Press Releases 2023
Notice Regarding Partial Amendment to Articles of Incorporation and Shelf Registration with Respect to Issuance of Series 1 Bond-Type Class Shares
May 24, 2023
SoftBank Corp. (the “Company”) hereby announces that the Board of Directors passed a resolution on May 24, 2023 to submit a proposal for a partial amendment to the Articles of Incorporation (“Amendment to Articles of Incorporation”) to the Company's 37th Annual General Meeting of Shareholders (the “General Meeting of Shareholders”) planned to be held on June 20, 2023 and to file a shelf registration statement with respect to the Issuance of Series 1 Bond-Type Class Shares, as described below.
Press release full text (PDF: 196KB/14 pages)
Ⅰ. Partial Amendment to Articles of Incorporation
1. Purpose of and Reasons for Amendment to Articles of Incorporation
Since its founding, the Company has sought to harness the Information Revolution to contribute to the wellbeing of people and society based on the corporate philosophy of “Information Revolution - Happiness for everyone.” The Company is working to maximize corporate value based on its “Beyond Carrier” growth strategy, whereby it aims to achieve sustainable growth in the telecommunications business, while going beyond just being a telecommunications carrier to actively roll out new businesses in the information and technology field.
On May 10, 2023, the Company announced a three-year Medium-term Management Plan (from the fiscal year ending March 31, 2024 to the fiscal year ending March 31, 2026) aimed at rebuilding its business foundation to achieve its long-term vision of becoming a company that provides next-generation social infrastructure essential for the development of a digital society.
The Company believes that going forward, next-generation digital services utilizing AI will be integrated into daily life, making people's lives richer and more convenient. At the same time, it has been pointed out that AI will generate enormous data processing and electricity demand, which is expected to be challenging to reconcile with a sustainable society. Next-generation social infrastructure must be structured to address this challenge. The Company will work over the medium to long term to advance telecommunications and IT technologies and develop and procure renewable energy sources, as well as realize the following initiatives to build next-generation social infrastructure: “distributed AI data centers” that can geographically distribute and balance AI data processing and electricity consumption; a “super-distributed computing infrastructure” (xIPF: cross Integrated PlatForm) that can view the distributed AI data centers virtually as if it were a single system; services using generative AI (artificial intelligence capable of generating a variety of content, including text, images, and program code); and more.
Since its listing in December 2018, the Company has expanded and grown its business in non-telecommunications areas based on its “Beyond Carrier” growth strategy, including the acquisition of Z Holdings Corporation (formerly Yahoo Japan Corporation) as a subsidiary, the integration of Z Holdings Corporation and LINE Corporation, and the launch of “PayPay” cashless payment service. During this period, the Company has financed these growth investments internally and with debt financing, while continuing to provide a high level of shareholder returns. As a result, the Company's consolidated total assets have grown to over 14 trillion yen, and its consolidated net interest-bearing debt has increased to approximately 4 trillion yen.
In order to continue to balance growth investment with a high level of shareholder returns while making growth investments related to advanced telecommunications and IT technologies and next-generation social infrastructure, the Company has come to the conclusion that it would be desirable to enhance its capital and reinforce its financial base by incorporating equity financing in addition to debt financing.
Against this backdrop, the Company believes that “Bond-Type Class Shares” with the following features would be a useful option as a financing method to increase equity capital that would minimize the impact on the interests of existing holders of Common Shares of the Company (“Common Shareholders”) as much as possible, and would meet the needs of a wide range of investors, including retail investors:
- No dilution of the rights to vote, as the holders of the Bond-Type Class Shares do not have the rights to vote at General Meetings of Shareholders or to convert the Bond-Type Class Shares into Common Shares. (The Bond-Type Class Shares are considered ill-suited to takeover protection measures by their nature owing to the lack of the rights to vote at General Meetings of Shareholders and the lack of the rights to convert them into Common Shares, irrespective of the ownership ratio, and are not anticipated to be used in that manner.)
- As “non-participating” class shares, no dividend is paid beyond the preferred dividend initially set, and only Common Shareholders have the right to participate in dividends beyond that.
- Issued within the existing total number of authorized shares (the total number of shares of Common Shares and Bond-Type Class Shares authorized to be issued by the Company), such that the total number of authorized shares is not increased by this proposal.
Any future issuance of Bond-Type Class Shares is anticipated to be through a public offering rather than a shareholder allotment (including gratis allotment) or third-party allotment, and a listing application in respect of such shares for the Prime Market of the Tokyo Stock Exchange, Inc. (the “TSE”) is planned to be made. These Bond-Type Class Shares represent a new design for “bond-type” class shares in Japan - a product aimed at a wide range of investors while minimizing the impact of dilution on Common Shareholders.
Thus, the Company intends to add provisions to its Articles of Incorporation for the issuance of new class shares, Series 1 Bond-Type Class Shares through Series 5 Bond-Type Class Shares (the “Bond Type-Class Shares”).
The Company also released today “Information Material regarding Bond-Type Class Shares” and “Q&A regarding Bond-Type Class Shares.” The same information is also available on the Company's website. Please refer to them both.
2. Content of Amendment to Articles of Incorporation
Please refer to the Attachment, “Proposed Amendment to Articles of Incorporation.”
3. Schedule of Amendment to Articles of Incorporation
|Date of General Meeting of Shareholders to approve Amendment to Articles of Incorporation||June 20, 2023
|Planned effective date of Amendment to Articles of Incorporation||June 20, 2023
4. Product Nature of Bond-Type Class Shares
(1) Product nature as “bond-type” class shares
In consideration of Common Shareholders of the Company, the hybrid design of the Bond-Type Class Shares provides a combination of “bond-like” features, such as no dividend paid beyond the preferred dividends initially set and no dilution of the rights to vote, and “stock” features, such as the nature to increase equity capital.
Therefore, the Company believes that if the proposed Amendment to Articles of Incorporation is approved at the General Meeting of Shareholders, it will be an option as a financing method for the Company to realize an increase in equity capital to secure a sound financial base without dilution of the rights to vote of Common Shareholders, while taking into more consideration the impact on the Company's financial indicators, including ROE and EPS for Common Shares*, compared to a capital increase through the issuance of Common Shares.
- *On the assumption that the relevant amounts of the Bond-Type Class Shares (paid-in amount and preferred dividends) are deducted from the net assets and net income when calculating ROE and EPS for Common Shares
(2) Product nature similar to that of hybrid bonds
So that the Bond-Type Class Shares can be certified as capitalized (50% of the amount of funds raised) by the rating agencies (Rating and Investment Information, Inc. and Japan Credit Rating Agency, Ltd.) when Bond-Type Class Shares are issued, the Company envisions a product nature similar to that of hybrid bonds, and is considering a design with the following main features.
- Preferred dividend: Initially, a fixed dividend for approximately five years from the issuance*1 and variable dividend thereafter, senior to Common Shares, cumulative, non-participating
- Clause for acquisition by the Company (call option): The Company may acquire in exchange for cash after the elapse of five years from the issuance, etc.
- Refinancing restrictions: In principle, capital financing of equal or greater value will be required if the Company acquires the Bond-Type Class Shares by exercising the call option, etc.*2
- Rights to vote: None
- Rights to convert into Common Shares: None
- *1Under the market conditions as of May 24, 2023, the annual dividend rate for the period from the fiscal year in which the issuance date of the Series 1 Bond-Type Class Shares falls to the fiscal year in which the date five years after that issuance date falls is anticipated to be from 2 to 4 percent.
- *2In the case of hybrid bonds, it is common for hybrid bonds, etc. with equal or greater capitalization to be issued in accordance with replacement restrictions when the issuer makes early redemption (call).
For this reason, the Company provides up to fifth series of Bond-Type Class Shares authorized to be issued by the Company in the Amendment to Articles of Incorporation so that other series of the Bond-Type Class Shares can be issued when the Company acquires the Bond-Type Class Shares by exercising the call option.
Meanwhile, as opposed to ordinary hybrid bonds, the amount raised through the issuance of the Bond-Type Class Shares will be also recorded as equity for accounting purposes.
(3) Issuance by public offering; listing on the TSE
Any future issuance of Bond-Type Class Shares is anticipated to be through a public offering rather than a shareholder allotment including gratis allotment or third-party allotment, and a listing application in respect of such shares for the Prime Market of the TSE is planned to be made. As such, this is intended to make the product available for investment by retail investors.
(4) General Meetings of Class Shareholders
Under the Companies Act, shareholders of Bond-Type Class Shares (“Bond-Type Class Shareholders”) may resolve only the matters provided for in such act and the Articles of Incorporation at General Meetings of Class Shareholders. The Amendment to Articles of Incorporation, if passed, will require a resolution of the General Meeting of Class Shareholders comprising Bond-Type Class Shareholders if the Company performs any of the following acts and there is any likelihood of causing damage to Bond-Type Class Shareholders.
- a merger with the Company as the disappearing company or a share exchange or share transfer with the Company as the wholly owned subsidiary company (except for a sole-share transfer conducted by the Company); or
- an approval by the Board of Directors of the Company of a demand for a cash-out by a Special Controlling Shareholder against the other shareholders of the Company.
As stated above, the Company believes that the product nature of Bond-Type Class Shares is not such that Common Shareholders will be disadvantaged in terms of dilution of their rights to vote. Further, as the Company believes it is important to increase the flexibility of its financial strategy so that the Company can respond to any situation, the Company intends to make the Amendment to Articles of Incorporation with the aim of pursuing flexible financing options.
Ⅱ. Shelf Registration with respect to the Issuance of Series 1 Bond-Type Class Shares
The Company today filed a shelf registration statement with respect to the issuance of Series 1 Bond-Type Class Shares, as follows.
The issuance conditions, total issuance amount, and certain conditions of the Series 1 Bond-Type Class Shares have not yet been determined. Further, the specific timing of the issuance of the Bond-Type Class Shares including Series 1 Bond-Type Class Shares has not yet been determined. However, if the proposed Amendment to Articles of Incorporation is approved at the General Meeting of Shareholders, the Company expects to issue Series 1 Bond-Type Class Shares on the order of up to 120 billion yen in the fiscal year ending March 31, 2024, depending on the market conditions. Any issuance will be determined by the Board of Directors of the Company in light of the Company's capital policy. The specific timing of issuance and conditions of the Series 2 Bond-Type Class Shares and subsequent series of Bond-Type Class Shares, if any, will be determined based on comprehensive consideration of future capital needs and market trends, but at this time, the product nature and offering size of the future series are anticipated to be substantially the same as those of the Series 1 Bond-Type Class Shares.
|(1) Class of offered securities||Series 1 Bond-Type Class Shares|
|(2) Planned issue period||Until the elapse of two years from the effective date of the shelf registration
(June 1, 2023 - May 31, 2025)
|(3) Planned issue amount||Up to 120.0 billion yen|
|(4) Offering method||Public offering|
|(5) Use of proceeds||The proceeds will be used for growth investments related to advanced telecommunications and IT technologies and next-generation social infrastructure, details of which will be determined at the time of resolution of the issuance.|
This press release has been prepared for the sole purpose of publicly announcing the amendments to the Company's Articles of Incorporation and the shelf registration with respect to Issuance of the Series 1 Bond-Type Class Shares, and not for the purpose of soliciting investment or engaging in any other similar activities in Japan or any foreign country.
Furthermore, this press release does not constitute an offer of securities in the United States. The securities referred to herein have not been, and will not be, registered under the U.S. Securities Act of 1933, and may not be offered or sold in the United States absent registration thereunder or an applicable exemption from registration requirements. In this case, no offering of securities will be made in the United States.
- SoftBank, the SoftBank name and logo are registered trademarks or trademarks of SoftBank Group Corp. in Japan and other countries.
- Other company, product and service names in this press release are registered trademarks or trademarks of the respective companies.