Dai-ichi Sees Strong IPO Demand

By ALISON TUDOR and AYAI TOMISAWA

TOKYO—Dai-ichi Mutual Life Insurance Co.'s initial public offering, expected to be the largest global IPO in two years, was oversubscribed, as Japanese households jumped at the chance to buy a piece of one of the country's best-known insurers, people familiar with the matter said Friday.

While demand among institutional investors was less brisk in an offering that could be worth more than $17 billion, market watchers said the strong retail showing could provide a fresh investor base for other companies considering going public to tap into, in what is shaping up to be a bumper year for Japanese IPOs.

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CYCLICAL PICKUP? The IPO market, if demand for Dai-ichi's debut is any indication, is beginning to percolate. Here, the firm's Tokyo home.
.In Tokyo's next major listing, drug maker Otsuka Holdings Co. is expected to come to market in the second half of the year. That could be valued at more than $10 billion.

There have been five completed IPOs this year, according to data provider Dealogic, and bankers say there will likely be 30 to 40 before the year is over, compared with just 20 last year. A combination of the Tokyo stock market's recent recovery, the Bank of Japan's monetary easing and high hopes for a recovery in Japanese corporate earnings are luring a raft of companies seeking to raise funds. The Nikkei 225 Stock Average is trading about 36% higher than it was at this time last year.

Book-building for Dai-ichi Mutual's offering, set to be the biggest IPO since Visa Inc.'s $19.7 billion IPO in March 2008, closed March 18. Pricing is still being finalized ahead of a formal announcement on Tuesday, according to people familiar with the matter. But with a tentative range set earlier this month at 125,000 yen to 155,000 yen ($1,383 to $1,715) per share, the offer could raise as much as 1.55 trillion yen ($17.2 billion).

The retail tranche of Dai-ichi's IPO was said to be four-to-five times oversubscribed. The tranche for institutional investors was one-to-two times oversubscribed, according to the people familiar with the matter.

Dai-ichi Mutual officials declined to comment.

Bankers in Tokyo said the news was positive for the Japanese stock market and future IPOs, as it has increased the number of active investors, with many opening accounts with brokers for the first time to participate. One banker said investors haven't been this enthusiastic over an offering since cellphone company NTT DoCoMo Inc.'s 2.1 trillion yen IPO in 1998.

Bankers were divided on where they expected the offering's final price to fall. Some saw the price at the top end of the range, reflecting the over-subscription levels. Others placed it smack in the middle of the range, saying Dai-ichi will be keen to ensure buoyant trading once shares list April 1.

Dai-ichi may well err on the side of caution, given that several equity offerings in Asia have performed poorly in the secondary market over recent months. UC Rusal, the aluminum producer controlled by Russian oligarch Oleg Deripaska, raised $2.3 billion in Hong Kong only to have its shares ease since the Jan. 26 listing. Shares in Korean life insurer Tong Yang Life also dropped in the aftermath of its debut.

Korea Life Insurance Co. ensured an upbeat first day of trading on Wednesday by pricing its share offer below expectations to pique investors' interest ahead of Dai-ichi's IPO, and rival Samsung Life Insurance Co.'s planned $4 billion IPO in May.

Dai-ichi needs to work hard to keep investors interested, as many fund managers are concerned that the stodgy domestic life-insurance sector doesn't hold exciting growth prospects.

The Japanese life-insurance business as a whole is expected to struggle in a market that is shrinking as the population ages. For the nine months ended December, Dai-ichi reported premium income of 2.09 trillion yen, down 3.8% from 2.17 trillion yen a year earlier.

Others said that even though Japan's insurance business has its problems, it is still a large industry in the world's second-biggest economy. Many institutional investors will buy into Dai-ichi because they track stock market indexes and Dai-ichi will have such a large weighting.

"The Japanese insurance market is shrinking, but it's still a big market. If a sleeping giant wakes up to the fact that there are business opportunities in Asia and aggressively taps into the lucrative market, Dai-ichi will be able to demonstrate that its IPO is intended to help it grow," said Kyoya Okazawa, head of equity sales at Credit Suisse.

Dai-ichi has gotten the jump on domestic rivals in entering such emerging markets as India, Vietnam and Thailand.

"I think the price is cheap even if it's settled at the upper limit of 155,000 yen," said Mitsushige Akino, a fund manager at Ichiyoshi Investment Management, adding that the share price could rise to 200,000 yen in the April-June quarter on the assumption that the overall market will rise.

Mizuho Securities, Bank of America Corp.'s Merrill Lynch Japan and Nomura Securities are the lead underwriters for the IPO in Japan. The joint lead managers overseas are Merrill Lynch International, Mizuho International, Nomura International and Goldman Sachs International.

Write to Alison Tudor at alison.tudor@wsj.com

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