SoftBank targets $20-billion IPO for Japanese mobile unit
Amount falls short of Alibaba’s record $25B in 2014
TOKYO— SoftBank Group Corp. said it would seek to raise more than $20 billion (U.S.) with the initial public offering of its Japanese mobile unit, as it hunts for funds to fuel its nearly $100 billion investment machine.
The proposed IPO shows how SoftBank, which is planning to give up control of Sprint Corp. in the U.S., is cashing out of its slower-growing assets so Chief Executive Masayoshi Son can focus on a technology portfolio that already includes a stake in Uber Technologies Inc.
The listing of the Japanese mobile unit, set for Dec. 19, could raise as much as ¥2.6 trillion ($23 billion), falling just short of the record $25 billion raised by Alibaba Group Holding Ltd. in 2014. SoftBank plans to sell more than a third of the unit.
For years, the Japanese market has helped bankroll Mr. Son’s ambitions. The country’s banks, smarting from decades of low interest rates, have been eager to lend SoftBank billions of dollars, while retail investors have snapped up its bonds.
Now Mr. Son is betting that Japanese stock investors, facing a dearth of domestic tech IPOs, will welcome the chance to buy into one of Japan’s three main mobile carriers. About 90% of the shares will be offered domestically.
The IPO and a planned deal to sell control of Sprint to T-Mobile US Inc., which is awaiting regulators’ approval, are set to help SoftBank Group lower its ballooning debt.
The group’s debt was close to ¥18 trillion ($158 billion) as of Sept. 30, compared with ¥3.2 trillion in cash and cash equivalents. If SoftBank uses the bulk of the IPO proceeds for debt repayment, that could lift its credit rating, currently in “junk,” or speculative-grade, territory, said S&P Global Ratings.
“SoftBank is reaching the limits of debt financing,” said Ichiro Yamada, executive officer for securities investment at Fukoku Mutual Life Insurance. “It has so much interest-bearing debt.”
Mr. Son doesn’t necessarily see it that way. While he said last week at an earnings news conference that he would use some of the IPO proceeds to pay down debt, he said afterward that he was seeking more loans to help his SoftBank Vision Fund invest in the world’s biggest startups.
He said debt was a way to lift the returns at the Saudi-backed fund, which commands $92 billion in capital.
Mr. Son told the news conference that the killing of Saudi journalist Jamal Khashoggi at the kingdom’s consulate in Istanbul was a tragic incident but wouldn’t affect his ties to the kingdom.
The Japan mobile business has been lucrative for SoftBank, the country’s third-largest carrier, behind NTT Docomo Inc. and KDDI Corp.
But Mr. Son last year bemoaned the industry’s growth prospects because of market saturation, price competition and the need for more capital spending.
The profits in Japan might take a further hit because the two bigger carriers have bowed to government complaints and promised to slash phone charges. Japanese e-commerce firm Rakuten Inc. is preparing to enter the market with low-cost services aimed at cutting into SoftBank’s share.