Traditionally, unsolicited offers or “hostile takeovers” were taboo among Japanese companies, but recently the number of M&A transactions in which an offeror releases its intention to make a tender offer without the consent of a target company has increased. The most notable example is the reported takeover offer in August 2024 by Canada’s Alimentation Couche-Tard for Seven & i Holdings, which operates 7-Eleven, Japan’s largest convenience store chain.
One contributor to this change is the release by the Ministry of Economy, Trade and Industry (METI) on 31 August 2023 of Guidelines for Corporate Takeovers – Enhancing Corporate Value and Securing Shareholders’ Interests (2023 guidelines). Below we consider how the 2023 guidelines have affected the target company board of directors and give some points for offerors to consider.
Impact on target boards
Sho Tsuzuki
Partner
Atsumi & Sakai
To promote desirable acquisitions in Japan, the METI has developed guidelines providing principles, perspectives and best practices for M&A transactions. The 2023 guidelines primarily address transactions in which an offeror gains corporate control of a listed company by acquiring shares, including when an acquisition proposal is made without a request or approach by the target company management (i.e. an unsolicited offer). The METI position is that:
such unsolicited offers can be “desirable acquisitions”, defined as acquisitions that both increase corporate value and secure the interests of shareholders; and
the lack of such unsolicited acquisitions in the Japanese M&A market has contributed to the unhealthy state of the capital markets, where many companies have low capital efficiency.
A key point of the 2023 guidelines is its requirement for a target company board of directors to give sincere consideration to bona fide offers, defined as a specific, rationale of purpose, and feasible acquisition proposals. Traditionally, some Japanese listed companies have rejected takeover offers without the board’s sufficient consideration, or any reason given. However, the 2023 guidelines provide three principles for responding to takeover offers:
Principle of Corporate Value and Shareholders’ Common Interests;
Principle of Shareholders’ Intent; and
Principle of Transparency. These principles require directors of a target company who receive a bona fide offer to appropriately and proactively provide information to aid rational shareholder decision making in matters involving corporate control of the company.
Recent cases
By the end of February 2025, there had been six disclosed acquisition offers, without target company consent, made under the 2023 guidelines. Two were simple unsolicited offers and four counter-tender offers against offers made by other parties with the consent of the target company.
Three of these proposals were successful, and in all of those, “advance notice of a planned tender offer” was made, where an acquirer announces its intention to launch a tender offer prior to a public notice of commencement of the tender offer. This practice, as explained by offerors, aims to give time to the target company board and shareholders to consider proposals, or to counter a tender offer by another party and obtain support for the acquisition from target company shareholders. Observation of these cases suggests the following indications regarding acquisitions without consent:
Offer prices tend to be higher. For example, in two of the successful cases higher than average premium prices were proposed, with premiums of 79.68% and 86.84% over the relevant closing price. In an unsolicited offer, the offeror bears the transaction risk because they must conduct due diligence without the co-operation of the target company;
To enhance corporate value post-acquisition, it is preferable to obtain consent from the target company board. There are cases where target company consent is required to begin an official tender offer after advance notice of a planned tender offer; and
An offeror is not legally obliged to conduct a tender offer by giving advance notice of a planned tender offer. This raises concerns about the market manipulation and destabilisation of the target company and its shareholders, so it seems likely that regulations on advance notice will be discussed more.
The 2023 guidelines have made acquisitions of listed companies in Japan more feasible. This trend is also pushed by the Corporate Governance Code, which reduces or eliminates cross-shareholdings, and the Stewardship Code, which has led previously conservative voting Japanese institutional investors to view reasonable proposals more favourably. The author predicts more desirable acquisitions, which will improve future corporate value and capital efficiency in Japanese companies.
Sho Tsuzuki is a partner at Atsumi & Sakai in Tokyo
Atsumi & Sakai
Fukoku Seimei Bldg.
2-2-2 Uchisaiwaicho
Chiyoda-ku
Tokyo 100-0011 Japan
www.aplawjapan.com
Contact details:
T: +81 (0)3 5501 2111
E: sho.tsuzuki@aplaw.jp
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