Golf course float a first for Japan

TOKYO - Lone Star Funds, the biggest owner of Japanese golf courses, will raise about 50 billion ($645 million) selling shares in the business, the first such initial public offering (IPO) in Japan, sources said.

Pacific Golf Management, which operates 92 courses, will offer the shares to investors in Japan as early as November, sources said.

Dallas-based Lone Star will next month sell about 70 billion of shares in Tokyo Star Bank, a local lender.

The share sales aim to take advantage of a 20 per cent rally in the Topix index in 2005 that propelled Japan's benchmark to a four-year high. The nation's economy, the world's second biggest, expanded 3.3 per cent in the second quarter, three times faster than the Government's initial estimate.

"Most members at Japanese golf courses are corporate so investing in a golf-course stock is like investing in Japan's economy," said Hitoshi Yamamoto, who manages about US$1 billion in Japanese equities as the president at Commerz International Management (Japan) in Tokyo. "Still, the number of players isn't growing so some courses are having to cut fees to attract players, squeezing profits."

Lone Star, which buys real estate, companies and distressed loans, raised about US$5 billion ($7.2 bilion) by the start of this year for its biggest investment fund. The company, led by John Grayken, will sell part of its stake in Pacific Golf, which will in turn offer new shares to raise funds for expansion, sources said.

Nomura, Nikko Nomura Holdings and Nikko Citigroup, Japan's leading stock underwriters this year, would manage the golf IPO, people familiar with the plan said. The size of the Pacific Golf IPO was still under discussion and might change.

Lone Star and Goldman Sachs acquired almost 180 golf courses in Japan in the past five years, betting they can cut costs and attract more players to boost investment returns.

Goldman's Accordia Golf Japan unit, which has 86 courses, is planning to sell shares early next year.

Japan had 2458 golf courses last year, according to Golf Management, a monthly industry magazine, compared with 2200 golf courses 10 years earlier. The courses generated 1.19 trillion ($15.5 billion) of revenue last year, down from 1.8 trillion in 1994, according to Japan Productivity Centre for Socio-Economic Development.

Japanese companies raised 665 billion in 118 IPOs this year, according to Bloomberg data, compared with 114 sales valued at a combined 681 billion a year earlier.

- BLOOMBERG