By Nobuhiro Kubo and Yoko Kubota
TOKYO (Reuters) - Mitsubishi Motors Corp (TYO:7211) plans to raise around $2 billion in a public share offering as early as January to pay back top shareholders for a 2004 bailout that enabled its decade-long turnaround, sources familiar with the matter said on Saturday.
The capital raising will also allow the second-tier Japanese automaker to pay dividends for the first time in nearly a decade and a half. And it will maintain close equity ties to the Mitsubishi group to meet the challenges of tightening environmental standards and other technological advances while it lacks a strategic automotive partner.
It is also a milestone in the company's recovery from a defect cover-up scandal early in the last decade and a retreat from European production to focus on fast-growing Southeast Asia, under the guidance of President Osamu Masuko who arrived from Mitsubishi Corp <8058.T> in 2005.
Group companies including Mitsubishi Heavy Industries Ltd <7011.T>, Mitsubishi UFJ Financial Group Inc <8306.T> and Mitsubishi Corp rescued the troubled carmaker in 2004 by taking the bulk of a preferred share offering after a failed tie-up with DaimlerChrysler AG.
Mitsubishi Motors will use the roughly 200 billion yen ($2 billion) it hopes to raise to buy back the majority of those preferred shares at a discounted price and retire them, said the sources, who declined to be named as they were not authorized to speak to the media.
"It was difficult for them to find an alliance partner while the preference shares were hanging over them, but this will let them be a normal company," one of the sources said.
Remaining preferred shares will be converted to ordinary stock.
The 380 billion yen of preferred shares in the hands of Mitsubishi group companies has made it prohibitively costly for Mitsubishi Motors to resume dividend payments.
Mitsubishi Heavy, Mitsubishi UFJ Financial and trading house Mitsubishi Corp will retain their combined 34 percent minority controlling stake after the buy back and conversion, the sources said, possibly via a purchase of ordinary shares by Mitsubishi Heavy.
Mitsubishi Motors will announce the move when it makes public its latest multi-year management plan on November 5, one of the sources added. That plan is expected to include expanded production 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 Exchange on Saturday that it was considering various options to deal with its preferred shares but no decisions had been made.
The maker of Triton pickups and i-MiEV electric cars, which sells one-quarter of its vehicles in Southeast Asia, this week raised its net profit outlook for the full year to next March by 40 percent to 70 billion yen, but trimmed its revenue outlook by 6.2 percent to 2.13 trillion yen. It said a boost from a weaker yen and cost cuts offset a drop in vehicle sales.
It will announce its second-quarter earnings on October 29, when Masuko is expected to speak.
Mitsubishi Motors' shares jumped more than 7 percent in intraday trade on Friday in their highest volume in a month and a half, although they pulled back by the close to end with a gain of 1.2 percent at 1,036 yen. They nevertheless outperformed Tokyo's benchmark Nikkei average (.N225) which sank 2.8 percent.
News that Mitsubishi Motors was considering a share issue and other measures to complete its restructuring first emerged in May. Its shares are up 16 percent so far this year, compared with underperforming shares in other second-tier automakers Mazda Motor Corp <7261.T> and Subaru maker Fuji Heavy Industries Ltd <7270.T>, which are two-and-a-half times their value at the start of the year.
(Additional reporting by Taiga Uranaka, Emi Emoto and Kentaro Sugiyama; Editing by Edmund Klamann and Michael Perry)