By Makiko Yamazaki
TOKYO (Reuters) -Japan’s financial regulator is considering expanding the range of transactions that require a tender offer, in what would be the first revision of such rules in 17 years, as unsolicited takeovers have become more common.
The Financial Services Agency (FSA) on Thursday asked an expert panel to review takeover regulations, following a rise in unrestricted stake-building on the stock market that could result in companies effectively being taken over.
Currently, an acquirer is required to make a tender offer if it wants to buy more than a third of a company’s shares off market.
A tender offer gives all shareholders in a company the opportunity to tender their shares to an acquirer usually at a specific price and for a limited time.
But Japan’s tender offer rules do not apply to stake-building on the market, which experts say is a loophole that allows an effective takeover without other shareholders having a say on the deal.
The issue gained attention when Tokyo-listed Asia Development Capital (ADC) built up most of its 40% stake in printing press manufacturer Tokyo Kikai Seisakusho Ltd on market in a matter of weeks, enough to give it veto rights over important board decisions.
The FSA also asked the expert panel to discuss to what extent partial takeovers should be allowed.
Currently, an acquirer is required to purchase all shares tendered by existing shareholders only if it aims to buy more than two thirds of the target company.
Critics say such a partial tender offer could turn remaining shareholders into minority shareholders of a listed company with low liquidity in its shares.
In addition, the panel will also look into clarifying existing rules that allow investors to make joint proposals to companies without infringing disclosure regulations on joint holders.
Under current regulations, investors deemed to be “acting in concert” can be required to submit ownership disclosure filings. Some investors say ambiguity in the rules has the effect of discouraging shareholders from working together to improve governance at companies.
Steps to allow companies to identify shareholders behind custodians on their share registries more easily would also be discussed at the panel, the FSA said.
(Reporting by Makiko Yamazaki; Additional reporting by Ritsuko Shimizu; Editing by Sonali Paul and Jane Merriman)