Press Releases 2019

(3) Important Agreements Concerning the Tender Offer

① The Definitive Business Integration Agreement and the Transaction Agreement

To implement the Tender Offer, the Tender Offerors, ZHD and the Target Company executed the Definitive Business Integration Agreement as of today, and the Tender Offerors executed a transaction agreement (hereinafter, the “Transaction Agreement”) as of today in connection with the Definitive Business Integration Agreement. The Tender Offerors, ZHD and the Target Company have agreed in the Definitive Business Integrated Agreement and the Transaction Agreement as follows:

  1. (ⅰ)
    Method of the Business Integration

As described in “(1) Overview of the Tender Offer” above, we have agreed as follows: (ⅰ) subject to the satisfaction of the Conditions Precedent (as defined below), the Tender Offerors will jointly implement the Tender Offers in Japan and the U.S.; (ⅱ) in the event that, following the completion of the Tender Offers in Japan and the U.S., a portion of the Target Company Shares have not been tendered and acquired through such Tender Offers in Japan and the U.S., we will implement squeeze-out procedures (with the intended result that post-squeeze out, the Tender Offerors shall be the only shareholders of the Target Company) using a share consolidation or other methods to take the Target Company private (hereinafter, the “Target Company Squeeze-out”); (ⅲ) we will implement a tender offer in which the Target Company after the Target Company Squee-out is a tender offeror and 2,125,366,950 ZHD shares held by Shiodome Z Holdings Co., Ltd. (hereinafter “ShiodomeZHD”) will be the target shares (hereinafter, the “ZHD Tender Offer”) *1, and SoftBank will transfer all ZHD shares holding through ShiodomeZHD to the Target Company (hereinafter, the “ZHD Shares Transfer Procedures”); (ⅳ) SoftBank will transfer a part of its Target Company Common Shares to NAVER Offerors and we will make the ratio of voting rights in the Target Company held by NAVER Offerors and SoftBank (immediately after the ZHD Shares Transfer Procedures) 50:50 (hereinafter, the “Shareholding Adjustment Procedure”); and (ⅴ) the Target Company will transfer all of its business under the control of ZHD, and ZHD will be a holding company, shares in which continue to be listed on TSE, with having control over all of the current business of ZHD and the Target Company (hereinafter, the “Target Company Business Transfer Procedure”).
Also, we have agreed as follows: in connection with the ZHD Shares Transfer Procedures, the Target Company shall issue the bonds of the Target Company at the cash amount equivalent to the purchase price for the Tender Offer to SoftBank, and SoftBank shall subscribe such bonds; the Target Company shall conduct an absorption-type merger in which the Target Company is the surviving company and the ShiodomeZHD is the absorbed company (hereinafter the “Merger”), and based on the total number of outstanding shares of the Target Company and ZHD (excluding treasury shares) as of September 30, 2019, the Target Company shall issue 180,882,293 shares of the Target Company Common Shares*2, allocate and deliver such shares to SoftBank, the parent company of ShiodomeZHD, as consideration for the Merger; in connection with the Target Company Business Transfer Procedure, the Target Company shall implement an absorption-type corporate demerger in which all of the Target Company's business will be succeeded to the Target Succeeding Company; and, subject to the satisfaction of certain conditions precedent, we will implement the Share Exchange with ZHD shares as consideration whereby ZHD becomes the wholly owning parent company and the Target Succeeding Company becomes the wholly owned subsidiary company (based on the assumption that the number of issued and outstanding shares of the Target Succeeding Company becomes the same as the total number of issued and outstanding shares of the Target Company (excluding treasury shares) as of September 30, 2019, 11.75 ZHD shares for each share of the Target Succeeding Company will be allocated and delivered to the Target Company). In addition, the Tender Offerors have agreed under the Transaction Agreement that, as part of the Shareholding Adjustment Procedure, SoftBank will sell the necessary number of the Target Company Common Shares to NAVER Offerors and NAVER Offerors will purchase such shares from SoftBank (hereinafter, the “Share Transfer”), in accordance with the provisions of a share transfer agreement to be separately executed, by the date immediately before the commencement of settlement of the Tender Offer, so that the ratio of voting rights in the Target Company held by NAVER Offerors and SoftBank is 50:50 as a result of the Merger.

[Notes]
  1. *1
    ZHD Tender Offer will not be conducted for or for the interest of, directly or indirectly, the shareholders in the U.S. who are clearly excluded from the procedures of ZHD Tender Offer.
  2. *2
    If the result of the Target Company Squeeze-out or other factors make it reasonably necessary to adjust the number of shares, it will be appropriately adjusted in accordance with thefactors based upon an agreement between the Tender Offerors.
  1. (ⅱ)
    The Conditions Precedent for the Commencement of the Tender Offer

Under the Definitive Business Integration Agreement, the commencement of the Tender Offers in Japan and the U.S. including the Tender Offer is conditional upon satisfaction of all of the following conditions: (1) a resolution is adopted at the Target Company's board of directors' meeting, by a unanimous resolution of directors without conflicts of interest, expressing their opinion that they support the Tender Offers in Japan and the U.S. and recommend the shareholders of the Target Company and holders of American Depository Receipt to tender for the Tender Offers in Japan and the U.S. (provided, however, they leave holders of the Share Options and Convertible Bonds to decide whether to tender their Share Options and Convertible Bonds for the Tender Offers in Japan and the U.S. including the Tender Offer), and such opinion has not been changed or withdrawn; (2) the special committee of the Target Company established in connection with the Tender Offer advises the Target Company's board of directors that it would be appropriate to express the supporting opinion described in (1) above, and such advice has not been changed or withdrawn; (3) the special committee of ZHD established in connection with the Business Integration advises ZHD's board of directors that the Business Integration would not be disadvantageous to minority shareholders of ZHD, and such advice has not been changed or withdrawn; (4) the representations and warranties of each party under the Definitive Business Integration Agreement are true and correct in all material respects; (5) all obligations under the Definitive Business Integration Agreement which each party to the Definitive Business Integration Agreement must comply with or perform before the commencement date of the Tender Offer have been complied with or performed in all material respects; (6) ZHD's shareholders' meeting approves the necessary items with regard to the execution of the share exchange agreement concerning the Share Exchange and the Business Integration (except for the election of directors of ZHD under the provisions of the Capital Alliance Agreement (it means the capital alliance agreement executed between ZHD and the Target Company as of today, providing the governance and operation of ZHD after the Business Integration, the same applies hereinafter, please see “Regarding the execution of the definitive agreement with respect to business integration” released as of today by ZHD and the Target Company for the details of the Capital and Alliance Agreement)), and such approval is maintained in full force and effect; (7) in the event that the ZHD's general shareholders' meeting is held before the commencement date of the Tender Offer, such meeting approves the election of directors of ZHD under the provisions of the Capital Alliance Agreement; (8) the implementation of a series of transactions relating to the Business Integration does not, and is not reasonably expected to, constitute a violation of laws and regulations; (9) among the procedures under the competition laws and the investment control regulations of each jurisdiction which are necessary for the implementation of the Business Integration (including obtaining the permits and licenses and expiration of necessary waiting period and/or review period, hereinafter, the “Clearance Procedures”), the Clearance Procedures which are necessary for the implementation of the Delisting Procedures have been completed; (10) there are no decisions issued by governmental organizations seeking to impose restrictions upon or prohibit a series of transactions relating to the Business Integration; (11) no circumstances have arisen or turned out that would make the implementation of a series of transactions relating to the Business Integration or the achievement of the purpose of the Business Integration impossible or extremely difficult due to material adverse effect, or conditions or events which may have material adverse effect, on the business, financial condition, managing condition or cash flows, or forecast thereof, of the group of each party to the Definitive Business Integration Agreement taken as a whole; (12) there is no Material Fact Pertaining to Business or Other Matters (has the meaning set forth in Article 166, Paragraph 2 of the Act) of the Target Company which is not Publicized (has the meaning set forth in Article 166, Paragraph 4 of the Act) by the Target Company, and the Target Company has delivered the documents evidencing the same to the Tender Offerors; and (13) either of the Definitive Business Integration Agreement, the Transaction Agreement, the JV Agreement (defined in “② The JV Agreement” below) or the Capital Alliance Agreement is validly existing (the conditions (1) to (13) are collectively referred to as the “Conditions Precedent”).

  1. (ⅲ)
    Cooperation on the Business Integration

The Tender Offerors, ZHD and the Target Company have agreed to: (ⅰ) make an effort to complete all Clearance Procedures as quickly as practically possible to the extent reasonably possible and necessary; (ⅱ) in the event that, in connection with the implementation of a series of transactions relating to the Business Integration, it is required to obtain necessary permits and license under laws and regulations in addition to the Clearance Procedures, make an effort, and mutually cooperate, to obtain such permits and licenses as quickly as practically possible to the extent reasonably possible and necessary; and (ⅲ) mutually cooperate to facilitate a series of transactions related to Business Integration.

② The JV Agreement

As of today, in relation to the Business Integration, the Tender Offerors executed the joint venture agreement providing the organization and operation of the Target Company which will be owned by only SoftBank and NAVER after the completion of the Business Integration and will be a joint venture with the purpose of owning the ZHD Shares (hereinafter, the “JV Agreement”). Please refer to the Press Release concerning the Definitive Business Integration Agreement for the details of the JV Agreement.

(4) Measures to Ensure the Fairness of the Tender Offer, including Measures to Ensure the Fairness of the Tender Offer Price and to avoid Conflicts of Interest

Considering that the Target Company is a consolidated subsidiary of NAVER as of today, and the possibility of structural conflicts of interest in Target Company's consideration of the Delisting Procedures including the Tender Offer, the Tender Offerors and the Target Company respectively have taken by today or are planning to take by the commencement of the Tender Offer the following measures in order to ensure the fairness of the Tender Offer.

  1. the Tender Offerors' acquisition of a share valuation report from an independent third-party evaluator
  2. the Target Company's acquisition of a share valuation report and a fairness opinion from an independent third party evaluation organization
  3. the Target Company's receipt of advice from an independent law firm
  4. the Target Company's establishment of the special committee
  5. the special committee's acquisition of a share valuation report and a fairness opinion from an independent third party evaluation organization
  6. the special committee's receipt of advice from an independent law firm
  7. approval of all of the Target Company's directors without interest and the opinion of all the Target Company's statutory auditors to the effect that they have no objection
  8. measures to secure purchase opportunities from other offerors

For details regarding the above, please refer to “① Basis of Valuation” and “② Process of Valuation” in “(4) Basis for Valuation of the Price of Purchase” in “2. Overview of Purchase”.

(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)

① Target Company Common Shares

As stated in “(1) Overview of the Tender Offer”, if the Tender Offerors fail to acquire all of the Target Shares during the Tender Offers in Japan and the U.S. including the Tender Offer, once the Tender Offer is complete, the Tender Offerors plan to implement procedures set forth as below so that the Tender Offerors shall be the only shareholders of the Target Company.
In particular, the Tender Offerors plan to request the Target Company to hold an extraordinary shareholders' meeting (hereinafter, the “Extraordinary Shareholders' Meeting”) to implement a share consolidation of the Target Company Common Shares (hereinafter, the “Share Consolidation”) and to partially amend its articles of incorporation to the effect that it deletes the provisions regarding share unit number subject to the Share Consolidation. Note that the Tender Offerors plan to support each of the measures described above at the Extraordinary Shareholders' Meeting. If the measure for the Share Consolidation is approved at the Extraordinary Shareholders' Meeting, the Target Company shareholders hall each, as of the date on which the Share Consolidation is to take effect, retain a number of the Target Company Common Shares corresponding the Share Consolidation ratio approved at the Extraordinary Shareholders' Meeting. If the Share Consolidation results in fractional shares that are less than 1 full share, the Target Company Common Shares, number of which is equal to sum total of such fractional shares (if the total of fractional shares is less than 1 full share, the fractional shares shall be discarded), shall be sold to the Tender Offerors in accordance with the terms of Article 235 of the Companies Act (Law No. 86 of 2005 as amended; the same applies hereafter) and other relevant laws and regulations, and the owners of such fractional shares shall be provided with money in exchange. With respect to the sale price of the total number of fractional Target Company Common Shares, the plan is to request that the Target Company petition a court for permission for voluntary sale, after ensuring that as a result of such sale of fractional shares, the monetary sum provided to the Target Company shareholders who did not apply to the Tender Offer (excluding the Tender Offerors and the Target Company) will be the same as the value obtained when the number of the Target Company Common Shares owned by such shareholders is multiplied by the Tender Offer Price. Furthermore, although the ratio of consolidation of the Target Company Common Shares is still undetermined as of today, the plan is to ensure that the decided-upon ratio will result in fractional shares owned by the Target Company shareholders who did not tender for the Tender Offer totaling less than 1 full share so that the Tender Offerors will retain all Target Company Common Shares (excluding treasury shares owned by the Target Company).
In the interest of protecting the rights of minority shareholders in connection with the procedures above, if the Share Consolidation is made, and this results in fractional shares that are less than 1 full share, the Companies Act allows the shareholders in the Target Company to demand that the Target Company purchase any fractional shares less than 1 full share in their possession at a fair price, as well as to petition a court for a decision regarding the price of the Target Company Common Shares, all in accordance with the provisions of Articles 182-4 and 182-5 and all other relevant laws and regulations. As mentioned above, in the Share Consolidation, the number of shares to be held by the shareholders in the Target Company who have not tendered for the Tender Offer (excluding the Tender Offerors and the Target Company) is expected to be less than 1 full share. Therefore, the shareholders in the Target Company who do not support the Share Consolidation will be able to demand that the Target Company purchase any fractional shares less than 1 full share in their possession at a fair price, as well as to petition a court for a decision regarding the price of the Target Company Common Shares, all in accordance with the provisions of Articles 182-4 and 182-5 and all other relevant laws and regulations. Of course, the price in response to such petition shall ultimately be determined by courts.
With respect to the procedures above, implementation methods and timeline may be subject to change based on the status of amendments to, implementation of, and interpretation by relevant authorities of the relevant laws and regulations, and the Ownership Ratio of Share Certificates, etc. of the Tender Offerors after the Tender Offer and owing statue regarding the Target Company Common Shares by the Target Company shareholders other than the Tender Offerors. However, even in such cases, the Tender Offerors intend to take any measures to eventually pay cash to each of the Target Company shareholders who do not tender their shares for the Tender Offer (excluding the Tender Offerors and the Target Company) and cause the amount of cash to be paid to each of such shareholders to be equal to the amount obtained by multiplying the Tender Offer Price by the number of the Target Company Common Shares held by such shareholder. Specific procedures and the schedule thereof in the above cases will be announced by the Target Company once they are determined through mutual discussions between the Tender Offerors and the Target Company.
Note that, the Tender Offer is not in any way intended to solicit the Target Company shareholders to approve the proposals at the Extraordinary Shareholders' Meeting. All shareholders need to take sole responsibility for seeking advice from their tax accountants with regard to the tax consequences of tendering their shares for the Tender Offer or participating in the procedures outlined above.

In addition, as described in “(3) Important Agreements Concerning the Tender Offer”, after the Share Consolidation, the Tender Offerors will make the ratio of voting rights in the Target Company held by SoftBank and NAVER Offerors 50:50 through the Share Transfer and the Merger. The price in the Share Transfer may differ from the Tender Offer Price. However, in order to exclude the impact on the stock price of speculative media reports on November 13, 2019 by certain news agencies regarding the Business Integration, we will determine such price based on the objective value of the Target Company Common Shares referencing to the average of the market price of the Target Company Common Shares during a certain period prior to November 13, 2019, which is considered not to be affected by such speculative media reports, and we will not take into account any premium equivalent.

② Share Options

If the Tender Offer is complete but the Tender Offerors fail to acquire all of the Share Options during the Tender Offer, the Tender Offerors will promptly request the Target Company to implement the procedures reasonably necessary for the implementation of the Delisting Procedures, such as acquiring the Share Options and encouraging holders of the Share Options to abandon the Share Options.

③ Convertible Bonds

With respect to the Convertible Bonds, the effective conversion price of the convertible bonds due 2023 as of today is JPY7,467 per share and the effective conversion price of the convertible bonds due 2025 as of today is JPY7,518 per share, both of which are higher than the Tender Offer Price of JPY 5,380. Therefore, it is not expected that the Convertible Bonds will be converted into the Target Company Common Shares during the Tender Offer Period. The Convertible Bonds have a provision to the effect that the effective conversion price will be adjusted in the event of the acquisition of the Target Company Common Shares through the Tender Offer in conjunction with delisting the Target Company Common Shares. The Tender Offer is conducted in conjunction with delisting, and the effective conversion price will be adjusted as a result of the settlement of the Tender Offer. In the Definitive Business Integration Agreement, NAVER has agreed not to convert the Convertible Bonds held by NAVER into the Target Company Common Shares.
In addition, the Convertible Bonds have an early redemption provision* stipulating to the effect that holders of the Convertible Bonds may exercise the conversion right in the event that the Target Company's shareholders' meeting approves the share consolidation in conjunction with delisting the Target Company Common Shares, and that the Target Company Common Shares are acquired through the Tender Offer in conjunction with delisting (which is also provided as a cause for adjustment of the effective conversion price as above) (on the condition that the Target Company's shareholders' meeting above is not resolved within 60 days of the acquisition of the Target Company Common Shares through the Tender Offer). The Convertible Bonds, which are not acquired through the Tender Offer and are not converted into the Target Company Common Shares, will be redeemed after the Tender Offer at a face value or higher in accordance with such early redemption provision. For details of the Convertible Bonds, please refer to “Notice of the Issuance of Zero Coupon Convertible Bonds Due 2023 and Zero Coupon Convertible Bonds Due 2025” and “Announcement of Determination of Terms of Issue, etc. of Zero Coupon Convertible Bonds Due 2023 and Zero Coupon Convertible Bonds Due 2025”, which was published on September 4, 2018 by the Target Company.

[Note]
  • *
    In particular, in the event that the Target Company's shareholders' meeting approves the share consolidation in conjunction with delisting the Target Company Common Shares (hereinafter, the “Squeeze-out Event”), the Target Company shall, upon the provision of notice to holders of the Convertible Bonds as soon as practicably possible (but within 14 days from the day of the occurrence of the Squeeze-out Event), redeem all of the outstanding Bonds (mean the part of the Convertible Bonds corresponding to only bonds; hereinafter the same applies) (partial redemption shall not be permitted), on the date specified for redemption in such notice (the redemption date shall be any day before the effective date of the relevant Squeeze-out Event falling between 14th to 30th Tokyo business day after the day of the relevant notice; provided, however, that in the case where the relevant effective date is a day before the 14th Tokyo business day from the date of the relevant notice, then the redemption date shall be moved up to a day before the relevant effective date), at the redemption price per one Bond certificate calculated by (a) the amount obtained by deducting the face value of each Bond from the offer price of each Convertible Bond, multiplying (b) the number obtained by dividing the number of days from the redemption date above (including the same day) to the maturity date (excluding the same date) by the number of days from the payment date (including the same date) to the maturity date (excluding the same date), and then, plus the face value of each Bond. In addition, in the event that the Squeeze-out Event does not occur within 60 days after the acquisition date of the Target Company Common Shares by a tender offer, the Target Company shall, upon the provision of notice to holders of the Convertible Bonds as soon as practically possible (but within 14 days from the last day of the 60-day period) redeem all of the outstanding Bonds (partial redemption shall not be permitted), on the date specified for redemption in such notice (the redemption date shall be any day falling between 14th to 30th Tokyo business day after the day of the relevant notice), at the redemption price per one Bond certificate calculated by (a) the amount obtained by deducting the face value of each Bond from the offer price of each Convertible Bond, multiplying (b) the number obtained by dividing the number of days from the redemption date above (including the same day) to the maturity date (excluding the same date) by the number of days from the payment date (including the same date) to the maturity date (excluding the same date), and then, plus the face value of each Bond (together with provision regarding the early redemption pursuant to the Squeeze-out Event above, hereinafter, the “Early Redemption Provisions”).

(6) Possibility of Delisting and Reasons Thereof

As of today, the Target Company Common Shares are listed on the First Section of TSE, but, as the Tender Offerors has not set a upper limit of shares to be purchased with respect to the Tender Offer, based on the results of the Tender Offer, it is possible that the Target Company Common Shares may become delisted following the designated procedures of the Tender Offer in accordance with the delisting standards established by TSE. Furthermore, even in the event the delisting standards do not apply as of the completion of the Tender Offer, the Tender Offerors will implement certain procedures so that they shall be the only shareholders of the Target Company as described in “(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)” above after the completion of the Tender Offer. In such cases, the delisting standard will then apply, and the Target Company Common Share will become delisted following the designated procedures. Note that, after being delisted, it will be impossible to trade the Target Company Common Shares on the First Section of TSE.
Also, as of today, the American Depositary Receipts are listed on the New York Stock Exchange, but, after the U.S. Tender Offer is complete, we will implement the delisting procedures of the American Depositary Receipts with the approval of the relevant authorities as necessary based on procedures and methods permissible under the relevant laws and regulations. Note that, after being delisted, it will be impossible to trade the American Depository Receipts on the New York Stock Exchange.