FSA Proposes Expanding Tender Offer Regulations to Off-Hours Transactions

Strategic Insights -

The Financial Services Agency (FSA) has announced plans to extend regulations governing tender offers to cover off-hours transactions, such as those used by Livedoor Co. to acquire Nippon Broadcasting System Inc. shares. The proposed revisions to the Securities and Exchange Law aim to increase transparency in corporate acquisitions by requiring disclosure of information in cases where a purchaser seeks to gain more than a one-third interest in a listed company. The measure is expected to be included in the current Diet session and take effect this summer.

Key Takeaways:

  • The FSA plans to expand tender offer regulations to cover off-hours transactions, which currently do not require disclosure under the Securities and Exchange Law.
  • The proposed revisions aim to increase transparency in corporate acquisitions by requiring disclosure of information in cases where a purchaser seeks to gain more than a one-third interest in a listed company.
  • Livedoor Co. used the Tokyo Stock Exchange's off-hours trading system to acquire a 29.63% stake in Nippon Broadcasting System Inc. shares, avoiding the constraints of a tender offer.
  • The FSA believes that expanding tender offer requirements to off-hours trades will provide a fair opportunity for the target's stockholders to sell or defend their shares.
  • Violating the disclosure requirement can result in fines of up to 5 million yen.
  • The FSA will convene the Financial System Council on Thursday to discuss regulations on off-hours trading, and will issue a legislative proposal to the Liberal Democratic Party on March 8.

Statistics:

  • 9.72 million: The number of shares Livedoor Co. bought in six transactions on February 8, representing a 29.63% stake in Nippon Broadcasting System Inc.
  • 34.99%: The combined stake of Livedoor Co. in Nippon Broadcasting System Inc. shares, acquired directly and indirectly.
  • 5 million yen: The maximum fine for violating the disclosure requirement.

Sources:

  • Asia Pulse, March 3
  • Nikkei