Japan eats up McDonald's stock

McDonald's, Japan's biggest burger joint, is tempting its customers to buy its stock

By CNN's Alex Frew McMillan in Hong Kong

TOKYO, Japan -- Hamburger chain McDonald's served not a billion customers but billions of yen of stock in Japan on Thursday as McDonald's Co. (Japan) stock had its first trade in Tokyo.

McDonald's Japan is the biggest of McDonald's overseas operations, as well as the first to sell shares to the public.

The initial public offering, or IPO, is worth just under $1 billion (113 billion yen). That makes it the biggest so far in 2001 in Japan. The full debut comes tomorrow.

To get customers to take a bite of the offering, it'll give freebies to stockholders.

Japan's biggest burger joint

VIDEO Convinced that Japanese consumers demand affordable food, McDonald's floats its first overseas IPO (July 26) Play video (QuickTime, Real or Windows Media)    CNN.com Asia More news from our Asia edition

McDonald's Japan opened its first store 30 years ago. The inventor of the Teriyaki McBurger is a joint venture headed by colorful billionaire President Den Fujita, 75.

"We would like all our customers to be our stockholders," Fujita said, via a spokeswoman.

As an incentive, stockholders as of December will pick from a voucher worth 5,000 yen ($40), 50 tickets for a free coffee or orange juice, or a Happy Meal toy per month.

The company plans such giveaways every six months.

With stores throughout Japan, it served 1.3 billion customers last year. It's Japan's most-popular fast food chain, dwarfing burger rivals like Mos Foods.

McDonald's Japan shares were gobbled up like a lunchtime Big Mac, rising 9.3 percent to 4,700 yen, from the offering price of 4,300 yen.

That's a decent debut, considering the recent slump in Japanese stocks. The benchmark Nikkei crunched to a 16-year low on Monday.

Despite good retail demand, with the giveaways, institutional investors have been put off McDonald's stock by the prospect of tough competition.

The company is selling 26.2 million shares. They were suspended for the rest of Thursday, with regular trading slated for Friday on Tokyo's Jasdaq, run by Japan's securities' dealers.

A local menu

Like McDonald's around the world, the burger chain flogs regional specialties in Japan. Its Teriyaki McBurger is one of its top sellers, rivaling the Big Mac and McCheeseburger.

McDonald's Japan also sells a chicken sandwich with cabbage that's called the chicken tatsuta, after the way it's cooked.

Their popularity helped the company to $3.5 billion (431.1 billion yen) in sales in 2000, when you throw in franchisees.

At last count, McDonald's had 3,676 stores around Japan, and more than 100,000 burger flippers. It plans to use the money from the IPO to build out to 10,000 stores over the next few years.

McDonald's is popular throughout Asia, where its stores tend to have more cachet than in the United States. But the marketing giant has not been without its blunders.

The Illinois-based chain stumbled into trouble in India, where customers have accused the company of using beef in its fries. Cows are sacred in India.

Fears over beef safety and "mad cow" disease have hurt the American parent's earnings.

Dentsu deal due by year-end

In Japan, McDonald's has a strong brand. It opened its first store in 1971 in the upscale Ginza shopping district.

Analysts say its reliability has given it an edge over other burger companies, driving out even other big chains like Burger King.

But in Japan's tapped-out restaurant market, experts note that McDonald's faces tough competition from fast-food chains like Yoshinoya, which sells traditional fare like sushi and beef over rice.

The McDonald's Japan IPO is twice the size of Usen Corp.'s offering. The Internet-service provider set the previous IPO high-water mark in 2001 when it raised 54 billion yen on April 25.

Advertising giant Dentsu, Japan's largest agency, is expected to edge out McDonald's IPO later this year.

Dentsu reiterated Thursday that it plans to sell stock to the public, despite the Nikkei's slump. Analysts expect an offering in October or November this year.