ($5 billion), according to people with direct knowledge of the matter, in what would be the rail industry’s biggest initial public offering in more than two decades.
The Japan Railway Construction, Transport and Technology Agency, which fully owns the company, also known as JR Kyushu, plans to sell its entire stake, the people said, asking not to be identified as the information is private. The sale would likely be the world’s second-largest this year and the biggest rail IPO since 1993, when East Japan Railway Co. raised $7.2 billion, according to data compiled by Bloomberg.
JR Kyushu, which also operates bullet trains on Japan’s third-largest island, is benefiting from record overseas visitors to Japan, spurring travel and demand for its hotels and restaurants. Based in Fukuoka City, about 890 kilometers (550 miles) southwest of Tokyo, JR Kyushu will become the fourth government-owned railway company created from the breakup of Japan Railways in 1987 to be privatized.
“It is a very good timing for them to privatize,” said Masayuki Kubota, chief strategist at Tokyo-based Rakuten Securities Economic Research Institute. “Their business is gaining momentum because of inbound demand. I think the IPO will be successful.”
The government is privatizing companies as it seeks to spur individuals to put more of the country’s pool of household savings in the stock market. It sold shares in Japan Post Holdings Co., Japan Post Bank Co. and Japan Post Insurance Co. last year in its biggest state asset sale since 1987.
JR Kyushu expects to receive approval for the sale Thursday and the shares will trade on both the Tokyo and Fukuoka stock exchanges, the people said. The listing is planned for Oct. 25, one of them said. Representatives at JR Kyushu and the transport ministry declined to comment.
The railway stock was split 500 for 1 in August, according to a government document. After the split, the agency now holds 160 million shares of JR Kyushu.
Nomura Holdings Inc., Mitsubishi UFJ Morgan Stanley Securities Co. and JPMorgan Chase & Co. are global coordinators for the company’s IPO, while SMBC Nikko Securities Inc. and Goldman Sachs Group Inc. will also lead the global offering.
The sale is set to top Line Corp., which raised about $1.3 billion in July, to become Japan’s largest IPO this year.
JR Kyushu predicts net income of 38.2 billion yen in the year ending March 31, with sales forecast to increase 0.2 percent to 379 billion yen. The train operator had a net loss of 433 billion yen last fiscal year, as it booked a one-time 479 billion yen cost for depreciation of railway assets.
The company got about half of its sales from railways last fiscal year, according to the company. About a quarter of revenue came from its construction business, while the rest came from its train station, real estate, retail and restaurant businesses and other operations, according to the company.
JR Kyushu has more than 9,000 employees and over 30 group companies. It will join East Japan Railway, Central Japan Railway Co. and West Japan Railway Co., which operate trains in other areas around Japan and were sold by the government in the 1990s.
This article was written by Chris Cooper and Kiyotaka Matsuda from Bloomberg and was legally licensed through the NewsCred publisher network.