listings get bullish sign as Recruit sets IPO price
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[October 06, 2014]
By Ritsuko Ando
TOKYO (Reuters) - Japan's largest
recruitment company Recruit Holdings Co Ltd priced its $2 billion
initial public offering at 3,100 yen, the top of its bookbuilding range,
raising expectations of strong demand that could break a run of flops
among big Tokyo listings.
The range of 2,800 to 3,100 yen, set last week, had already
suggested a more bullish stance than the initial indicative price of
2,800 yen for Japan's second-biggest listing of the year.
Investors see the company's Oct. 16 listing, which will help Recruit
to pay for future acquisitions as it expands overseas, as a test of
the market's appetite for new offerings after several high-profile
Some of those have reflected company-specific reasons, with Japan
Display Inc's <6740.T> shares skidding 43 percent from their IPO
price as investors fret about falling smartphone screen prices and
its ability to compete with Asian rivals.
Investors also sold off Tokyo shares early in the year as euphoria
faded over Prime Minister Shinzo Abe's expansionary economic
policies. The benchmark Nikkei average <.N225> has rebounded 10
percent since Japan Display's debut and analysts said Recruit may
benefit from the stronger sentiment as well as solid fundamentals.
Recruit, one of the world's top five staffing firms, is aiming to
become the world's biggest by 2020. In 2013, it reported revenue of
1.2 trillion yen ($10.96 billion).
While the offering price puts its forward price/earnings ratio at
25.5 times, slightly higher than a multiple of about 12 for Swiss
rival Adecco SA <ADEN.VX>, its EBITDA margin is also higher at 15
percent compared with Adecco's 5 percent.
In recent years, Recruit has aggressively acquired overseas firms,
seeking to offset a shrinking market in Japan where the population
is rapidly aging. It has acquired U.S. staffing service CSI,
Advantage Resourcing and Staffmark Holdings as well as Indeed.com.
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"It's got brand recognition and it appears to have attracted
interest from individuals as well," said one Japanese institutional
investor who declined to be named because he was not authorized to
speak to the media.
"It may not have too much growth potential but if you consider the
favorable market environment, a PE ratio around 25 is an appropriate
Including an overallotment, the offering is worth 213.82
billion yen ($1.95 billion) and values the company at 1.78 trillion
yen. Roughly half of the proceeds are due to go to the company,
which will issue new shares and sell treasury stock. The rest of the
funds will go to existing shareholders.
Joint global coordinators for the offering are Nomura Securities,
Morgan Stanley MUFG, Mizuho Securities and SMBC Nikko Securities.
(Additional reporting by Hirotoshi Sugiyama; Editing by Edmund
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