JAPAN Law and Practice Contributed by: Jiro Mikami, Ryo Okubo, Hiromi Hattori and Tomohiro Koyasu, Nagashima Ohno & Tsunematsu
of promulgation but the exact date has not yet been decided. Methods of Acquisition If a tender offer is required for an acquisition, the tender offeror must file a tender offer registration statement with the regulator, describing a wide variety of matters, including the following. • The purpose of the transaction, including the management policy following the completion of the transaction. • The terms of the second step of the transac- tion, such as a squeeze-out scheme. • How the tender offer price has been calcu- lated, including: (a) the method of the calculation (eg, the discounted cash flow method) and the calculated range of the price; and (b) the ratio of the premium added. • How the price was negotiated with the target and its principal shareholders. • Whether or not a stock price valuation report was obtained from an expert and how the opinion of the expert was reflected in the tender offer price. • Agreements between the tender offeror and the target or its management. • In the case of management buyouts, the measures undertaken to secure the fair- ness of the tender offer price. The Ministry of Economy, Trade and Industry has recom- mended certain measures to secure the fair- ness of the tender offer price in management buyouts, such as the use of a special com- mittee, in the Fair M&A Guidelines released in June 2019. Funding To support the existence of funds to close the tender offer, the tender offeror is required to
attach the following to the tender offer state- ment: • financing certificates issued by lenders; and • investment certificates issued by equity investors. The Financial Services Agency of Japan (the “FSA” ) has published its view that these certifi- cates must be supported by a certainty of fund- ing and has provided examples of what will be required of these certificates in order to support a certainty of funding. The FSA also requires full disclosure on these certificates of the conditions precedent provided in the commitment letters. Generally speaking, the FSA’s view on certainty of funding is less restrictive than the “certain funds” requirements in the UK. In particular, business and market material adverse change provisions, which are typically included in the commitment letters from banks, are not consid- ered to impair certainty of funding. Squeeze-Out Procedures Two methods are typically used in order to squeeze-out minority shareholders follow- ing a tender offer. The first method uses stock consolidation and requires a special resolu- tion (requiring a two-thirds voting majority) at a shareholders’ meeting. The second method is a statutory squeeze-out procedure. While the second method is only available to a controlling shareholder holding 90% or more of the voting rights of its subsidiary, its process is simpler and does not require a shareholders meeting (a board resolution suffices), significantly expedit- ing the squeeze-out process. Although a squeeze-out transaction can still be completed by securing two-thirds through a stock consolidation, it does not necessarily mean that the transaction will not be blocked
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