NTT to Sell Entire 4.9% NEC Stake as Alliance Continues

NTT will sell all 65.1 million NEC shares it owns, equal to 4.90% of the company, through a two-part disposal.

The transaction puts 32.56 million shares into an off-market institutional sale and 32.56 million into NEC’s tender offer for its own shares at ¥3,462 per share.

The full exit ends the capital tie-up formed in July 2020. NTT and NEC confirmed their business alliance will continue as before.

The tender price represents a 23% discount to NEC’s ¥4,479 close on Nov. 9, according to Investing.com.

What does the split transaction cover?

• Institutional sale: NTT will sell 32.56 million shares off-market through a securities firm, mainly to overseas institutional investors. Pricing is set on Nov. 10, with delivery on Nov. 12.
• Share buyback: NTT will tender 32.56 million shares into NEC’s tender offer at ¥3,462 each. The offer runs from Nov. 13 through Dec. 14, with settlement starting Jan. 7.
• Complete exit: The two blocks total 65.1 million shares, or 4.90% of NEC, and terminate the capital tie-up created in July 2020.

The disposal separates NTT’s ownership from a relationship that already covers commercial technology development, network products and undersea infrastructure.

How much could the sale raise?

Investing.com cited a Citi estimate of ¥240–250 billion in total proceeds. The estimate assumes a roughly 10% discount on the institutional sale.

That figure was an estimate, not a confirmed transaction total. The institutional leg had no stated price before its Nov. 10 pricing date.

Reuters reported that NEC’s buyback is capped at ¥130 billion. The cap and the fixed ¥3,462 tender price constrain the buyback component, while the institutional block remains exposed to the Nov. 10 market pricing.

Why is NTT exiting after five years?

Reuters reported that NTT paid about ¥64.4 billion for its original stake of roughly 4.8% in 2020. The investment came through a third-party share allotment.

NTT said the capital participation supported joint development of technology and products, followed by global sales. The companies have since worked together on O-RAN, the IOWN all-photonics network and submarine cables.

After more than five years of joint work, NTT said the relationship “can be kept and expanded without a shareholding.”

The companies therefore expect their commercial cooperation to continue even though NTT will hold no NEC shares after the disposal.

How will NTT record the gain?

NTT expects a gain of about ¥189 billion in its standalone or parent-company accounts during its fiscal third quarter. The estimate uses NEC’s Nov. 9 share price.

The company expects no gain on its consolidated income statement and no effect on consolidated profit. NTT carries the NEC stake at fair value through other comprehensive income under IFRS.

That accounting treatment explains the split between the large parent-company gain and the absence of a corresponding consolidated earnings benefit.

What does the debt figure imply?\n

Citi, as cited by Investing.com, called the transaction “a balance-sheet action.” The same analysis noted that NTT’s consolidated interest-bearing debt had risen to ¥17.5 trillion at the end of September.

The disposal will convert NTT’s listed NEC holding into cash proceeds. However, the available financial treatment records much of that value outside consolidated operating profit.

NTT’s operating rationale is narrower. It will end cross-shareholding while preserving its joint O-RAN, IOWN and submarine-cable programs with NEC.

The next measurable outcomes are the Nov. 10 institutional price and final tender take-up through Dec. 14, which will determine the disposal proceeds while the companies carry forward their technology alliance without shared equity.