FamilyMart Co., Ltd., today announced that its Board of Directors adopted a policy to i) purchase FamilyMart shares and other securities1 by a group of shareholders2 with the intent to hold 20% or more of the total voting rights3 of FamilyMart, or ii) purchase FamilyMart shares resulting in a group of shareholders holding 20% or more of the total voting rights of FamilyMart (except for cases where FamilyMart's Board of Directors has given consent in advance of the purchase set out in i) or ii) above and cases where the purchase is made by any person or a company belonging to a group of shareholders that holds 20% or more of the total voting rights as of today regardless of the purchase method such as market transactions and tender offer). A purchase of FamilyMart shares as set out in i) or ii) above shall be hereinafter referred to as a Large-Scale Purchase. A person or a company that intends to conduct a Large-Scale Purchase shall be hereinafter referred to as a Large-Scale Purchaser.
- Reasons for the Large-Scale Purchase Rules
FamilyMart's Board of Directors believes that its shareholders should make the final decision as to whether a Large-Scale Purchase is acceptable and the Company's shares should be sold because FamilyMart is a listed company that has open transactions of its shares. If a Large-Scale Purchase is to be conducted, sufficient information should be provided through the Board of Directors to the shareholders so that appropriate decisions can be made. The Board of Directors intends to assess and examine any proposed Large-Scale Purchase after the information on such Large-Scale Purchase is provided, and subsequently to disclose the opinion of the Board of Directors, to assist shareholders in making their decision. The Board of Directors may negotiate with the Large-Scale Purchaser or offer alternative plans to shareholders if it is deemed necessary.
The Company mainly engages in the convenience store business and also conducts electronic commerce (EC) businesses and services related to the mainstay convenience store business. It is indispensable for the management of the Company to have a broad range of know-how and experience regarding its franchised operations and sufficiently understand relations with stakeholders such as customers, affiliated owners (franchisees) in Japan and overseas, employees and business partners.
Shareholders might not be able to judge FamilyMart's potential corporate or shareholder value without fully understanding these important factors. Although the Company endeavors to supply shareholders and investors with sufficient information through its routine IR activities so that they can assess an appropriate value for FamilyMart stock, it is essential that shareholders receive proper information from the Large-Scale Purchaser and the Board of Directors so that they may examine the terms and conditions of the Large-Scale Purchase, including the adequacy of the proposed purchase price of FamilyMart shares. The Company believes that if a Large-Scale Purchase is to be conducted, even shareholders who intend to continue holding their FamilyMart shares should be made aware of the purchase's potential impact on the future management of the Company, as well as management policies and business plans that the Large-Scale Purchaser wishes to adopt, to examine and determine whether to continue holding their shares. Similarly, shareholders should be made aware of the opinion of the Company's Board of Directors on the Large-Scale Purchase.
Taking into account these factors, the Board of Directors has concluded that a Large-Scale Purchaser should supply shareholders in advance with necessary and sufficient information regarding its Large-Scale Purchase to help them examine whether said Large-Scale Purchase is acceptable. After such information is provided, the Board of Directors will immediately start to form an opinion regarding such Large-Scale Purchase through deliberate review while receiving advice from outside experts and disclose its opinion. Moreover, the Board of Directors may negotiate with the Large-Scale Purchaser to improve the latter's proposals or offer alternative plans to shareholders if considered necessary. Through these processes, shareholders will have an opportunity to examine the proposals and alternative plans (if any are presented by the Board of Directors) while carefully referring to the opinion of the Board, thereby allowing them to make their own definitive decision on whether the Large-Scale Purchase is acceptable.
Accordingly, the Company's Board of Directors believes that a Large-Scale Purchase should comply with certain relevant rules regarding the advance supply of information on Large-Scale Purchases of FamilyMart shares (hereinafter referred to as "Large-Scale Purchase Rules") as described below in Item 2 for the benefit of the Company and all shareholders.
- Large-Scale Purchase Rules
The Large-Scale Purchase Rules require that i) a Large-Scale Purchaser provide sufficient information to the Board of Directors, and ii) a Large-Scale Purchaser be permitted to commence the Large-Scale Purchase only after the prescribed period during which the Board of Directors assesses the Large-Scale Purchase.
First, a Large-Scale Purchaser is required to provide FamilyMart's Board of Directors with sufficient information (hereinafter referred to as "Required Information") so that the Company's shareholders may make decisions and the Board of Directors may form its opinion regarding such Large-Scale Purchase. The Required Information generally includes the following, although details of the Required Information may vary depending on the attributes of the Large-Scale Purchaser and the substance of the Large-Scale Purchase:
- an outline of the Large-Scale Purchaser and its group (including information on the businesses engaged in by said Large-Scale Purchaser and the experience thereof in business lines similar to those of the Company);
- the purposes and conditions of the Large-Scale Purchase;
- the basis for determination of the purchase price and funds for purchase; and
- management policies, business plans, financial plans, capital policies, dividend policies, property management plans and so on (hereinafter referred to as "After-Purchase Management Policies") that the Large-Scale Purchaser intends to adopt after becoming a participant in the Company's management.
The Large-Scale Purchaser is first required to submit to the President of FamilyMart Co., Ltd., a letter of intention to comply with the Large-Scale Purchase Rules, specifying the name of the Large-Scale Purchaser, the address, the governing law of incorporation, the name of the representative, contact details in Japan and an outline of the proposed Large-Scale Purchase. Within 10 business days after receipt of such letter, the Company will determine an appropriate deadline and deliver to the Large-Scale Purchaser a list of the Required Information to be initially provided by the Large-Scale Purchaser. If the information initially provided by the Large-Scale Purchaser is deemed insufficient as Required Information to allow the Company's shareholders to make a decision and the Board of Directors to form its opinion through due diligence, the Board of Directors may determine an appropriate deadline and require additional information until it receives sufficient information. The Board of Directors will disclose the proposed Large-Scale Purchase and all or part of the Required Information submitted to the Board of Directors at the time it deems appropriate, if such disclosure is considered necessary for shareholders to make a decision.
After all the Required Information is provided, FamilyMart's Board of Directors should be allowed a 60-day period (in the case of the purchase of all FamilyMart shares by a tender offer with cash-only (yen) consideration) or a 90-day period (in the case of any other Large-Scale Purchase), depending on the level of difficulty of the assessment, during which it will assess, examine, negotiate, form an opinion and seek alternatives (hereinafter referred to as the "Assessment Period"), which is reckoned from the date of delivery by the Board of Directors to the Large-Scale Purchaser of a document certifying that the supply of necessary information on the Large-Scale Purchase has been completed. The Large-Scale Purchase, therefore, shall commence only after the Assessment Period has elapsed. The Board of Directors will thoroughly assess and examine the proposed Large-Scale Purchase with advice from outside experts during the Assessment Period, and carefully form and disclose its opinion. As mentioned above, the Board of Directors may negotiate with the Large-Scale Purchaser to improve the terms of the proposed Large-Scale Purchase or it may offer alternative plans to shareholders, as necessary.
- Policy toward a Large-Scale Purchase
- In case a Large-Scale Purchaser complies with the Large-Scale Purchase Rules
If a Large-Scale Purchaser complies with the Large-Scale Purchase Rules, FamilyMart's Board of Directors does not intend to prevent the proposed Large-Scale Purchase even if it is opposed thereto. However, the Board may express objections and/or submit alternative plans in an effort to convince shareholders not to accept the proposed Large-Scale Purchase. After all, the shareholders will be required to determine whether the proposed Large-Scale Purchase is acceptable in view of the proposed Large-Scale Purchase, the opinion submitted by the Board of Directors, alternative plans and other factors. In case such Large-Scale Purchase is deemed to significantly damage the overall interests of the Company's shareholders, the Company's Board of Directors may take necessary measures to protect the interests of shareholders even if the Large-Scale Purchaser complies with the Large-Scale Purchase Rules. As for the examination and determination on whether the Large-Scale Purchase would considerably damage the overall interests of the Company's shareholders, the Board of Directors shall carefully review the Large-Scale Purchaser and the substance of the Large-Scale Purchase (e.g., purpose, methods, objectives, class and amount of the purchase price), as well as the impact thereof on overall shareholder interests, while receiving advice from outside experts and based on the Required Information including the After-Purchase Management Policies supplied by the Large-Scale Purchaser, to ensure the objectivity and rationality of its opinion. The opinion given by the Corporate Auditors, including the outside corporate auditors, will be used as reference in the measures to be determined by the Board of Directors.
- In case a Large-Scale Purchaser does not comply with the Large-Scale Purchase Rules
If a Large-Scale Purchaser does not comply with the Large-Scale Purchase Rules, FamilyMart's Board of Directors may take countermeasures, despite the actual purchase method, against the Large-Scale Purchaser to protect the interests of the Company and all shareholders. Countermeasures include the issuance of stock acquisition rights or any other measures that the Board of Directors is permitted to take under the Commercial Code of Japan, the Corporate Code or other laws and the Company's Articles of Incorporation. The Board of Directors will adopt specific countermeasures that it deems most appropriate at that time. If the Board of Directors elects to issue stock acquisition rights in a rights offering, the outline of the issuance thereof shall be as described in the attachment hereto. If the Board of Directors actually elects to issue stock acquisition rights as a countermeasure, it may determine the exercise period and exercise conditions of the stock acquisition rights, including the condition that the Large-Scale Purchaser is not the person that belongs to a group of shareholders holding a certain percentage of the total voting rights (except for the person to whom FamilyMart's Board of Directors has given consent in advance and any person or a company that belongs to such a group of shareholders as of today), in consideration of the effectiveness thereof as a countermeasure. After the Corporate Code is implemented, however, the Board of Directors intends to adopt the gratis issuance of stock acquisition rights as set forth in Article 277 of the Corporate Code instead of the aforementioned issuance of stock acquisition rights in a rights offering to shareholders.
- Impact on Shareholders and Investors
- Impact of the Large-Scale Purchase Rules on shareholders and investors
The purpose of the Large-Scale Purchase Rules is to provide an opportunity for FamilyMart's shareholders to receive necessary information about the Large-Scale Purchase, as well as the opinion and any alternative plans from FamilyMart's Board of Directors in order to determine whether the Large-Scale Purchase is acceptable. This should allow each shareholder to make an appropriate decision on the propriety thereof with sufficient information, thereby resulting in the overall protection of shareholders. Accordingly, the Large-Scale Purchase Rules are a prerequisite for ensuring proper judgments on investment by shareholders and investors, and should contribute to protecting the interests of both sets of stakeholders.
As described in Item 3 above, the Company's policy toward the Large-Scale Purchase will differ depending on whether the Large-Scale Purchaser complies with the Large-Scale Purchase Rules. Shareholders and investors of the Company are, therefore, requested to pay close attention to the trends of Large-Scale Purchasers.
- Impact of the countermeasure on shareholders and investors when enacted
If a Large-Scale Purchaser does not comply with the Large-Scale Purchase Rules, FamilyMart's Board of Directors may take countermeasures that are permitted under the Commercial Code of Japan, the Corporate Code or other laws and the Company's Articles of Incorporation against the Large-Scale Purchaser to protect the interests of the Company and all shareholders. However, due to the nature of the mechanism of such countermeasures, the aforementioned countermeasures do not assume any circumstances where they may cause legal or economic damage or loss to shareholders (except for any Large-Scale Purchasers who would infringe any of the Large-Scale Purchase Rules and any such Large-Scale Purchasers who intend to conduct Large-Scale Purchases that are deemed to considerably damage the overall interests of shareholders). If the Board of Directors determines to take any specific countermeasures, it will appropriately disclose the information at a proper time in accordance with relevant laws and the Stock Exchang Rules.
As for the issuance of stock acquisition rights, which is considered one such countermeasure, the procedure to be followed by shareholders is as follows: Shareholders should apply for and pay certain amounts within the predetermined period to obtain FamilyMart shares through the exercise of stock acquisition rights. The detailed procedure will be announced pursuant to the relevant law when actual issuance of such stock acquisition rights is determined. However, shareholders who have not yet completed the procedure of name transfer must complete it prior to the record date of the stock acquisition rights, which would be determined by the Board of Directors and publicly announced.
If the stock acquisition rights are allocated through a gratis issuance of stock acquisition rights as set forth in Article 277 of the Corporate Code after the Code is implemented, the above procedure will become unnecessary and the shareholders whose names are recorded or registered in the last register of shareholders or the register of beneficiary shareholders as of the record date shall be the persons entitled to receive the stock acquisition rights on the effective date of such a gratis issuance of stock acquisition rights, as a matter of course.
- Term of Validity of the Large-Scale Purchase Rules
The Company's policy toward Large-Scale Purchases shall become effective as of April 11, 2006, pursuant to a resolution adopted at a Board of Directors meeting held on that day. The term of validity thereof shall be until June 30, 2006. Provided, however, that said term of validity shall be extended for one year if at a Board of Directors meeting to be held prior to June 30, 2006, which would consist of the Directors (whose term of office is one year and who are reelected every year) to be elected by the Ordinary General Meeting of Shareholders to be held on May 25, 2006, it is determined to continue this policy, and the same shall apply thereafter consequently. By the way, individual pros and cons of respective nominees shall be stated in the proposal on the election of directors at the Ordinary General Meeting of Shareholders with regard to this policy toward a Large-Scale Purchase. The Board of Directors will announce its determination as soon as practicable.
Even if a continuation of the policy is determined, the Board of Directors intends to review the Large-Scale Purchase Rules from time to time for reasons including the enforcement of the Corporate Code, the Securities and Exchange Law and any other enactments of legislation. Any such review would be conducted strictly from the viewpoint of the improvement of corporate value and shareholder value and will be immediately announced.
