JAPAN Law and Practice Contributed by: Hajime Tanahashi, Takayuki Kihira, Kenichi Sekiguchi and Akira Matsushita, Mori Hamada
explained in 6.3 Consideration , stock is more commonly used. 6.7 Types of Deal Security Measures In a tender offer, as explained in 5.5 Definitive Agreements , it is becoming more common par - ticularly in the large size deals for an acquirer and a target company to document a tender offer in a definitive transaction agreement. In recent high-profile deals, such as the respective going-private transactions of Toshiba and JSR Corporation, certain deal security measures, such as non-solicitation provisions, break-up fees or match rights, are agreed with the target company. It is also common for a buyer and principal shareholder of a target company to enter into an agreement where the shareholder agrees to tender its shares in the contemplated tender offer (see 6.11 Irrevocable Commitments ). The irrevocable commitments often include certain deal security measures such as non-solicita - tion provisions. Non-solicitation provisions and force-the-vote provisions (or the like) are also often seen in a statutory business combination. 6.8 Additional Governance Rights If an acquirer does not seek 100% ownership of a target company, the acquirer may seek certain contractual protections, such as the right to des - ignate members of a company’s board of direc - tors, veto rights over certain material matters, and information rights to receive periodic finan - cial information and business reports. However, if the target company is a listed company, such protections may be quite limited because the target company will not be likely to accept such protections of the acquirer from a corporate governance standpoint. In addition, the amend - ments to the relevant ordinance of the FIEA in 2024 require the mandatory disclosure of certain
is that passive index funds that hold the target shares normally do not tender shares in a tender offer, but do vote in favour of the second step squeeze-out (where a shareholder resolution is required). Partial Ownership If an acquirer does not seek 100% ownership of a target company, the minimum acceptance condition is typically set such that the voting rights held by the acquirer after the tender offer will be a majority of the voting rights of the target company on a fully diluted basis. The majority ownership will allow the acquirer to pass an ordi - nary resolution of the shareholders at a share- holders’ meeting. The primary purpose of a deal of this type is typically to allow the shares of the target company to continue to be listed on a stock exchange. In addition, the acquirer may also set a maximum number of shares to be purchased by the acquir - er, provided that the total shareholding ratio of the acquirer after the tender offer will remain less than two thirds. If the number of shares tendered exceeds that maximum number, the acquirer must purchase the tendered shares on a pro rata basis. If, for instance, a bidder sets both a minimum and maximum at the level of a simple majority, a majority acquisition can be achieved without purchasing all shares tendered. 6.6 Requirement to Obtain Financing In a statutory business combination, there are no specific limitations on conditions. However, in practice, the conditions in a business com - bination among listed companies are typically quite limited, such as necessary shareholder approval and regulatory approvals and clear - ances. A financing condition is not commonly used in a business combination because, as
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