January 3, 2014 7:00 am JST

Up to 80 firms seen listing in Japan in 2014

SHINSAKU SEKINE, Nikkei staff writer

Akira Morikawa, chief executive of Line Corp., speaks at an event marking its milestone of more than 300 million users.

TOKYO -- The number of initial public offerings in Japan is on track to grow for a fifth consecutive year in 2014, underpinned by the booming stock market and economic recovery.

     Some 70 to 80 companies are expected to list their stocks, compared with 54 in 2013.

     Large privately held firms, those managed by investment funds and fast-growing emerging companies are among the likely candidates to launch IPOs.

     Japan Display Inc., a liquid crystal display maker established in 2012 by Hitachi Ltd., Toshiba Corp. and Sony Corp., is expected to go public as early as March. Integrating the three companies' small- and midsize-LCD panel businesses, Japan Display has improved results on the strength of its panels for smartphones and tablet computers.

     Innovation Network Corp. of Japan, a public-private partnership founded in 2009 to support firms with cutting-edge technologies, invested in Japan Display and a listing would mark its first return.

     A company's initial offering price generally takes into account the stock price of peer firms that are already listed. When the stock market is strong as a whole, IPO prices tend to be high -- prime conditions for businesses rebuilding under the wing of investment funds to go public.

     One such business is Skylark Co., a restaurant chain pushing ahead with management reform under U.S. investment firm Bain Capital. Mounting uncertainties surround the restaurant business, such as a weaker yen driving up food prices and this spring's looming sales tax hike. As a result, many market players expect Bain to relist Skylark after getting a read on earnings growth for the year through December 2014.

     Seibu Holdings Inc. is gauging when to go public again as well, even as it butts heads with its largest shareholder Cerberus Capital Management, an American private-equity fund.

     Meanwhile, big unlisted firms are growing more inclined toward going public in a bid to cope with intensifying global competition. The need for funding to cover mergers and acquisitions is also strong among such companies.

     Recruit Holdings Co., a leading unlisted firm -- much like Suntory Beverage & Food Ltd. before its 2013 listing -- is seen going public this year. Expectations are that its market capitalization will reach some 1 trillion yen ($9.43 billion).

     Line Corp., the provider of the free call and instant messaging smartphone app, is also likely to debut. Although boasting 300 million users overall in Japan and such markets as Taiwan, Thailand and Spain, the company faces increasing competition from such rivals as WeChat of China and KakaoTalk of South Korea. With capturing big market shares ahead of rivals crucial for Internet service firms, Line hopes to secure enough funds from an IPO to ensure its growth.

     Among other Internet-related companies, Minnano Wedding Co., which operates a website for wedding information, and gumi Inc., a provider of social games, are also likely to list this year.

     An IPO is generally three years in the making, often giving market players plenty of time to confirm a firm's earnings growth prior to its debut. Since the Lehman shock of 2008, many auditing companies and securities houses have cut back on support services for businesses planning to go public. The number of IPOs, therefore, is not expected to increase sharply at present.

     While up to 80 companies are lining up to list this year, the figure is small compared with IPO numbers over the past two decades or so. But interest in supporting unlisted firms is gaining momentum on the back of rising stock prices. Venture businesses are attracting investments from big companies, while the Tokyo Stock Exchange is holding seminars across Japan to encourage local firms to go public by providing detailed information about IPOs.