Japanese advt giant Dentsu plans $1.2-bn share issue to repay debt

Japan's No.1 advertising group Dentsu Inc, which recently acquired leading British marketing firm Aegis Group Plc, plans to raise approximately ¥120 billion ($1.2 billion) through a public issue to repay its debt.

In a statement yesterday, Dentsu said that it intends to use the net proceeds of the public issue and disposal of treasury shares to repay a part of its short term debt of ¥200 billion borrowed for the Aegis acquisition.

Dentsu's $4.8-billion purchase of Aegis, the biggest ever takeover in the marketing business, was completed earlier in March, creating the Asia-Pacific region's largest advertising firm and formation of a separate operating unit Dentsu Aegis Network in London to oversee the group's global operations outside Japan.

The company said that it will issue 29 million shares it owns and 8 million new shares to Japanese and overseas investors. It may also issue up to 3 million new shares under the overallotment arrangement in case of exceptional demand.

The pricing of the issue will be decided during 22-24 July.

According to analysts, Dentsu is taking advantage of the stock market boom in recent months to go for the share sale. The stock has risen almost 80 per cent from their November lows in the last seven months.

However, further to the news of public issue, shares in Dentsu dropped over 9 per cent to ¥3,150 on morning trade today in Tokyo, due to dilution concerns.

The Tokyo-based advertising company, which generates around 86 per cent of its revenue from the domestic market, has been taking steps lately to become a truly global communications network in order to reduce its dependence on the home market. The company has a worldwide presence spanning 110 countries and employs over 36,000 people across the globe.

The 112-year old company, which produced the first newspaper advertisements and the first television commercials in Japan, offers a range of services from traditional marketing to specialty areas such as sports marketing, investing in film production and acquiring broadcasting rights, public relations and communication services.

The company has a diverse client portfolio and handles the advertising campaigns of many blue-chip companies.

Dentsu maintains a top share in the advertising market in Japan, which accounts for about 10.3 per cent of the global market, second only to the US which has about 34-per cent market share.

Dentsu's main rivals in the field include British advertising giant WPP Plc, New York-based Omnicom Group Inc and French company Publicis Groupe SA.

Through this financing, Dentsu will further strengthen its financial base and increase its financial flexibility and will develop measures to realize flexible implementation of its growth strategy and enhance its competiveness in order to succeed in the global advertising market, the company said.

As part of its expansion, in May, Dentsu has executed a partnership agreement with US digital marketing firm 360i for providing services to clients in Canada, through DentsuBos, a unit of Dentsu Aegis Network.

According to Bloomberg data, companies have raised $26.5 billion in shares in Japan this year, up 16 per cent from last year's $22.6 billion.

Japanese Soft drink maker, Suntory Beverage & Food Ltd successfully has raised $3.8 billion in an initial public offering, Asia's largest IPO so far this year. The stock listed yesterday on the Tokyo Stock Exchange surged 3 per cent on its first day of trading.