[Intl-tobacco] Japan set for $2.07 bln JT share offering

[robert.weissman@essentialinformation.org]

Japan set for $2.07 bln JT share offering-sources
Reuters, 05.19.04, 1:14 AM ET

TOKYO, May 19 (Reuters) - The Japanese government is gearing up for a $2.07
billion
offering of Japan Tobacco Inc <2914.T> shares in which it will unload up to
14
percent of the world's third-largest tobacco group, market sources said on
Wednesday. The government is likely to unveil later this week the planned
offering
of up to 289,334 shares -- worth up to 235.8 billion yen ($2.07 billion)
under
Tuesday's closing price -- in the former state monopoly best known for its
Camel,
Winston, Salem and Mild Seven cigarettes, the sources said. The move follows
a $2.3
billion offering of state-owned shares in West Japan Railway <9021.T> (JR
West) in
March.

JT, which made its market debut in 1994, is two-thirds owned by the
government and
controls 73 percent of Japan's tobacco market -- the world's third-largest
after
China and the United States.

Under a revision in the law governing the tobacco firm, the government was
allowed
to lower its stake to 50 precent by unloading 289,334 JT shares on the
market from
April 2002. However, the offering has been delayed amid worries about its
potential
adverse impact on the Tokyo stock market. The government now looks ready to
give
the go-ahead after seeing a 47 percent jump in Tokyo's benchmark Nikkei
average
<.N225> in the year to March -- the biggest annual rise in more than three
decades.

The size and pricing of the share sale have yet to be decided, and will
depend on
the outcome of book-building. Daiwa Securities SMBC, the investment banking
arm of
Japan's second-biggest brokerage, Daiwa Securities Group Inc <8601.T>, and
Merrill
Lynch (nyse: MER - news - people) of the United States were hired two years
ago to
lead-manage the JT offering. The sources, who declined to be identified,
said it
would not be too hard for the market to absorb the offering, although some
raised
concerns that demand from investors, especially foreigners, could be less
than in
the case of JR West.

Growing health consciousness has curbed tobacco demand in advanced countries
such
as Japan, and global tobacco firms face stricter rules on advertising and
other
activities. JT has tried to counter five straight years of shrinkage in
Japan's
tobacco market through sweeping restructuring at home while boosting sales
of its
high-margin, top-brand cigarettes abroad, where it generates 16 percent of
its
revenues. The firm posted its first-ever group net loss in the business year
that
ended in March, hit by one-off charges related to its pension obligations,
but its
pre-tax profit excluding extraordinary items rose to a record. Shares in JT
were up
0.61 percent at 820,000 yen in Tokyo afternoon trade, against a 2.37 percent
rise
in the Nikkei.

Japan's cash-strapped government also plans to unload part of its 46 percent
stake
in the country's dominant telecoms carrier, Nippon Telegraph and Telephone
Corp
(NTT) <9432.T>. The Nihon Keizai newspaper said on Tuesday that instead of
selling
on the market, the government would sell between 800,000 and 900,000 shares
directly to NTT, which has announced plans to buy back up to one million
shares or
600 billion yen worth. ($1=114.03 yen)

Copyright 2004, Reuters News Service