Tokyo High Court Ruling on FamilyMart Buyout

By Makiko Yamazaki and Ritsuko Shimizu

TOKYO (Reuters) – Tokyo's high court has ruled that the fair value of FamilyMart shares is 13% higher than Itochu's buyout offer, marking another landmark victory for minority shareholders and potentially impacting future deals in Japan.

The ruling, dated Oct. 31 and reviewed by Reuters, mandates that FamilyMart shareholders who petitioned for a better price receive 2,600 yen ($17.08) per share, which is 300 yen more than the 2,300 yen offered by Itochu for the convenience store chain's shares that it did not already own in 2020.

This decision, which largely upheld a lower court's ruling, may provide a pathway for minority shareholders dissatisfied with buyouts to seek court determination on a fair price for target companies, a route that had seen little activity in Japan since a 2016 court decision.

FamilyMart has announced plans to appeal, expressing deep disappointment that the fairness of their processes was not recognized. Itochu did not provide comments on the ruling.

The high court found that Itochu's tender offer was not conducted via a generally accepted fair process as it did not incorporate feedback from FamilyMart's independent committee, which argued that the price was inadequate.

The financial adviser to FamilyMart's independent committee had suggested a price range of 2,472 yen to 3,040 yen.

With the increase in buyout deals in Japan, more minority shareholders have begun exercising appraisal rights seeking higher compensation after being squeezed out. However, Japanese courts have been hesitant to evaluate fair value in buyouts since the 2016 ruling regarding a Jupiter Telecommunications tender offer. This Supreme Court decision concluded that a tender offer price derived from a generally accepted fair process should be regarded as fair value, making it difficult for petitioning shareholders to prove flaws in the tender offer process, thereby lowering the likelihood of securing higher prices.

> ($1 = 152.2400 yen)

Summary

The Tokyo high court ruled FamilyMart shares are worth 13% more than Itochu's offer, benefiting minority shareholders and possibly reshaping future Japanese buyout negotiations.