Press Releases 2019

② Process of Valuation

  1. (ⅰ)
    Process that led up to Determination of the Tender Offer Price

SoftBank, ZHD, NAVER and the Target Company, began discussions on various possibilities, including business alliances, in mid-June 2019. After that, since around early August of the same year, the four companies have discussed and examined a wide range of options for the Business Integration feasibility and methods, bearing in mind limitation, etc. under applicable domestic and foreign laws and regulations. Through these discussions, from mid-August until late-August, as the method for the Business Integration, the four companies decided to conduct a series of initial discussions on the feasibility of series of transactions, including a tender offer to the Target Company jointly conducted by Tender Offerors, an absorption-type company split in which the Target Company will cause the Target Succeeding Company to succeed all of the Target Company's business, the Share Exchange in which ZHD becomes the share exchange wholly-owning parent company, the Target Succeeding Company becomes the share exchange wholly-owned subsidiary, and the consideration is ZHD shares, etc. In early September 2019, each parties shared the understanding on the significance of the transaction, and decided to conduct further deliberations including the implementation of due diligence. As a result, from late September to early November 2019, discussions on the objectives of the Business Integration including synergies continued and due diligence on the Target Company by the Tender Offerors and ZHD and due diligence on ZHD by SoftBank and the Target Company were conducted. As a result of this process, a basic common understanding was reached among the four companies that the method described in “(ⅰ) Method of the Business Integration” in “① The Definitive Business Integration Agreement and the Transaction Agreement” in (3) Important Agreements Concerning the Tender Offer” herein including the privatization of the Target Company by the Tender Offerors was to be mainly considered. Accordingly, as of November 18, 2019, MOU was reached to be executed. On the same day, the Tender Offerors submitted to the Target Company a statement of intent regarding the suggestion of the Tender Offer for trades aimed at the transaction to realize the Business Integration. In the statement of intent, the Tender Offerors proposed to the Target Company the Tender Offer Price to be 5,200 per each of the Target Company Common Shares, taking into account the Business Integration synergies and the premiums associated with the transfer of control.
Since the MOU was executed, SoftBank, ZHD, NAVER, and the Target Company have continued to examine deliberately the details of terms and conditions and the method of transactions in a series of the transactions in relation to the Business Integration. Furthermore, concurrently with the aforementioned examinations, the Tender Offerors have engaged in discussions and negotiations with the Target Company on the Tender Offer Price since early December 2019. Specifically, although the Tender Offerors proposed to the Target Company the Tender Offer Price to be JPY 5,200 on December 10, 2019 and JPY 5,320 on December 18, 2019, the Target Company determined those proposed Tender Offer Price is not sufficient and requested the Tender Offerors to reconsider the proposal. Through the aforementioned negotiations, Tender Offerors proposed to the Target Company the Tender Offer Price to be JPY 5,380 on December 20, 2019. After that, the Tender Offerors and the Target Company agreed to make the Tender Offer with the Tender Offer Price at JPY 5,380 per share on December 23, 2019 and the Tender Offerors decided, for NAVER, at the board of directors held today, and for SoftBank, by the decision of Ken Miyauchi, Representative Director, President & CEO of SoftBank, who was authorized by the resolution of the board of directors of SoftBank held today, to implement the Tender Offer.
In addition, the Tender Offerors decided the Tender Offer Price based on each of the process described as follows.

(Background for NAVER to determine its Tender Offer Price)

  1. (a)
    Name of the third party requested to provide opinion on valuation

In determining the Tender Offer Price, in order to ensure the fairness of the Tender Offer Price, NAVER requested Deutsche Bank, its financial advisor, as a third-party valuation institution independent from the Tender Offerors, ZHD or the Target Company, to evaluate the share value of the Target Company. Deutsche Bank is not a related party to, the Tender Offerors, ZHD or the Target Company, nor does it have any material interests in relation to the Tender Offer (except for the receipt of fees in connection with its engagement in relation to a series of transactions relating to a series of transactions relating to the Business Integration).

  1. (b)
    Summary of the opinion

Deutsche Bank has evaluated the value of the Target Company Common Shares by using the Average Market Price Method due to the fact that the Target Company Common Shares are listed on TSE, and a DCF Analysis in order to reflect financial forecasts and other information and data related to the Target Company provided by the management of NAVER in the evaluation.

The results of valuation made by Deutsche Bank with respect to the value of each common share of the Target Company is as follows:

Average Market Price Method JPY 3,570 to JPY 4,585
DCF Analysis JPY 3,819 to JPY 5,497
  1. (c)
    Background for determining the Tender Offer Price taking into account such opinion

NAVER resolved at the meeting of its board of directors held on December 23, 2019 that the Tender Offer Price will be JPY 5,380 per share, based on a comprehensive review of various factors, including the results of due diligence in respect of the Target Company that took place from late October 2019 to early November 2019, precedent examples of premiums paid in tender offers by parties other than the Issuer where the parent company took or intended to take its listed subsidiary private upon completion of such tender offer, the likelihood of approval of the Tender Offer by the Target Company's board of directors, the market trends of the price of the Target Company Common Shares, the prospects of subscription for the Tender Offer, in addition to the valuation analysis contained in the DB Valuation Report received from Deutsche Bank (please refer to “①Basis of Valuation” above for details), as well as taking into account results of the discussions and negotiations with the Target Company.

(Process that led up to Determination of a Tender Offer price by SoftBank)

  1. (a)
    Name of the third party from whom SoftBank received an opinion upon the valuation

In determining the Tender Offer Price, in order to ensure the fairness of the Tender Offer Price, SoftBank requested Nomura Securities, its financial advisor, as a third-party valuation institution independent from the Tender Offerors, ZHD, or the Target Company, to evaluate the share value of the Target Company. SoftBank received Nomura Valuation Report from Nomura Securities on December 23, 2019. Note that SoftBank has not received from Nomura Securities a fairness opinion regarding the fairness of the Tender Offer Price.

  1. (b)
    Summary of the opinion

According to Nomura Valuation Report, the methods adopted and the range of the values per share of the Target Company Common Shares, which were evaluated by such methods, are as follows:

Average Market Price Method JPY 3,570 to JPY 4,585
DCF Analysis JPY 3,412 to JPY 5,142
  1. (c)
    Background to the decision on a tender offer price in consideration of the opinion

As described in “① Basis of Valuation” above, SoftBank decided to set the Tender Offer Price at JPY 5,380 per share as of today based on the result of the discussion and negotiation with NAVER and the Target Company, generally taking into account the result of initial due diligence conducted during the period from late September to early November, 2019, the actual examples of premium granted upon determining price of purchase in the past tender offers to Share Certificate, etc. in the issuers other than ones which are similar to the Tender Offer, circumstances of market share price of the Target Company Common Shares, whether or not for the board of directors of the Target Company to support the Tender Offer and the forecast of the tender to the Tender Offer in addition to the valuation result of the Nomura Valuation Report acquired from Nomura Securities as of December 23, 2019.

  1. (ⅱ)
    Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest

Taking into the account the Target Company are the consolidated subsidiary of NAVER as of today, and the structural conflicts of interest may be issued in the consideration of the Delisting Procedures of the Target Company, the Tender Offerors and the Target Company have implemented the following measures from the perspective of ensuring the fairness of the Tender Offer.

  1. (a)
    Acquisition of a share valuation report from an independent third party valuation organization by Tender Offerors

In determining the Tender Offer Price, in order to ensure the fairness of the Tender Offer Price, NAVER requested Deutsche Bank, its financial advisor, as a third party valuation institution independent from Tender Offerors, ZHD and the Target Company, to evaluate the share value of the Target Company. Deutsche Bank is not a related party to the Tender Offerors, ZHD or the Target Company, nor does it have any material interest in the Delisting Procedures, including the Tender Offer. Please refer to "① Basis of Valuation" above for an outline of the share valuation report relating to the valuation results of the share value of the Target Company acquired by NAVER from Deutsche Bank dated December 22, 2019.
In determining the Tender Offer Price in order to ensure the fairness of the Tender Offer Price, SoftBank requested Nomura Securities, its financial advisor, as a third party valuation institution independent from the Tender Offerors, ZHD or the Target Company, to evaluate the share value of the Target Company. Nomura Securities is not a related party to the Tender Offerors, ZHD or the Target Company, nor does it have any material interest in the Business Integration, including the Tender Offer. Please refer to "① Basis of Valuation" above for the summary of the share valuation report relating to Nomura Valuation Report acquired by SoftBank from Nomura Securities on December 23, 2019.

  1. (b)
    Acquisition of share valuation report and a fairness opinion from an independent third party valuation institution by the Target Company

According to the Target Company Press Release, in examining the Tender Offer Price presented by the Tender Offerors and forming the opinion with respect to the Tender Offer, in order to ensure the fairness of the opinion, in July 2019, the Target Company retained J.P. Morgan Securities, a third party valuation institution independent from the Tender Offerors, ZHD or the Target Company, as its financial advisor and requested J.P. Morgan Securities to provide the valuation of the Target Company Common Shares and also requested J.P. Morgan Securities to provide a fairness opinion to the effect that the agreed price for share of the Target Company Common Shares in the Tender Offers in Japan and the U.S. (i.e., JPY 5,380 per share of the Target Company Common Shares, the same applies to this paragraph).
According to the Target Company Press Release, J.P. Morgan Securities performed a market share price analysis on the Target Company Common Shares considering the Target Company Common Shares are listed on the First Section of TSE, as well as a DCF Analysis based on the standalone business plan (not including the impact of the Business Integration) and financial projections prepared and furnished to J.P. Morgan Securities by the management of the Target Company in order to reflect the situation of the future business of the Target Company in the valuation and presented to the Target Company the JPM Valuation Report concerning the share value of the Target Company Common Shares (hereinafter, the “Share Value”) dated December 23, 2019.
Furthermore, according to the Target Company Press Release, J.P. Morgan Securities presented the JPM Fairness Opinion dated December 23, 2019 to the board of directors of the Target Company, to the effect that the agreed price for share of the Target Company Common Shares in the Tender Offers in Japan and the U.S. is fair to the holders of the Target Company Common Shares (except for the Tender Offerors and their affiliates) under a certain set of assumptions from a financial perspective. According to the Target Company Press Release, the JPM Valuation Report and JPM Fairness Opinion were provided solely for the benefit of the board of directors of the Target Company in connection with the evaluation of the Tender Offer and for information purposes in performing such evaluation. According to the Target Company Press Release, it should be noted that J.P. Morgan Securities is not a related party of the Tender Offerors, ZHD or the Target Company and has no material interest in the proposed Business Integration including the Delisting Procedure.
According to the Target Company Press Release, based on the JPM Valuation Report, the calculated ranges of the Share Value per share of the Target Company Common Shares based on each method are as indicated below.
According to the Target Company Press Release, in light of speculative press reports about the Business Integration having been published after TSE market hours on November 13, 2019, in performing the market share price analysis, J.P. Morgan Securities used November 13, 2019 as the record date (hereinafter, the “JPM Record Date”), and reviewed the per share closing price trading data of the Target Company on the JPM Record Date and the average daily closing share prices of the Target Company on TSE for the one-month, three-month and six-month periods concluding on the JPM Record Date.
According to the Target Company Press Release, the DCF Analysis was based on the business plan and financial projections of the Target Company for the fiscal year ending December 2019 through the fiscal year ending December 2029, earnings projections and investment plans as set forth in the business plans of the Target Company, the results of due diligence on and interviews with the Target Company, and other publicly available information and factors approved by the Target Company to be used by J.P. Morgan Securities. According to the Target Company Press Release, in calculating the Share Value, a range of discount rates of either 6.0%~7.0% or 10.5%~12.5% depending on the business segment of the Target Company is applied to the free cash flows projected to be produced by each business segment of the Target Company for the periods after fiscal year ending December 2021, while a range of perpetual growth rates of 1.0%~2.0% is used to calculate the perpetual growth value. According to the Target Company Press Release, the business plan of the Target Company, which was used by J.P. Morgan Securities for the purposes of the DCF Analysis with the approval of the Target Company, expects operating deficit for the fiscal years ending December 2019 and December 2020, due to the investments and high marketing costs associated with the strategic businesses, and expects a substantial increase in its profits after the fiscal year ending December 2021 as a result of the improvement of the profitability due to, among others, the decrease in marketing cost and positive impact from the business investments. According to the Target Company Press Release, as the Target Company Common Shares are listed on the New York Stock Exchange in addition to TSE, after carefully considering, among others, the risk under the U.S. securities regulations, it is decided that the business plan of the Target Company, which the DCF Analysis by J.P. Morgan Securities is based upon, is not disclosed on the Target Company Press Release.

Valuation method Range of the Share Value per share of the Target Company Common Shares
Market Share Price Analysis JPY 3,570 to JPY 4,585
DCF Method JPY 4,371 to JPY 6,414
[Note]
  1. *
    According to the Target Company Press Release, in preparing the opinions contained in the JPM Fairness Opinion and in conducting the share valuation of the Target Company Common Shares on which such opinions were based, including JPM Valuation Report (the same shall apply hereinafter), J.P. Morgan Securities has relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan Securities by the Target Company or otherwise reviewed by or for J.P. Morgan Securities, and J.P. Morgan Securities has not independently verified (nor has it assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. According to the Target Company Press Release, J.P. Morgan Securities has not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor has it evaluated the creditworthiness of the Target Company under any laws relating to bankruptcy, insolvency or similar matters. According to the Target Company Press Release, in relying on financial analyses and projections provided by the Target Company to J.P. Morgan Securities or derived therefrom, J.P. Morgan Securities has assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Target Company to which such analyses or projections relate. According to the Target Company Press Release, J.P. Morgan Securities expresses no view as to such analyses or forecasts or the assumptions on which they were based. According to the Target Company Press Release, J.P. Morgan Securities has also assumed that the Tender Offer and any other transactions contemplated by the Definitive Business Integration Agreement (hereinafter, collectively referred to as “Tender Offer, etc”) will be consummated as described in the Definitive Business Integration Agreement, that the Tender Offer and the U.S. Tender Offer shall be commenced on the substantively same terms and conditions in all material aspects and that the final execution version of the Definitive Business Integration Agreement will not differ in any material respects from the draft thereof furnished to J.P. Morgan Securities. According to the Target Company Press Release, J.P. Morgan Securities is not a legal, regulatory, tax or accounting expert and relied on the assessments made by advisors to the Target Company with respect to such issues. According to the Target Company Press Release, J.P. Morgan Securities has further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Tender Offer, etc would be obtained without any adverse effect on the Target Company or on the contemplated benefits of the Tender Offer, etc.
    According to the Target Company Press Release, the JPM Fairness Opinion and the results of the share valuation of the Target Company Common Shares on which the JPM Fairness Opinion was based was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan Securities as of the date of the JPM Valuation Report. According to the Target Company Press Release, it should be understood that subsequent developments may affect the JPM Fairness Opinion and that J.P. Morgan Securities does not have any obligation to update, revise, or reaffirm such valuation results or opinion.
    According to the Target Company Press Release, the JPM Fairness Opinion was limited to expressing the opinion to the effect that the agreed price for share of the Target Company Common Shares in the Tender Offers in Japan and the U.S. is fair to the holders of the Target Company Common Shares (except for the Tender Offerors and their affiliates) under a certain set of assumptions from a financial perspective, and J.P. Morgan Securities expressed no opinion as to the fairness of the Tender Offer Price in the Tender Offer to the holders of any class of securities, creditors or other constituencies of the Target Company, or as to the underlying decision by the Target Company to engage in the Tender Offer, etc. According to the Target Company Press Release, furthermore, neither the JPM Fairness Opinion nor the results of the share valuation of the Target Company Common Shares on which the JPM Fairness Opinion was based are intended to recommend a certain tender offer price to the Target Company, its board of directors, Tender Offerors or their board of directors, nor are they intended to advise that a certain tender offer price is the only appropriate tender offer price. According to the Target Company Press Release, J.P. Morgan Securities expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Tender Offer, etc, or any class of such persons relative to the Tender Offer Price in the Tender Offer, etc or with respect to the fairness of any such compensation. According to the Target Company Press Release, J.P. Morgan Securities expressed no opinion as to the price at which the Target Company Common Shares may trade at any future time. According to the Target Company Press Release, the JPM Fairness Opinion was limited to the amount payable in JPY and was not made to the USD amount to be paid to the holders of the Target Company Common Shares by applying the applicable exchange.
    According to the Target Company Press Release, the business plans and financial projections for the Target Company furnished to J.P. Morgan Securities by the Target Company (hereinafter, the “Projections”) were prepared by the management of the Target Company. According to the Target Company Press Release, the Target Company has not publicly disclosed the Projections provided to J.P. Morgan Securities in connection with J.P. Morgan Securities' preparation of JPM Fairness Opinion and the share valuation of the Target Company Common Shares on which the JPM Fairness Opinion was based, and the Projections were not prepared with a view toward public disclosure. According to the Target Company Press Release, the Projections are inherently uncertain and were based on numerous variables and assumptions that may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. According to the Target Company Press Release, accordingly, actual results could vary significantly from those set forth in the Projections.
    According to the Target Company Press Release, the foregoing summary of the JPM Fairness Opinion and the results of share valuation of the Target Company Common Shares on which the JPM Fairness Opinion was based does not purport to be a complete description of data referenced or presented by the Target Company Common Shares. The preparation of the JPM Fairness Opinion and JPM Valuation Report is a complex process and the foregoing summary of the result of the share valuation of the Target Company Common Shares and the valuation methods thereof does not necessarily present all aspects of the analysis conducted in an accurate manner. According to the Target Company Press Release, J.P. Morgan Securities believes that the results of its analyses must be considered as a whole and that selecting portions of such analyses, without considering all of such analyses as a whole, could create an incomplete view of J.P. Morgan Securities' analyses and the processes underlying such analyses. According to the Target Company Press Release, in providing the JPM Valuation Report, J.P. Morgan Securities considered each analysis and factor in a comprehensive and holistic manner, did not attribute any particular weight to any analyses or factors considered by it and did not form a view as to whether or how any individual analysis or factor, considered in isolation, supported or failed to support the JPM Valuation Report. According to the Target Company Press Release, none of the selected companies reviewed as described in the above analysis as a comparable company is identical to any operating units or subsidiaries of the Target Company. According to the Target Company Press Release, however, the companies selected were chosen because they are publicly traded companies with businesses that, for purposes of J.P. Morgan Securities' analysis, may be considered similar to those of the Target Company, as the case may be. According to the Target Company Press Release, the analyses necessarily involve complex considerations and judgments concerning differences in financial and business characteristics of the companies involved and other factors that could affect the companies compared to the Target Company.
    According to the Target Company Press Release, J.P. Morgan Securities has acted as financial advisor and third party valuation agent to the Target Company with respect to the proposed Business Integration including the Delisting Procedure and will receive a fee from the Target Company for its services, a substantial portion of which will become payable only if the proposed Business Integration including the Delisting Procedure is consummated. According to the Target Company Press Release, in addition, the Target Company has agreed to indemnify J.P. Morgan Securities against certain liabilities arising out of its engagement. During the two years preceding the date of the JPM Fairness Opinion, J.P. Morgan Securities and its affiliates have had commercial or investment banking relationships with the Target Company and SoftBank, for which J.P. Morgan Securities and its affiliates have received customary compensation. According to the Target Company Press Release, such services by J.P. Morgan Securities and/or its affiliates during such period have included J.P. Morgan Securities and/or its affiliates' acting as a Joint Active Bookrunner for the Target Company's dual tranche Euro Yen Zero Coupon Convertible Bonds offering in September 2018, as a Lead Arranger and Lender for SoftBank's Loan Agreement in August 2018, and as a Joint Global Coordinator for SoftBank's Global Initial Public Offering in December 2018. According to the Target Company Press Release, in addition, J.P. Morgan Securities and its affiliates own less than 1% of the outstanding common shares of the Target Company, ZHD, and the Tender Offerors in its own accounts. According to the Target Company Press Release, in the ordinary course of businesses of J.P. Morgan Securities and its affiliates, they may actively trade the debt and equity securities of the Target Company, ZHD, NAVER or SoftBank for their own account or for the accounts of customers and, accordingly, J.P. Morgan Securities and its affiliates may at any time hold long or short positions in such securities.
  1. (c)
    Acquisition of advice from an independent law firm by the Target Company

According to the Target Company Press Release, prior to the proposal of the Tender Offer by the Tender Offerors, the Target Company selected Anderson Mori & Tomotsune in July 2019, and Sherman & Sterling Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho) in August 2019 as a legal advisor, which was independent from the Tender Offerors, ZHD and the Target Company. The Target Company has received legal advice from those firms with respect to the procedures of the Business Integration and the decision-making process of the board of directors of Target Company and the method thereof.
Given that the Target Company received the proposal of the Tender Offer from the Tender Offerors, in ensuring the fairness of the Tender Offer, the Target Company has received legal advice from Anderson Mori & Tomotsune, and Sharman & Sterling Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho) with respect to the procedures of the Business Integration and the Target Company's board of directors' decision-making process and methods.
Anderson Mori & Tomotsune and Sharman & Sterling Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho) are not related parties to the Tender Offerors, ZHD and the Target Company, nor do they have any material interests to be described in respect of the Delisting Procedures, including the Tender Offer.

  1. (d)
    Establishment of the Special Committee in the Target Company
  1. (ⅰ)
    Background of establishment

According to the Target Company Press Release, in order to ensure the validity of the terms and conditions of a transaction and the fairness of procedures from the standpoint to improve the enterprise value of the Target Company and the benefit of its general shareholders in the Business Integration, the Target Company established an special committee (hereinafter, the “Special Committee”) on October 15, 2019, which consists of three persons, Rehito Hatoyama (Chairperson), Tadashi Kunihiro and Koji Kotaka who have no interests with the Tender Offerors, ZHD and the Target Company, are the outside directors of the Target Company notified to Tokyo Stock Exchange as an independent officer, and are judged to have the experience and eligibility necessary to consider the Business Integration. In considering the Business Integration, the Target Company consulted with the Special Committee with respect to (ⅰ) whether the Business Integration facilitates the improvement of the enterprise value and its purposed is reasonable, (ⅱ) whether the fairness of procedures for the Business Integration is ensured, (ⅲ) whether the validity of the terms and conditions of the Business Integration is ensured, and (ⅳ) whether it is considered based on the above (ⅰ) to (ⅲ) that the Business Integration is disadvantageous to the minority shareholders of the Target Company.
After the proposal of the Tender Offer from the Tender Offerors, given that the Business Integration will fall within transactions with controlling shareholder provided in the Securities Listing Regulations of Tokyo Stock Exchange in the future if the Delisting Procedures including the Tender Offer is implemented, the Target Company continues to consult with the Special Committee, and made the following resolutions at the meeting of the board of directors held on November 18, 2019; the matters to consult with the Special Committee are changed to (ⅰ)whether the Business Integration facilitates the improvement of the enterprise value and its purposed is reasonable, (ⅱ)whether the fairness of procedures for the Business Integration is ensured, (ⅲ)whether the validity of the terms and conditions of the Delisting Procedures, including the Tender Offer Price of the Tender Offer, is ensured, (ⅳ) whether it is considered based on the above (ⅰ) to (ⅲ) that the Business Integration is disadvantageous to the minority shareholders of the Target Company, and (ⅴ) whether it is considered that it is reasonable to announce the opinion supporting the Tender Offers in Japan and the U.S. including the Tender Offer by the board of directors of the Target Company and recommend to tender the Tender Offers in Japan and the U.S. including the Tender Offer to the Target Company's shareholders; the board of directors will accurately understand and comprehend the judgement of the Special Committee, and make the decision with respect to the Business Integration including the Tender Offer with the highest regard for the contents of the decision of the Special Committee; and the board of directors will not agree to the Tender Offer if the Special Committee determines that the execution or the terms and conditions of the Tender Offer are not valid.
In addition, the fixed compensation for the consideration for the service will be paid to each member of the Special Committee, regardless of its report.

  1. (ⅱ)
    Process of Review

According to the Target Company Press Release, the Special Committee held 18 meetings (28 hours in total) between October 15, 2019 and December 23, 2019. According to the Target Company Press Release, in between these meetings, the Special Committee also shared reports/information, deliberated and made decisions, among other actions, via email. According to the Target Company Press Release, it was through these means that the special committee carefully discussed and considered the Terms of Reference.
According to the Target Company Press Release, specifically, the Special Committee confirmed the independence and rich experiences of and appointed Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho)/White & Case (Gaikokuho-Kyodo-Jigyo) as the legal advisors to the Special Committee. According to the Target Company Press Release, after interviewing multiple candidates and confirming a submitted disclosure letter describing the fact that they provided their services to other parties involved in the Business Integration in transactions other than the Business Integration, the Special Committee compared each candidate, and consequently, taking into consideration the nature of the services provided by BoA to other parties involved in the Business Integration in transactions other than the Business Integration, the fact that BoA has had a lot of experiences and their reputation, etc., determined that the fact that BoA provided aforementioned services to other parties will not prevent BoA from giving their independent advices to the Special Committee, and appointed BoA as the financial advisor and third party valuation firm for the Special Committee.
According to the Target Company Press Release, moreover, the Special Committee confirmed the independence and wealth of experience of Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho), the legal advisors to the Target Company, based on what was reported by such advisors, as well as the independence and wealth of experience of J.P. Morgan Securities, the financial advisor and third party valuation firm for the Target Company, based on what was reported by such advisor.
According to the Target Company Press Release, in addition, regarding the Target Company's internal review structure on the Delisting Procedures, the Special Committee requested explanations from the Target Company's management and Anderson Mori & Tomotsune, the legal advisor to the Target Company, with respect to the number of directors that have conflicts of interest. According to the Target Company Press Release, the Special Committee reviewed Anderson Mori & Tomotsune's response based on the advice from Nakamura, Tsunoda & Matsumoto, the legal advisor to the Target Company, and considered carefully whether the Target Company's internal review structure has any problems from a fairness point of view.
According to the Target Company Press Release, given that, the Special Committee received explanations from the Target Company's management on the preparation process / objectives, contents and important assumed conditions of the Target Company's stand-alone business plan (excluding the effects of the Business Integration) (hereinafter, the “Business Plan”), together with the integration synergies of the Business Integration, and had a question and answer session.
According to the Target Company Press Release, the Special Committee received advice from BoA, Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho)/White & Case (Gaikokuho-Kyodo-Jigyo), as well as explanations with respect to the Business Integration from the Tender Offerors. According to the Target Company Press Release, in response, the members of the Special Committee asked various questions on the operation / governance policy of the Target Company after the Business Integration and the integrated company (meaning ZHD, hereinafter, “Integrated Company”, which will be the integrated company after the Business Integration), the evaluation of the Business Plan, the integration synergies of the Business Integration, the synergies anticipated between the NAVER group and the SoftBank group, the tender offer price of the Tender Offer proposed by the Tender Offerors, and the planned procedures of the Tender Offer and the Delisting Procedures after the implementation of the Tender Offer. According to the Target Company Press Release, the Special Committee received answers to these questions. According to the Target Company Press Release, moreover, the Special Committee received advice from BoA, as well as explanations from ZHD, which is the other party to the Business Integration. According to the Target Company Press Release, in response, the Special Committee asked various questions with respect to the Business Integration, including the operation / governance policy of the Target Company after the Business Integration and the Integrated Company, the evaluation of the Business Plan and the integration synergies of the Business Integration. According to the Target Company Press Release, the Special Committee received answers to these questions from ZHD.
According to the Target Company Press Release, thereafter, as described below in “(e) Acquisition of a share valuation report and a fairness opinion from an independent third party valuation organization by the Special Committee” the Special Committee obtained the BoA Valuation Report regarding the Target Company Common Shares from BoA on December 23, 2019 prepared under certain prescribed conditions, and received explanations from BoA on the method for calculating the value of the Target Company Common Shares, the reasons for choosing such method, the results of calculations based on a DCF Analysis and the premium levels etc. in similar recent transactions in the Japan and the U.S. markets, as well as the details and assumptions related to such matters, deliberated those matters, and conducted a question and answer session. According to the Target Company Press Release, moreover, as described below in “(e) Acquisition of a share valuation report and a fairness opinion from an independent third party valuation organization by the Special Committee” on December 23, 2019, the Special Committee received the BoA Fairness Opinion from BoA prepared under certain prescribed conditions, to the effect that the Tender Offer Price of the Target Company Common Shares etc. is fair to holders of the Target Company Common Shares etc. (except for the Tender Offerors and their affiliated companies) from a financial perspective, received explanations regarding its contents and assumed conditions, deliberated those matters and conducted a question and answer session.
According to the Target Company Press Release, the Special Committee received a statement of intent that included the initial price proposal from the Tender Offerors on November 18, 2019, and the Special Committee received an explanation directly from the Tender Offerors of the rationale for the tender offer price. According to the Target Company Press Release, the Special Committee deliberated and considered the financial advice received from BoA and requested the Tender Offerors to increase the tender offer price, considering the Target Company's stand-alone stock value and the premiums in similar cases. According to the Target Company Press Release, moreover, in order to clearly convey this request to the relevant parties, the Special Committee, of its own accord, requested its attendance at negotiations with the Tender Offerors on three occasions, and, having received the opportunity to express its opinion, the Special Committee did so.
According to the Target Company Press Release, the Special Committee received an explanation of a summary of the Integration Agreement and Capital Alliance Agreement, to which the Target Company was to become a party, from the Target Company's management and Anderson Mori & Tomotsune, the Target Company's legal advisor, and a question and answer session was conducted.
According to the Target Company Press Release, the Special Committee received advice from its legal advisors Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho)/White & Case (Gaikokuho-Kyodo-Jigyo) regarding the Target Company and ZHD's press release titled “Announcement Regarding Capital Alliance MOU on Business Integration,” dated November 18, 2019, SoftBank and NAVER's press release titled “Notice Concerning the Entry into a Memorandum of Understanding Regarding the Business Integration of Z Holdings Corporation (Securities Code: 4689) and LINE Corporation (Securities Code: 3938), and the Submission of a Letter of Intent in Relation to a Joint Tender Offer for the Shares of LINE Corporation” dated November 18, 2019, and the Target Company's draft press release at the time of the 17th meeting of the Special Committee titled “Announcement of Opinion Regarding the Planned Commencement of the Joint Tender Offer for the Shares of LINE Corporation by SoftBank Co., Ltd. and NAVER Corporation, the Controlling Shareholder of LINE Corporation” dated December 23, 2019 (collectively referred to as the “Disclosure Documents”), requested and received explanations from Anderson Mori & Tomotsune, the legal advisor to the Target Company and its management, regarding the contents of the information scheduled to be disclosed by the Disclosure Documents, and conducted a question and answer session.
According to the Target Company Press Release, following the procedures noted above, the Special Committee received advice from Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers' Office (Gaikokuho-Jimu-Bengoshi-Jimusho)/White & Case (Gaikokuho-Kyodo-Jigyo), the legal advisors to the Special Committee e, and deliberated the draft of the Report multiple times.