LINE / Softbank & NAVER

LINE / Softbank & NAVER: Antitrust and Data, Squeeze-Outs and Appraisal Rights

Publication Date: February 17, 2020

Research Report Overview

The recent boom in Japanese deal-making is drawing the attention of global risk arbitrage investors. In terms of size, volume and liquidity, excluding FCA / PSA, the Japanese public M&A universe is currently overtaking that of the Europe. While risk arbitrage spreads in Japan are tight, a function of deal certainty and interest rates, activity is exciting. In this report, we explore a common trend - minority squeeze-outs - whereby a controlling shareholder seeks to take private its Japanese publicly traded subsidiary via a two-step transaction. From speaking to lawyers and academics, we assess the investment feasibility of Japanese back-end trades for minorities, akin to German domination agreements and squeeze-outs, and decipher whether dissident funds can profit from exercising appraisal rights in Japanese courts. Our focus here is the LINE / Softbank & NAVER transaction but similar considerations and strategies apply to the pending buyouts of Hitachi Chemical, Hitachi Hi-Tech, Keihin, Mitsubishi Tanabe, NuFlare, Parco and Showa, among others. We take a step further with LINE and analyse vertical antitrust risks due to data accumulation and consider external factors that may lead to minority shareholders receiving an increased offer.

Contents (48 Pages):

1. Deal Structure and a Sound Strategic Rationale 2. Data Accumulation and Antitrust: The Japanese FTC Review 3. Japanese Fair M&A Guidelines and Shortfalls by Advisers 4. Optionality Through Peer Performances, ZHD Stock Terms 5. Deal Certainty and Squeeze-Out Options for the Buyers 6. The Back-End: Dissenters, Court Appraisal Proceedings 7. Back-End Considerations for LINE and Pitfalls from Precedents 8. Risk Arbitrage Trading Strategies Appendix A. Japanese M&A Framework

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