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¥1 trillion sale to help pay for Tohoku reconstruction; cigarette maker to buy back most shares

Government to sell massive JT stake

Bloomberg

The government said Monday it will sell a stake in Japan Tobacco Inc. worth nearly ¥1 trillion to help cover reconstruction costs for the 2011 earthquake and tsunami in the country’s largest share offering since 2010.

The Finance Ministry owns about 1 billion shares, or 50 percent, of the cigarette maker and will offer as many as 333.3 million shares, according to a regulatory filing in Tokyo. Based on Monday’s closing price of ¥2,901 a share, the stake is worth about ¥967 billion.

JT has gained about 34 percent in Tokyo trading since mid-November, when the yen started weakening, boosting the value of the overseas earnings, which account for more than half of the company’s operating income.

The slumping yen has spurred a 35 percent rally in the Nikkei 225 stock average in the same period.

“The current stock-market environment will be good enough to absorb the sale as trading volumes have grown,” Mikihiko Yamato, deputy head of research for JI Asia, said before Monday’s announcement.

The share sale may be priced as early as March 11, according to the filing. The offering would be the largest in Japan since Dai-ichi Life Insurance Co.’s ¥1.6 trillion initial public in 2010, according to data compiled by Bloomberg.

The Finance Ministry delayed a sale initially targeted for last year amid an economic slump. Under a law passed in 2011, the government can sell its stake down to about 33 percent of the firm.

The maker of Winston, Camel and Mild Seven brand cigarettes said it plans to buy back as many as ¥250 billion of the shares.

JT last month raised its net income forecast to ¥330 billion for the year ending March 31, citing the effect of the weaker yen, compared with a previous outlook for ¥318 billion.