By Nobuhiro Kubo and Yoko Kubota
TOKYO, Oct 26 (Reuters) - Mitsubishi Motors Corp plans to raise around $2 billion in a public share offering asearly as January to pay back top shareholders for a 2004 bailoutthat enabled its decade-long turnaround, sources familiar withthe matter said on Saturday.
The capital raising will also allow the second-tier Japaneseautomaker to pay dividends for the first time in nearly a decadeand a half. And it will maintain close equity ties to theMitsubishi group to meet the challenges of tighteningenvironmental standards and other technological advances whileit lacks a strategic automotive partner.
It is also a milestone in the company's recovery from adefect cover-up scandal early in the last decade and a retreatfrom European production to focus on fast-growing SoutheastAsia, under the guidance of President Osamu Masuko who arrivedfrom Mitsubishi Corp in 2005.
Group companies including Mitsubishi Heavy Industries Ltd, Mitsubishi UFJ Financial Group Inc andMitsubishi Corp rescued the troubled carmaker in 2004 by takingthe bulk of a preferred share offering after a failed tie-upwith DaimlerChrysler AG.
Mitsubishi Motors will use the roughly 200 billion yen ($2billion) it hopes to raise to buy back the majority of thosepreferred shares at a discounted price and retire them, said thesources, who declined to be named as they were not authorised tospeak to the media.
"It was difficult for them to find an alliance partner whilethe preference shares were hanging over them, but this will letthem be a normal company," one of the sources said.
Remaining preferred shares will be converted to ordinarystock.
The 380 billion yen of preferred shares in the hands ofMitsubishi group companies has made it prohibitively costly forMitsubishi Motors to resume dividend payments.
Mitsubishi Heavy, Mitsubishi UFJ Financial and trading houseMitsubishi Corp will retain their combined 34 percent minoritycontrolling stake after the buy back and conversion, the sourcessaid, possibly via a purchase of ordinary shares by MitsubishiHeavy.
Mitsubishi Motors will announce the move when it makespublic its latest multi-year management plan on Nov. 5, one ofthe sources added. That plan is expected to include expandedproduction in emerging markets and an expanded lineup of SUVs,which currently include the Outlander Sport.
The company said in a statement to the Tokyo Stock Exchangeon Saturday that it was considering various options to deal withits preferred shares but no decisions had been made.
The maker of Triton pickups and i-MiEV electric cars, whichsells one-quarter of its vehicles in Southeast Asia, this weekraised its net profit outlook for the full year to next March by40 percent to 70 billion yen, but trimmed its revenue outlook by6.2 percent to 2.13 trillion yen. It said a boost from a weakeryen and cost cuts offset a drop in vehicle sales.
It will announce its second-quarter earnings on Oct. 29,when Masuko is expected to speak.
Mitsubishi Motors' shares jumped more than 7 percent inintraday trade on Friday in their highest volume in a month anda half, although they pulled back by the close to end with again of 1.2 percent at 1,036 yen. They nevertheless outperformedTokyo's benchmark Nikkei average which sank 2.8 percent.
News that Mitsubishi Motors was considering a share issueand other measures to complete its restructuring first emergedin May. Its shares are up 16 percent so far this year, comparedwith underperforming shares in other second-tier automakersMazda Motor Corp and Subaru maker Fuji Heavy IndustriesLtd, which are two-and-a-half times their value at thestart of the year.
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