Dentsu in Japan's biggest stock sale


Slumping stock prices have forced many companies to cancel or postpone public offerings, but Dentsu is pushing ahead

By Alex Frew McMillan CNN Hong Kong

TOKYO, Japan (CNN) -- Advertising agency Dentsu has unveiled what is expected to be the largest initial public offering in Japan this year.

Dentsu stock is slated to start trading on November 30. The offering has been anticipated since early this year, and its size shows how strong brands can still raise cash despite Japan's slumping stocks.

The agency, Japan's largest, on Tuesday priced its stock at 420,000 yen ($3,411) a share. That's the peak of its 380,000 to 420,000 yen range.

It also pegs the company's market value at 584 billion yen ($4.7 billion). That outweighs McDonald's Japan's public offering in July, which set the previous Japanese record this year.

At last count, McDonald's Japan was worth around 481 billion yen ($3.9 billion).

Raising less cash

Dentsu is the bigger company by market value, or what investors figure a company is worth, as measured by the share price multiplied by the total number of shares.

But McDonald's raised a lot more money for the company, a total of 113 billion yen (almost $1 billion at the time). That's because McDonald's sold 26.2 million new shares to the public.

At the other end of the scale, Dentsu is selling just 25,000 new shares. That will raise only 10.5 billion yen ($85 million).

The vast majority of Dentsu stock will still be held by the current shareholders. Kyodo News will own 18 percent of the company after it goes public, and Jiji News will hold 14 percent.

Those percentages reflect the 110,000 existing shares that Jiji and Kyodo, major Japanese newswire services, expect to sell in a secondary offering.

A small float

All in all, the "float" of publicly held shares will account for 9.7 percent of Dentsu. Given the small size of the offering from the company, some observers say the offering is more about raising much-needed cash for the news services.

Many companies have canceled offerings in Japan. Advertising also suffers heavily during economic downturns.

Still, Dentsu's issue has been eagerly awaited because its command of its industry is so large. It accounts for around a quarter of all advertising in the country.

Measured by sales, it is the fourth-biggest agency in the world, behind the Interpublic Group, WPP Group and Omnicom Group.

Companies with the right profiles or industry clout have pulled off stock sales.

On a smaller scale, coffee company Starbucks raised 14.1 billion yen at the start of October in an offering that set its market value at 111 billion yen ($925 million).

Nomura Research Institute Ltd., a technology company affiliated with Nomura Holdings, plans another high-profile public offering for December 14.