Tags: IPO, Japan

Sony Financial Holdings Shaping to be Japan's Biggest IPO of the Year

By , Money Morning •

By Mike Caggeso
Staff writer

Most of us know Sony Corp. (SNE) as Japan's electronics and videogame juggernaut. But its upcoming IPO will add another public dimension — insurance and financial services juggernaut.

Yesterday (Tuesday), the Tokyo Stock Exchange approved the application for the listing of the common shares of Sony Financial Holdings. Sony Corp. will sell about $2.9 billion (332 billion yen) in Sony Financial, making for Japan's biggest IPO of the year.

Pricing for the 725,000 shares available — 34.5% of the Sony Financial — will be set on Oct. 1. Trading will begin Oct. 11. Sony also states that Japanese underwriters may allot an additional 70,000 shares, which can be bought with an exercisable option available until Nov. 2.

However, most United States investors won't be able to get a piece of this action. Sony Financial's offering to the U.S. market is limited to a private placement of "qualified institutional buyers," says the company's news release of the sale.

This isn't an entirely new venture for the world's second-largest electronics maker. Sony Financial operates Sony Bank in addition to auto and life insurance firms — accounting for 9% of Sony's group revenue in the fiscal year ending in March, MarketWatch reported.

Sony Financial began in 1979 as a Sony Prudential Life Insurance Co., Ltd., a joint venture between Sony and Prudential Financial Inc. (PRU). Over the years, it added auto insurance, fire insurance and banking to its service roster, according to the company's corporate Web site.

Steady Revenue Stream

The IPO's timing — in the middle of swaying opinions and shifting international interest rates from the U.S. subprime crisis — could be hailed as either perfect (standing out because of the vastly reduced number of IPO deals) or doomed to fail (finding a shortage of demand because of investor uncertainty).

"Investors are still concerned about the losses from subprime loans," Wataru Kasatani, a financial analyst at Meiji Dresdner Asset Management Co., told Bloomberg News. "The question for the Sony Financial IPO is how it can persuade investors that it is free from that concern."

Unlike the widely publicized spin-off of VMware Inc. (VMW) from parent-company EMC Corp. (EMC) in August, don't expect Sony Financial to be the new pivot of Sony Corp.

Sony Financial intends to net a little more than 10% (31.1 billion yen) of the IPO, and about half of that (16.5 billion yen) will be invested with Aegon NV (AEG), a Dutch insurer.

Rather, Sony Financial is intended to be a steady revenue stream for a company in need of more financial leverage in the highly competitive electronics market.

A wise move? Yes. Behind the curve? Yes.

Sony's move for diversification is peanuts compared to South Korea's Samsung Corp. In addition to its electronics arm, Samsung dips into chemical production, manufacturing machinery, construction, sports franchises and financial services and insurance.

Nonetheless, news and analysis of the IPO will continue to swirl until Oct. 11. The headlines will be a nice distraction from Sony's recent reputation as makers of the underperforming and (arguably) overpriced Playstation 3.

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