MBOs: TSE releases new rules regarding MBOs and other related party takeovers for public comment [April ‘25]

Addressee: Boards of Directors of all companies listed on the TSE.

Applicable transactions: Takeovers by management (i.e., MBO), controlling shareholders, or other affiliates through tender offers (TOBs), share exchanges, or similar methods that result in the delisting of the company.

Requirement: To obtain and disclose an opinion from a special committee comprised of unconflicted Outside Directors, Outside Corporate Auditors, and external advisors. ( “Outside Director”)

Opinion: The opinion must articulate the committee’s assessment of fairness to public shareholders by addressing the following points:

• whether the proposed transaction enhances corporate value
• whether the terms of the transaction (e.g., amount/value of consideration, structure of the takeover, type of consideration) are fair
• whether the transaction process is conducted in a fair manner

Additional explanations regarding the fairness of the terms: An opinion must include the committee’s assessment of fairness of the terms from various perspectives, including:

• the process of the discussions and negotiations with the acquirer
• the reasonableness of any valuations conducted along with the underlying assumptions
• the appropriateness of the proposed premium relative to the historical share price and premiums paid in comparable transactions

Additional explanations regarding the fairness of the process: An opinion must detail which measures outlined in the Fair M&A Guidelines of METI have been implemented. If any of the measures have not been adopted, the opinion must provide an explanation for this omission, along with the committee’s assessment of how the absence of such measures impacts overall fairness.

“Majority of Minority” requirement: The proposed new rules do not require obtaining acceptance from a majority of minority shareholders for an offer to be successful.