Recruit Holdings Announces Share Repurchase through Self Tender Offer
Oct 2, 2023 | Recruit Holdings Co., Ltd.
TOKYO, JAPAN (October 2, 2023) – 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 13,000,000 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 such Act, and the provisions of the Company's Articles of Incorporation.
The Self Tender Offer will be conducted at the purchase price of 4,148 yen (rounded down to the nearest yen), a 10% discount from the closing price of the Company’s common stock as of September 29, 2023, the business day immediately preceding the date that the Board of Directors resolved the Self Tender Offer, which was previously agreed with a Japanese business shareholder who intends to reduce its 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 and a self tender offer to provide these shareholders with opportunities to sell a large volume of shares at the same time in a coordinated manner.
Recently, TOPPAN Holdings Inc. ("TOPPAN"), one of the largest Japanese business shareholders of the Company, notified the Company of its intention to reduce some of its ownership stake in the Company's common stock by the end of March 2024. The Company has considered the priorities of TOPPAN, 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 markets 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 TOPPAN through the Self Tender Offer at the purchase price of 4,148 yen and has entered into a tender offer agreement with TOPPAN pursuant to which the shareholder has agreed to subscribe to tender shares in the Self Tender Offer.
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||4,148 yen (10% discount from the base price*1)|
|(4) Total number of shares to be repurchased||13,000,000 shares (Maximum) (up to 0.78% of the total number of shares issued excluding treasury stock)|
|(5) Total purchase price||53,924 million yen (Maximum)|
|(6) Self tender offer period||From Tuesday, October 3 to
Tuesday, October 31, 2023 (20 business days)
|(7) Prospective tendering shareholders||TOPPAN Holdings Inc.|
*1 4,609 yen, the closing price of the Company’s common stock as of September 29, 2023, the business day immediately preceding the date that the Board of Directors resolved 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 of shares in the Self Tender Offer may be made through any of the aforementioned methods or means, through such 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 of shares 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 the Self Tender Offer at a discounted price in response to the Japanese business shareholder’s intention to sell their shares?
After considering the priorities of TOPPAN Holdings Inc. (called the “Prospective Tendering Shareholder”), the potential impact on market price of our shares by a series of large uncoordinated sales of shares over a short period, and comprehensively taking into account our future strategic business investment capacity, 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.
Also, we believe the self tender offer is appropriate because it provides shareholders other than the Prospective Tendering Shareholder an opportunity to participate in the transaction. We also determined that it was desirable to purchase tendered shares at a price representing a certain discount to the market price to minimize cash outflow to the greatest extent possible.
A self tender offer price of 4,148 yen, which represents a 10% discount from 4,609 yen, the lowest price among (i) the closing price of the Company’s shares on September 29, 2023, the business day immediately preceding the date that the Board of Directors resolved the Self Tender Offer (October 2, 2023), (ii) the price which is the simple average of the closing prices of the Company’s shares for the one-month period until the said date and, (iii) the price which is the simple average of the closing prices of the Company’s shares for the three-month period until the said date.
Q2. What is the rationale for setting the tender offer price at a 10% discount?
We have reached agreement with the Prospective Tendering Shareholder on a 10% discount, we believe is appropriate taking into consideration the volatility of our share price, to enable the shareholders who tender the Self Tender Offer to sell the desired number of shares, and to reduce our cash outflow.
Additionally, we reviewed 24 Self Tender Offer transactions in Japan from January 2022 to August 2023 which are publicly available, 17 of which 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 agreement regarding the self tender offer only with TOPPAN Holdings Inc. to tender their shares. The self tender offer does not restrict which shareholders are able to tender, therefore, other Japanese business shareholders might tender their shares to the offer.
Q4. The shareholder scheduled to apply is a Japanese business shareholder. Can individual investors also participate in the tender offer transaction?
Individual investors in Japan may also apply at the tender 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.
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, 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 tax specialists such as certified public tax accountants and make your own judgment on your tax position.
Q6. What is the Company’s policy on treasury stock acquired through the Self Tender Offer?
The policy on treasury stock acquired through the Self Tender Offer has not yet been determined as of the date of submission of this document; however, it may be used for strategic M&A with the Company’s common stock as consideration, for the delivery of shares upon the exercise of stock acquisition rights, and for stock compensation using the Company’s common stock for employees of the Group.
Q7. Is there any impact to the Company’s financial performance for FY2023?
The maximum number of shares to be purchased represents 0.78% of the total number of shares issued excluding treasury stock as of October 2, 2023, which will be minimally accretive to adjusted EPS.