Recruit Holdings Announces Share Repurchase through Self Tender Offer
Jan 28, 2022 | Recruit Holdings Co., Ltd.
TOKYO, JAPAN (January 28, 2022) – Recruit Holdings Co., Ltd. (TSE: 6098) (the “Company”) announced that its Board of Directors resolved today to conduct a share repurchase of its common stock of up to 34,000,000 shares through a tender offer (the “Self Tender Offer”) as the specific purchase method pursuant to Article 156, Paragraph 1 of the Companies Act as applied by replacing certain terms pursuant to Article 165, Paragraph 3 of the said Act, and the provisions of the Company's Articles of Incorporation. The Self Tender Offer will be conducted at the purchase price of 4,581 yen, a 10% discount from the closing price of the Company’s common stock as of January 27, 2021, the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer, which has been previously agreed with a few Japanese business shareholders who intend to reduce their holdings of the Company’s common stock.
The Company recognizes that there has been concern in the capital markets regarding the possibility of uncoordinated sales by its Japanese business shareholders and the potential for downward pressure on its stock price. Previously, when the Company was notified that several of its shareholders intended to reduce their holdings, the Company conducted secondary equity offerings to provide these shareholders with an opportunity to sell a large volume of shares at the same time in a coordinated manner.
Recently, three Japanese business shareholders notified the Company of their intention to reduce their stake in the Company's common stock. The Company has considered the priorities of these shareholders, the potential impact on the Company’s share price from large uncoordinated sales of shares over a short period, the capacity to pursue strategic business investments, the capital market environment, and the outlook for its financial position and has determined it is appropriate to acquire its own shares in accordance with the Company’s capital allocation policy. Upon examining multiple transaction alternatives, the Company has decided to acquire the shares from these shareholders through the Self Tender Offer at the purchase price of 4,581 yen and has entered prospective tender offer agreements with the three Japanese business shareholders.
The Self Tender Offer at a discounted price from the market price enables the Company to minimize the cash outflow of acquiring its own shares, while enhancing shareholder value.
Outline of the Self Tender Offer
|(1) Class of Shares to be repurchased||Common Stock of the Company|
|(2) Method of the purchase||Self Tender Offer|
|(3) Purchase price||4,581 yen (10% discount to the base price（Note）)|
|(4) Total number of shares to be repurchased||34,000,000 shares (Maximum) (up to 2.06% of total number of shares issued excluding treasury stock)|
|(5) Total purchase price||155,754 million yen (Maximum)|
|(6) Self tender offer period||From Monday, January 31 to
Tuesday, March 1, 2022 (20 business days)
|(7) The prospective tendering shareholders||NTT DATA CORPORATION,
HAKUHODO DY HOLDINGS INCORPORATED,
TOKYO BROADCASTING SYSTEM TELEVISION, INC.
（Note） 5,090 yen, the closing price of the Company’s common stock as of January 27, 2022, the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer.
The Self Tender Offer will not be conducted, directly or indirectly, in or targeted at the United States, nor through the U.S. postal mail services or other interstate or international commercial methods or means (including, but not limited to, telephone, telex, facsimile, e-mail, and Internet communication), nor through any stock exchange facilities in the United States. No tender in the Self Tender Offer may be made through any of the aforementioned methods or means, through those stock exchange facilities, or from the United States. In addition, neither the press releases related to the Self Tender Offer nor other relevant documents will, or may, be sent or distributed in, to, or from the United States by the postal mail services or other means. No tender in the Self Tender Offer that violates, directly or indirectly, any of the aforementioned restrictions will be accepted. No solicitation to purchase securities or other equivalent instruments is being made to residents in the United States or within the United States. Even if such securities or other equivalent instruments are sent to the Company by residents in the United States or from the United States, they will not be accepted.
Q1.Why did the Company choose a self tender offer at a discounted price in response to the Japanese business shareholders’ intention to sell their shares?
After considering the priorities of NTT Data Corporation, Tokyo Broadcasting System Television, Inc. and Hakuhodo DY Holdings Inc. (collectively called the “Prospective Tendering Shareholders”), the potential downward pressure on our stock price from large uncoordinated sales of shares over a short period, and comprehensively taking into account our future strategic business investment capacity, our outlook for the market environment and our financial position, we have concluded that a self tender offer is the most appropriate transaction in accordance with our capital allocation policy.
We believe a self tender offer is appropriate because it provides shareholders other than the Prospective Tendering Shareholders an opportunity to participate in the transaction. Additionally, the opportunity to acquire shares at a discount to the market price allows us to minimize the cash outflow of the transaction.
A self tender offer price of 4,581 yen represents a 10% discount from 5,090 yen, the closing price of the Company’s common shares on January 27, 2022, the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer (January 28, 2022).
Q2. What is the rationale for setting the tender offer price at a 10% discount?
We have reached agreements with the Prospective Tendering Shareholders on a 10% discount which we believe is appropriate as it enables the shareholders who tender shares in the Self Tender Offer to sell their desired number of shares and allows us to reduce the cash outflow of acquiring our shares.
Additionally, we reviewed 13 publicly available self tender offer transactions in Japan from January 2021 to November 2021, and 8 were conducted at a discount of approximately 10%.
Q3. Do you anticipate other Japanese business shareholders will also participate in the transaction?
There is a possibility that other Japanese business shareholders also participate in the transaction. We communicate with Japanese business shareholders regarding their shareholding policy on an ongoing basis, however, we reached agreements regarding the Self Tender Offer only with the Prospective Tendering Shareholders.
The Self Tender Offer does not restrict which shareholders are able to tender and the lock-up period for the selling shareholders in the secondary offering conducted in December 2020 has expired, therefore, other Japanese business shareholders may tender their shares in the offer.
Q4. The Prospective Tendering shareholders are all Japanese business shareholders. Can individual investors also participate in the self tender offer transaction?
Individual investors in Japan can also participate to apply at the tender offering price, which is at a 10% discount to the base price.
For further inquiry about the self tender offer, please contact Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (0120-532-347)
Q5. What is the tax on the amount received by participating in the transaction?
If the amount of money to be paid by participating in this transaction exceeds the amount of the portion of the tender offerer’s capital corresponding to the shares to be delivered, the excess portion will be treated as a deemed dividend and taxed via withholding. In the case of corporate shareholders in Japan, the dividend exclusion from taxable income rules will be applicable, and the withholding tax imposed on the deemed dividends will be creditable against corporation tax as a withholding income tax credit. In addition, the portion of the amount of money to be paid in the Self Tender Offer, excluding the amount of deemed dividends, will be considered income from the transfer of shares in this transaction.
If you have any specific questions regarding tax matters, please consult with a tax accountant or other tax specialist and make your own judgment on your tax position.
Q6. Is there any impact to the Company’s financial performance for FY2021?
The maximum number of shares to be purchased represents 2.00% of the total number of shares issued as of September 30, 2021, which will be minimally accretive to adjusted EPS.