JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
authority and obtain approval before the transaction is completed. Buyers need to state the purpose of the acquisition and the buyer’s plan regarding the company on the large shareholding report and the prior notification under the FEFTA. There is no “put up or shut up” requirement under Japanese law. 4.2 Mandatory Offer In May 2024, the Diet passed amendments to the mandatory tender offer rules. The mandatory tender offer requirement will extend to any market trades (on-floor transactions), which are currently exempt. In addition, the threshold for triggering a mandatory tender offer will be reduced from the current one-third to 30%. These amendments will come into effect on 1 May 2026. 4.3 Transaction Structures The most common structure for an acquisition of a public company is a two-step transaction consisting of a tender offer, followed by a squeeze-out. A one- step merger is not common, as it would necessitate a revaluation of the transferred assets for tax purposes, resulting in taxable income being recognised based on the difference between the book value and the fair value. 4.4 Consideration and Minimum Price Cash transactions are typical in the energy and infra- structure industry. Cash can be used as consideration in not only tender offers but also merger transactions. There is not a minimum price requirement for a takeo- ver/business combination. 4.5 Common Conditions for a Takeover Offer/ Tender Offer Offer conditions are strictly regulated, with the FIEA setting out the limited list of permitted conditions. Financing cannot be an offer condition. 4.6 Deal Documentation In a friendly deal, although not very common, it would be possible to enter into an agreement with the target company which contains interim covenants, address-
ing issues identified during due diligence, and obliga- tion to cooperate for obtaining necessary governmen- tal approval and financing. 4.7 Minimum Acceptance Conditions Tender offerors can set a minimum threshold, which is usually set at two-thirds in a 100% acquisition to ensure the approval of a special resolution at a shareholders’ meeting that is required to finalise the squeeze-out following the tender offer. 4.8 Squeeze-Out Mechanisms If an offeror acquires 90% or more of a listed compa- ny’s voting rights, they can use a statutory call option under the Companies Act to squeeze out minority shareholders. This requires board approval, which the 90% shareholder can control, but not shareholder approval. If the offeror secures at least two-thirds of the voting rights but less than 90%, they can still squeeze out minority shareholders through methods requiring a two-thirds super-majority shareholder approval. Com- mon methods include a short-form cash merger or a reverse stock split ( kabushiki heigou ), with the latter being more prevalent. In a reverse stock split, minor- ity shareholders would end up with fractional shares, which would then be cashed out. 4.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer The offeror must submit equity and debt commitment letters to the regulator as evidence of financing, which will be publicly disclosed together with the registration statement at the commencement of the tender offer. Financing cannot be an offer condition. 4.10 Types of Deal Protection Measures A target company may agree to certain deal protec- tion measures such as break-up fees, no-talk and no- shop provisions, and a matching right upon thorough negotiations. 4.11 Additional Governance Rights In cases where a target remains listed after a tender offer, the tender offeror and the target sometimes enter into an agreement regarding the target’s gov- ernance. To the extent permitted by applicable laws
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