Nikko Asset Management Co. this week began choosing lead underwriters for an initial public offering, setting up the first debut share sale by a major Japanese asset manager in a decade, three sources said.
Nikko Asset is preparing to list on the Tokyo Stock Exchange as early as March 31, according to the sources. Sumitomo Trust and Banking Co. will sell some of its stake in a global offering, said the sources, who declined to be identified as the process is private.
Japan’s equity capital market has started to recover after share sales plunged in the wake of the earthquake in March. The Nikkei 225 stock average has pared losses since the disaster to about 5 percent from as much as 18 percent, and Japan Airlines Co., Tokyo Metro Co. and Tokyo Stock Exchange Group Inc. are among companies looking to sell shares to the public.
“This deal will provide a litmus test of Japan’s asset management business, and rivals are likely to follow,” said Fumiyuki Nakanishi, senior strategist at SMBC Friend Securities Co. “By listing, Nikko Asset will improve its visibility in Japan and abroad, making it easier to raise funds and sell its products.”
Nikko Asset will conduct so-called beauty contests this month to select managers for the offering, the sources said. The firm’s Tokyo-based spokeswoman, Kyoko Wada, declined comment, as did Sumitomo Trust spokesman Yasushi Kojima.
Citigroup Inc., which acquired Nikko Asset from Nikko Cordial Corp. in 2008, sold the company to Sumitomo Trust as part of a transaction that valued it at ¥120 billion in October 2009.
Nomura Holdings Inc., Goldman Sachs Group Inc., Citigroup, Daiwa Securities Group Inc. and SMBC Nikko Securities Inc. are among potential bidders to manage the sale, the sources said. Nomura was No. 1 underwriter for Japanese equity sales in 2010, according to data compiled by Bloomberg.
Since the March 11 disaster, 28 Japanese companies sold shares in public offerings worth ¥240 billion in total, In the same period a year earlier, 35 companies sold stock worth ¥2 trillion, according to the data. Goldman Sachs appointed two senior bankers to run Japanese equity and bond underwriting to boost its investment banking business following the quake.
Nikko Asset, founded in 1959, has 572 employees, including 72 fund managers, and has ¥12.8 trillion under management. The investment management firm, run by Chief Executive Officer Timothy McCarthy, has subsidiaries in London, New York, Singapore and Sydney.
In Japan, Nomura Asset Management Co. and Daiwa Asset Management Co. are among investment companies that remain unlisted. Asset manager Sparx Group Co. listed on the Jasdaq exchange in 2001.
“The shares will gain popularity among overseas investors as Nikko Asset operates globally and has opportunities to merge with other asset managers under Sumitomo Trust’s umbrella,” Nakanishi said.
Sumitomo Trust and Nikko Asset agreed to buy DBS Asset Management from DBS Group Holdings Ltd., Southeast Asia’s biggest bank, for $113 million to tap business from the expanding ranks of wealthy Asians, the companies said in December.
Goldman Sachs Group Inc. has raised its outlook for Japanese stocks, citing the likelihood of upward earnings revisions by companies and an earlier than forecast recovery of supply chains.
Strategists led by Kathy Matsui boosted Goldman Sach’s forecast for the Topix to 910 for the next six months from its previous outlook of 870, according to a report dated Saturday. It left the 12-month target at 970.
Domestic consumption, the passing of a second supplementary government budget and continued buying of Japanese equities by offshore investors were also supportive of the stock market, the strategists said.
“Japanese equities have proven surprisingly resilient on a relative basis since early April, quietly outperforming both the world and the rest of the Asia region and recouping much of their postquake underperformance,” Matsui and her colleagues wrote.
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