Japan Post companies net $12B in biggest IPO

TOKYO - Shares of Japan Post surged nearly 26 percent in their trading debut Wednesday after the company and its banking and insurance units raised a combined 1.44 trillion yen ($11.9 billion) in the world's biggest initial public offering this year.

The long awaited sale of shares in the state-owned company was the biggest since Chinese e-commerce giant Alibaba Group Holdings (BABA) raised $25 billion in its IPO in September 2014.

The Japan Post sale is meant to tease out some of the more than $14 trillion that Japanese have squirreled away in savings accounts. Some IPO funds will help pay for rebuilding from the 2011 tsunami disaster.

The government of Prime Minister Shinzo Abe has sought to push share prices higher as part of its economic policies meant to revive Japan's sluggish growth. The massive IPO helped push the benchmark Nikkei 225 index to its highest level in over two months by midday, though it later gave up some of those gains, rising 1.3 percent to 18,926.91.

Japan Post Bank shares surged 15.2 percent and Japan Post Insurance shares rocketed 55.9 percent.

"Through privatization, we can play a role in revitalizing the Japanese economy," Japan Post president Taizo Nishimuro told reporters after ringing a bell at the Tokyo Stock Exchange to start trading.

The IPO comes more than a decade after Japan began privatizing its postal system and the postal banks that are the backbone of the country's massive household savings pool.

Japanese have strong trust in their more than 140-year-old postal system, which has 24,000 outlets across the country. Shares in all three companies were in high demand and sold at the top end of the indicative price range.

The government sold the national telephone company, Nippon Telegraph and Telephone Corp., or NTT, in 1986, for $13.6 billion. The $18.4 billion IPO of NTT Mobile Communications Network in 1998 was the country's largest IPO ever.

Japan Post remains profitable, but only thanks to fees paid by its banking and insurance units for operating inside post offices. All three businesses face a shrinking market as Japan's population ages and declines.

Only 11 percent of the government's equity in the three companies was sold. Of the shares on sale, 80 percent was reserved for domestic investors and 20 percent for foreign buyers.

The government plans to sell more shares in additional steps, but is expected to keep majority ownership of Japan Post.

Regulators are hoping that the partial sale of the two big postal financial institutions will goad rival private banks and insurers toward greater consolidation, innovation and efficiency.

While operating as state-owned entities, the Japan Post banks and insurers faced limits on the types of business they could operate. But those restrictions, such as a prohibition against Japan Post Bank offering mortgages, will be lifted as the two institutions are privatized.

The privatization began in 2005, championed by then-Prime Minister Junichiro Koizumi, a former post and telecommunications minister, on the grounds that the government guarantee on postal savings was encouraging Japanese to park their money in low-interest accounts, diverting funds away from more productive investments.

But Koizumi faced strong opposition to the plan, especially from fellow conservative lawmakers representing rural areas where post offices are often the main bank.