Japanese firm Dai-ichi Life Insurance raised ¥241 billion ($2.4 billion) in equity on Tuesday to fund its pending acquisition of US company Protective Insurance Company.
The follow-on offering of 197.8 million shares was split 50/50 between international and Japanese investors and priced at ¥1,401 per share, a 3.04% discount to the July 15 close. Shares were initially marketed at a discount of between 3% and 5%, according to a banker close to the deal.
Both the international tranche and the domestic tranche were multiple times subscribed, the banker said, although demand was not robust enough to exercise a greenshoe option that would have increased the size of the deal to ¥277 billion, according to a term sheet.
The international tranche of the offering was taken up by hedge funds but also by existing shareholders, which should help to limit any subsequent volatility in the Dai-ichi Life share price, the banker said. Investor interest in the share offering was “probably skewed more towards Asia” but comprised decent European and American participation too, the banker added.
The Japanese tranche drew a mix of retail and institutional investors, with the syndicate lining up a number of them before the deal was formally launched.
Goldman Sachs and Nomura Securities were global coordinators for the deal, with Bank of America Merrill Lynch, JP Morgan Securities, Mizuho Securities and Daiwa Securities acting as joint lead managing and bookrunners. Citi and Deutsche Bank were co-managers.
The Japanese insurer is trading at 18.1 times its 2015 earnings, with shares down 18% so far this year. Dai-ichi Life's shares are up 1.5% since the company raised a record $11 billion in March 2010.
Dai-ichi Life was in talks to acquire NYSE-listed Protective Life for ¥500 billion ($4.9 billion) in June, as reported, which is in line with its stated plans to expand overseas. An equity share sale was one option for funding, although questions remained at the time over whether it would go down this route.
Japanese insurers have often paid extortionate prices in order to expand globally and questions will undoubtedly remain over how the synergies will work once the acquisition is complete.
Dai-ichi Life agreed last June to buy a 40% stake in Indonesian life insurer Panin Life for Rp3.3 trillion (Y34.3 billion), the equivalent of paying a price-to-book multiple of 11.8 times, a price-to-earnings ratio of 40 times (as of December 2012) and an embedded value multiple of more than five times.