JAPAN Law and Practice Contributed by: Jiro Mikami, Ryo Okubo, Hiromi Hattori and Tomohiro Koyasu, Nagashima Ohno & Tsunematsu
Certain exceptions were introduced in 2019 where the foreign acquirer satisfies certain requirements, which vary depending on whether or not the target business is “core business’” as defined in the FEFTA. The competent Japanese authorities may issue a recommendation or order the amendment of the terms of the acquisition or even suspend it. The only example to date of a Japanese authority suspending an acquisition occurred in 2008 when London-based hedge fund The Children’s Investment Fund (TCI) was ordered to refrain from acquiring up to a 20% stake in J-Power, a domestic electricity compa- ny that operates power plants, including nuclear power plants. This was because there was a concern that TCI’s shareholding could negatively affect the supply of electricity and the nuclear power policy in Japan and thereby potentially endanger public order. In addition, the FEFTA more broadly requires ex post facto reports for share acquisitions con- ducted by foreign investors but these reports When the target is conducting a regulated busi- ness, it may affect the terms of the acquisition finance. For example, obtaining the necessary regulatory consent may be added as a condition precedent and some of the assets owned by the credit parties may not be provided as security. 9.2 Listed Targets Specific Regulatory Rules Where the target is listed, the acquirer must fol- low the mandatory tender offer rules under the FIEA, which apply to the following. • Acquisitions in off-exchange transactions where, after the acquisition, the holding ratio (as defined in the FIEA) is more than 5% but are mere formalities. Effect on Transaction
less than one-third, except acquisitions of such shares from ten persons or fewer within 61 days (commonly known as the 5% rule). • Acquisitions in off-exchange transactions where, after the acquisition, the holding ratio exceeds one-third (commonly known as the one-third rule). • Acquisitions in off-exchange transactions where the holding ratio before the acquisition exceeds 50% and is two-thirds or less after the acquisition, except acquisitions of such shares from ten persons or fewer within 61 days. • Acquisitions of 10% or more of the total issued voting shares (whether in off-exchange or on-exchange transactions or whether already issued or newly issued shares) within three months, provided that this includes acquisitions of 5% or more of the total issued voting shares in off-exchange transactions (except for acquisitions through tender offer), where the holding ratio after the acquisition exceeds one-third (commonly known as the speed acquisitions rule). In addition, where the holding ratio of the acquir- er reaches two-thirds or more after acquisition, a tender offer is always required and the tender offeror must purchase all classes of equity secu- rities of the target offered in the tender without setting any limit on the number and the class of shares to be purchased (commonly known as the two-thirds rule). In May 2024, major amendments to the tender offer rules under the FIEA were promulgated. These included major changes to the rules such as adding on-exchange transactions to acqui- sitions subject to tender offer rules generally and lowering the one-third threshold under the one-third rule to 30%. These amendments will enter into force within two years from the date
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