Dai-ichi Life Shares Set to Rise After Biggest IPO in Two Years
March 31, 2010, 7:58 PM EDT
(Updates bidding price in second paragraph.)
April 1 (Bloomberg) — Dai-ichi Life Insurance Co., Japan’s second-largest life insurer, is poised to gain in the world’s biggest initial public offering in two years when it starts trading in Tokyo today.
Dai-ichi, which changed its name from Dai-ichi Mutual Life Insurance Co., was bid at 156,000 yen ($1,666) as of 8:46 a.m. and set to rise 11 percent from its initial offering price of 140,000 yen. The stock won’t trade until the afternoon session begins at 1 p.m. and will stop trading as soon as an initial price is determined, according to the Tokyo Stock Exchange’s Web site.
The company’s market value at its offering price was equal to 0.56 times embedded value, or the sum of its net assets and the current value of future profits from existing policies. That compared with 0.46 times for T&D Holdings Inc., the nation’s largest publicly listed life insurer, and 0.76 times for Sony Financial Holdings Inc.
“The shares don’t seem expensive if you look at their embedded value, which indicates their potential market worth,” said Junichi Misawa, head of equity investment at Tokyo-based STB Asset Management Co., which oversees about $14 billion. “It’s a level that would make it easy for institutional investors to buy the shares.”
Dai-ichi’s $11 billion IPO is the world’s largest since San Francisco-based Visa Inc. sold $19.7 billion in March 2008. In Japan, it’s the biggest offering since NTT DoCoMo Inc.’s $18.1 billion deal in October 1998, data compiled by Bloomberg show.
Passive Investors
The possible inclusion of Dai-ichi in FTSE Group and MSCI Barra equity gauges will likely prompt some investors to buy the stock to mirror the indexes’ returns. FTSE Group said on its Web site that it will add Dai-ichi shares to three of its gauges at the close of trading on April 2. The effective date for trading is April 5. MSCI officials weren’t immediately available to comment.
“Passive investors have no choice but have to buy Dai-ichi shares regardless of their price or growth outlook,” said Hiroshi Fujimoto, a fund manager at Shinkin Asset Management Co., whose company manages the equivalent of $3.8 billion in Tokyo. “Hedge funds and retail investors will likely buy Dai-ichi to benefit from the purchase of passive investors.”
Initial public offerings with a “significant” size may be included in the MSCI indexes before the index’s regular reviews, according to the Web site of New York-based MSCI Barra. The size of Dai-ichi’s IPO meets MSCI Barra’s criteria of free float- adjusted market capitalization of at least $5 billion, said Osamu Shintani, an analyst at Nomura Holdings Inc. in Tokyo.
“There’s a good chance early inclusion will be given for Dai-ichi,” Shintani said, with April 15 being the approximate date for inclusion.
Dai-ichi, established in 1902, had 8.2 million policyholders as of March 2009, according to the company’s Web site.
Nomura Holdings Inc., Mizuho Financial Group Inc. and Bank of America Corp.’s Merrill Lynch unit were hired to manage the sale. Goldman Sachs Group Inc. was a global arranger.
–Editors: Sam Waite, Darren Boey.
To contact the reporters on this story: Kana Nishizawa in Tokyo at ; Masaki Kondo in Tokyo at ; Satoshi Kawano in Tokyo at .
To contact the editors responsible for this story: Darren Boey at .