Japanese property giant Daiwa plans $1.4-bn public issue

Japan's largest home builder Daiwa House Industry Co is seeking to raise approximately ¥138 billion ($1.4 billion) as part of its ambitious plans to invest ¥400 billion in real estate business over the next three years.

In a filing with the Tokyo Stock Exchange, the Osaka-based company said that it would issue 53 million shares to the public, of which about 54 per cent or 29 million has been earmarked for Japanese investors and the remaining for overseas investors. It may also issue over 7 million new shares under the overallotment arrangement in case of exceptional demand.

The pricing of the issue will be determined during the 23-26 July period.

Further to the public issue, the company's total outstanding shares will increase to 660 million shares, indicating a share dilution of over 60 million or about 10 per cent.

Further to the news, shares in Daiwa plunged over 9 per cent on today's morning trade in Tokyo.

Analysts believe that the negative impact of the stock dilution could be for a short term, as Daiwa is a one of the top players in the industry and its growth plans are illustrative of the dynamic nature of the real estate market.

 According to government data released in May, land prices in Japan have started rising in 53 per cent of selected locations in major cities, for the first time in five years.

Daiwa plans to spend around ¥400 billion in the real estate sector in the next three years which will include construction or reconstruction of buildings and logistic facilities such as warehouses. In addition, the company will invest around ¥250 billion in mergers and acquisitions, overseas investments and capital spending.

The country's construction sector is on a recovery path after the devastating earthquake and Tsunami and the Fukushima nuclear catastrophe of March 2011 on the back of prime minister Shinzo Abe's economic policies to revive the sector and the government's $230-billion rebuilding package.

Just a few days ago, the country's largest advertising firm Dentsu Inc also revealed its plans to raise about $1.2 billion. (See: Japanese advt giant Dentsu pans $1.2-bn share issue to repay debt)

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, excluding the $2.6 billion to be raised by Dentsu and Daiwa.

Daiwa's public issue will be the largest in Asia in the real estate sector this year followed by Singapore's $1.25-billion sale by Global Logistic Properties Ltd.

According to market research firm Dealogic, other companies in the real estate sector such as Aeon Mall Co, Nippon Building Fund Inc and Nippon Prologis REIT Inc have also raised hundreds of millions of dollars for investment in the property sector since the beginning of the year.

Japanese soft drink maker, Suntory Beverage & Food Ltd successfully has raised $3.8 billion in an initial public offering, kaing it Asia's largest IPO so far this year. Its shares were listed on the Tokyo Stock Exchange last week.

Daiwa has selected Nomura Holdings Inc and Morgan Stanley for leading the public issue.