Japanese government plans sale of Japan Tobacco

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On the two-year anniversary of Japan’s damaging earthquake and tsunami, the government announced that on March, 11 it will sell a part of its share in Japan Tobacco Inc. for ¥747 billion ($7.8 billion).

The Japanese government said that it will sell shares in the firm, the world’s third-largest cigarette company, for ¥2,949 per share, offering a 2% discount to Monday’s final price of ¥3,010.

The idea to fix the price at a discount of only 2% indicates that the government is assured that buyer interest will be much better than it would have been in November.

Discounts of 3% to 5% have been usual for major share offerings lately.

Hiroaki Osakabe, a finance manager at Chibagin Asset Management Co., said the discounted price wasn’t a surprise considering that shares had increased significantly in the previous few months. Japan Tobacco shares had gone up 48% since November before losing some of those increases in the last few periods.

In February, Japan Tobacco, the maker of Winston cigarettes, repurchased ¥231 billion worth of stock from the government.

The announcement was set to align with the two-year anniversary of the March 11 earthquake and tsunami in northeastern Japan, a step likely designed to focus on the goal of the sale: to increase funds for reconstruction of the damaged areas. The government’s net earnings from the sale and last month’s buyback should represent ¥973.4 billion.

The sale was planned to be held in 2012, but was pushed back in mid-November, mostly because of weak market conditions.

On March, 11, the government presented other information of the sale, such as the amount: 253.3 million shares. Of the total, 107.6 million shares will be given to foreign investors; the remaining 145.6 million shares will be allocated to domestic purchasers. The sale could bring the ratio of foreign ownership of the stock to as much as 33%, from 28% as of December 31.

Friday’s sale, joined with last month’s share buyback, will decrease the government stake to around 33% from 50%. The Japanese government is legally needed to hold at least one-third of the essential shares.

Japan Tobacco was privatized in 1985. The most recent sale would mark the fourth time that the government has marketed shares of the company, which rates behind Philip Morris International Inc. and British American Tobacco PLC in global sales volume.

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