Fair Rules for the Acquisition of Substantial Shareholdings (Takeover Defense Measures for the Protection and Enhancement of Shareholders’ Common Interests)
Nippon Steel & Sumitomo Metal Corporation (“NSSMC”) has adopted the “Fair Rules for the Acquisition of Substantial Shareholdings” (the “Plan”) since March 2006 in order to protect and enhance common interests of the shareholders of NSSMC. The currently effective Plan was approved by NSSMC’s shareholders at the 92nd General Meeting of Shareholders held in June 2016.
The Content of the Plan
The Outline of the Plan
The outline of the Plan is from (1) to (3) below.
(1) Provision of the Required Information by the Bidder and examinations at a meeting of the Board
When the Board of Directors of NSSMC (the “Board”) has received all of the information as stipulated in the Plan (the “Required Information”) from any person who has an intention to hold 15% or more of the voting rights ratio of the shares, etc. of NSSMC (“Bidder”), the Board shall review as to whether or not the proposal for the acquisition of substantial shareholdings in NSSMC (a “Takeover Proposal”) made by the Bidder is in the best interests of the corporate value and the common interests of shareholders. (The review period, as a general rule, is 12 weeks.)
(2) Procedures to ascertain shareholders’ will
In order to have shareholders determine whether or not to accept a Takeover Proposal, the Board, as a general principle, after the review period, holds a shareholders vote to ascertain shareholders’ will (a “Shareholders Vote”) regarding whether or not the issuance of the stock acquisition rights (the “Rights”) by way of a gratis allotment (implementation of measures to a Bidder) will be implemented and the necessity thereof, through a written ballot or at a meeting held to confirm the shareholders’ will (“Shareholders Will Confirmation Meeting”).
However, after examinations of the Required Information by the Board, in such case the Board determines that the Takeover Proposal is in the best interests of the corporate value of NSSMC and the common interests of shareholders of NSSMC, a Shareholders Vote will not be held and the issuance of the Rights by way of a gratis allotment will also not be implemented.
(3) In the event the Rights are issued by way of a gratis allotment (the cases indicated with red lines in the chart above, “The flow of procedures of the Plan”)
The implementation of issuance of the Rights by way of a gratis allotment under the Plan is only limited to such cases in which (i) the shareholders of NSSMC vote in favor of the implementation of measures to a Bidder at the Shareholders Vote, (ii) the Bidder fits within one of the four categories including so-called green mailer specified as harmful and abusive according to the judicial precedents, and the Board determines the Takeover Proposal may cause clear damage to the common interests of the shareholders of NSSMC and (iii) the Board determines the Bidder failed to comply with the procedures set forth in the Plan.
Furthermore, when judging (ii) or (iii) above, the Board shall obtain an opinion of the Independent Committee beforehand, which consists of three members appointed from Outside Directors and Outside Audit & Supervisory Board Members, respecting such opinion as much as possible. For the members of the Independent Committee, please refer to “Members of the Independent Committee” described below.
The Necessity for the Plan (“Basic Policy on the Composition of Persons to Control Decision-Making over the Financial and Business Policies of NSSMC”)
Under the corporate philosophy that the NSSMC group will pursue world-leading technologies and manufacturing capabilities, and contribute to society by providing excellent products and services, the NSSMC group aims to improve its corporate value, and further the common interests of its shareholders, by enhancing its competitiveness and profitability through the planning and execution of management strategies.
NSSMC has decided to take necessary action to prepare for the acquisition of substantial shareholdings in NSSMC or other related activities that could disturb such corporate philosophy and management strategies and cause damage to NSSMC’s corporate value by, among other reasons, threatening obstruction of the existence and development of NSSMC, and which could result in harm to the common interests of NSSMC’s shareholders.
NSSMC believes that in the event a third party proposes a Takeover Proposal, the ultimate decision as to whether or not to accept the Takeover Proposal should be made by the then shareholders of NSSMC. On the other hand, NSSMC believes that such Takeover Proposals could include those with the potential to cause clear damage to the corporate value of NSSMC or the common interests of the shareholders of NSSMC or those with the potential to practically coerce shareholders into selling their shares of NSSMC.
Consequently, NSSMC implemented the Plan because NSSMC believes it is the Board’s responsibility to put in place clear and transparent rules in order to prepare for such disadvantages to the shareholders of NSSMC in the event a Takeover Proposal is made by a third party, and, for the occasions where a Takeover Proposal is actually made, to create an environment in which the shareholders of NSSMC can make an appropriate informed judgment based on sufficient information and with a reasonable time period to consider the Takeover Proposal.
Rationale and Fairness of the Plan
Due to the following points, NSSMC believes that the Plan supports the common interests of the shareholders of NSSMC, and that it is rational and fair and will not be implemented in an arbitrary manner.
(1) A system which reflects the shareholders’ will
In the event a Takeover Proposal is made by a third party, as a general rule, the necessity of issuance of the Rights by way of a gratis allotment (implementation of measures to a Bidder) is judged by the then shareholders of NSSMC through a Shareholders Will Confirmation Meeting and other methods. In addition, the term of the Plan shall be three years, and adoption and renewal, etc., of the Plan will be made upon approval of the shareholders.
Accordingly, the Plan is to be adopted and renewed upon shareholders’ will, and also the Rights are issued by way of a gratis allotment upon shareholders’ will (a system in which the Plan is adopted by shareholders and countermeasures are implemented via shareholder approval). As a result, NSSMC believes the Plan should adequately reflect the will of its shareholders.
(2) Establishment of the Independent Committee
NSSMC established the Independent Committee under the Plan. The Board respects the opinion of the Independent Committee as much as possible in the exceptional cases of the implementation of the issuance of the Rights by way of a gratis allotment without taking a vote of shareholders to confirm the shareholders’ will; such exceptional cases include instances where a Bidder failed to comply with the Plan (the exceptional cases are limited to the cases of (3) (ii) and (3) (iii) in the “Outline of the Plan” described above). Consequently, the system enhances the fairness of the judgments of Board in connection with the implementation of the Plan.
(3) Compliance with the judicial precedents of the Supreme Court, rules of financial instruments exchanges such as corporate governance codes, etc. and other guidelines, etc.
The Plan complies with the decision made by the Supreme Court in 2007 and other judicial precedents in Japan, the listing regulations such as corporate governance codes etc., as stipulated by financial instruments exchanges, “Guidelines Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value and Shareholders’ Common Interests” publicized by the Ministry of Economy, Trade and Industry and the Ministry of Justice in May 2005 and “Takeover Defense Measures in Light of Recent Environmental Changes” publicized in June 2008 by the Corporate Value Study Group.
(4) No dead-hand or slow-hand takeover defense measures
The Plan may be abolished by a resolution of a meeting of the Board. Therefore, the Plan is not a dead-hand takeover defense measure (a takeover defense measure in which even if a majority of the members of the board of directors are replaced, the implementation of the measure cannot be stopped). Also, as the term of office for each of the directors of NSSMC is one year and expires at the closing of NSSMC’s annual general meeting of shareholders every year, the Plan of NSSMC is not a slow-hand takeover defense measure either (a takeover defense measure in which the implementation takes more time to be stopped due to the fact that the members of the board of directors cannot be replaced all at once).
(5) An opinion has been issued pursuant to the Companies Act by Audit & Supervisory Board Members relating to the Plan
Relating to the Plan, a consensus opinion of all the Audit & Supervisory Board Members of NSSMC, including Outside Audit & Supervisory Board Members, has been issued pursuant to the Companies Act, confirming that the Plan is compliant with “Basic Policy on the Composition of Persons to Control Decision-Making over the Financial and Business Policies of NSSMC” described above, that it is not detrimental to the common interests of shareholders of NSSMC, and that it is not intended to maintain the status held by the directors of NSSMC.
Members of the Independent Committee
NSSMC has appointed Mr. Mutsutake Otsuka (the Outside Director of NSSMC), Mr. Ichiro Fujisaki (the Outside Director of NSSMC) and Mr. Hiroshi Obayashi (the Outside Audit & Supervisory Board Member of NSSMC) as three members of the Independent Committee established under the Plan. For each member’s brief personal history, please see below.
[Brief Personal History of Members]
Name : Mutsutake Otsuka
|January 5, 1943||:||Born|
|April 1965||:||Joined Japanese National Railways|
|June 1990||:||Director and General Manager of Personnel Dept. of East Japan Railway Company|
|June 1992||:||Executive Director and General Manager of Personnel Dept. of East Japan Railway Company|
|January 1994||:||Executive Director of East Japan Railway Company|
|June 1996||:||Executive Director and Deputy Director General of Corporate Planning Headquarters of East Japan Railway Company|
|June 1997||:||Executive Vice President and Director General of Corporate Planning Headquarters of East Japan Railway Company|
|June 2000||:||President and CEO of East Japan Railway Company|
|April 2006||:||Chairman and Director of East Japan Railway Company|
|April 2012||:||Executive Advisor to the Board of East Japan Railway Company (current position)|
|June 2014||:||Director (Outside Director) of NSSMC (current position)|
Name : Ichiro Fujisaki
|April 1969||:||Joined Ministry of Foreign Affairs of Japan|
|August 1999||:||Director-General, North American Affairs Bureau, Ministry of Foreign Affairs of Japan|
|September 2002||:||Deputy Minister for Foreign Affairs|
|January 2005||:||Ambassador of Japan to the United Nations and WTO in Geneva|
|April 2008||:||Ambassador of Japan to the United States of America|
|November 2012||:||Retired from Ambassador of Japan to the United States of America|
|January 2013||:||Distinguished Professor of Sophia University (current position)|
|June 2014||:||Director (Outside Director) of NSSMC (current position)|
Name : Hiroshi Obayashi
|June 17, 1947||:||Born|
|April 1972||:||Prosecutor, Tokyo District Public Prosecutor’s Office|
|May 2001||:||Director-General, Rehabilitation Bureau, Ministry of Justice|
|January 2002||:||Deputy Vice-Minister, Ministry of Justice|
|June 2004||:||Director-General, Criminal Affairs Bureau, Ministry of Justice|
|June 2006||:||Vice-Minister, Ministry of Justice|
|July 2007||:||Superintending Prosecutor, Sapporo High Public Prosecutors Office|
|July 2008||:||Superintending Prosecutor, Tokyo High Public Prosecutors Office|
|June 2010||:||Prosecutor General, the Supreme Public Prosecutors Office|
|December 2010||:||Retired from Prosecutor General, the Supreme Public Prosecutors Office|
|March 2011||:||Registered as Attorney-at-law (current position)|
|June 2014||:||Audit & Supervisory Board Member (Outside Audit & Supervisory Board Member) of NSSMC (current position)|