This article was written as of February 2025.

1. Introduction

On September 17, 2024, the Financial Services Agency released the "Points to Note Regarding Disclosure of a Tender Offer" (the "Guidelines") with regard to prior consultations with the authorities on disclosure documents for tender offers¹. The Guidelines have become effective as of October 1, 2024.

¹ https://www.fsa.go.jp/common/law/kaiji/20241001_guideline-tenderoffer.pdf (In Japanese)

2. Overview and Backgrounds

Under the Japanese securities regulations, an off-market acquisition of a certain large amount of shares in a listed company is required to be made by way of a tender offer. An acquirer (the "Tender Offeror") is required to make certain mandatory disclosures, including the Tender Offer Registration Statement (kokaikaitsuke todokedesho), in order to commence a tender offer.

In practice, although there is no written rule, it has been mandatory for the Tender Offeror to conduct a prior consultation with the Kanto Local Finance Bureau (the "KLFB") on the Tender Offer Registration Statement before submitting it. The principles based on which the KLFB provides guidance and instruction to applicants in such prior consultations have not been disclosed in the past, and there have been strong requests from market players to disclose such principles for better transparency and predictability.

In response to such requests, the Guidelines have been published to set out the principles based on which the KLFB provides guidance and instructions in prior consultations with applicants on the Tender Offer Registration Statement. The Guidelines provide guidance on what will be reviewed and what instructions will be provided by the KLFB on the statement.

3. Outline of the Guidelines

The Guidelines include the following contents:

(1) Key Points Regarding the Tender Offer Registration Statement

The Guidelines outline critical points the KLFB will assess during its review of the Tender Offer Registration Statement. Specifically, the KLFB will examine whether the following elements are included:

• In cases of tender offers aimed at acquiring all shares of a target company, if the minimum number of shares to be acquired through the tender offer is set at the number lower than a two-thirds of all issued shares², a rationale for why the Tender Offeror believes such minimum number is appropriate.
• The premium or discount rate compared to the market price of the target company's shares on the business day prior to the proposal date.
• If the tender offer price is lower than the target company's recent net asset value per share, whether the target has recognized the price as reasonable, including the basis for such recognition (e.g., an evaluation of the difference between the tender offer price and the net asset value per share).
• If the target evaluates the fairness of the tender offer price using premium rates from similar past cases, the method used to select those cases.
• If the premium rate of the tender offer price is significantly lower than the premium rates of similar past cases but the target has recognized the price as reasonable, the reason for such recognition.
• For tender offers aimed at partial acquisitions, the details, reasons, and timing of management policies (e.g. financing, election and dismissal of directors, measures to address management issues) after the tender offer should be described as thoroughly as possible.

(2) Submission of Review Materials

The Guidelines specify that the KLFB may request the submission of certain materials during the prior consultation process, such as:

• Share valuation reports,
• Related transactional agreements (e.g., Tender agreements, Non-tender agreements, Tender offer agreements with the target company, Shareholder agreements, Management delegation agreements), and
• Financing-related documents (e.g., materials confirming the Tender Offeror's financial capability including loan agreements or its term sheets).

² Under the Companies Act of Japan, a super majority approval is required for cash-out of minority shareholders.

4. Practical Response

Although it cannot be guaranteed that the KLFB will not provide any guidance and instructions that go beyond the scope of the Guidelines, the Guidelines make such guidance and instructions more transparent and predictable. Given that any Tender Offeror is in practice required to conduct a prior consultation with the KLFB and follow their instructions before submitting the Tender Offer Registration Statement and commencing a tender offer in Japan, it is advisable that any parties who intend to commence a tender offer in Japan should refer to the Guidelines before initiating a prior consultation with the KLFB.