Suntory Beverage prices $4 billion IPO near bottom of range

Mon Jun 24, 2013 3:57am EDT
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By Taiga Uranaka and Ritsuko Shimizu

TOKYO (Reuters) - Japan's Suntory Beverage and Food Ltd will raise 388 billion yen ($4 billion) after it set its IPO price near the bottom of its marketing range, hurt by concerns about its valuation and weak appetite amid market volatility.

The food and soft drinks unit of Suntory Holdings Ltd set the price of its initial public offering at 3,100 yen per share, compared with its 3,000-3,800 yen indicative range, it said in a regulatory filing on Monday.

The maker of Boss canned coffee had been seeking as much as 470 billion yen in Asia's biggest IPO so far this year, to bolster its war chest for acquisitions in emerging markets like Southeast Asia and boost its competitiveness against rivals like Kirin Holdings Co Ltd (2503.T: Quote).

"It's obviously a sign that the stock is not popular among institutional investors," said a hedge fund manager based in Singapore, who was not authorized to discuss the matter publicly.

"Given its valuation compared with its peers and high volatility in the market, I think even the price of 3,100 yen is too high for many institutional investors," he said.

The IPO price values Suntory Beverage at a price-to-earnings ratio of 23 based on its 2013 profit forecast. That is higher than 17 at domestic rival Asahi Group Holdings (2502.T: Quote) and 16 at Kirin, according to Thomson Reuters data.

At the IPO price, Suntory Beverage would have a market capitalization of 958 billion yen, behind Kirin's 1.5 trillion yen and Asahi's 1.2 trillion yen.

Suntory Beverage's IPO was also seen as a test of investor appetite for new listings at a time of high volatility in Japanese stock markets. The benchmark Nikkei .N225 has lost about 18 percent since hitting a 5-1/2 year high in late May.   Continued...

A woman purchases a Suntory beverage from a vending machine in Tokyo September 10, 2009. REUTERS/Yuriko Nakao