RMB Presses Bandai Namco to Raise the Tender Offer Price for Sotsu’s Minority Shareholders

RMB Capital (“RMB”), an independent investment advisory firm, presses Bandai Namco Holdings Inc. (7832 JP) to significantly raise the tender offer price for Sotsu Co., Ltd. (3711 JP) in a follow-on tender offer targeted at the general shareholders of Sotsu.

1. Bandai Namco should seek to acquire more than 90% of shares of Sotsu

Under the current tender offer, the combined shares held by Bandai Namco and the founding family of Sotsu amount to 71.99% of Sotsu’s total outstanding shares. Fully consolidating Sotsu through the Share Consolidation process, which requires an approval of only two-thirds of the shareholders, would effectively circumvent the local tender offer rules. Those rules are intended to protect general shareholders, but this process would enable the aforementioned two controlling parties to squeeze out more than 1,000 of Sotsu’s minority shareholders. RMB believes Bandai Namco instead should seek to acquire more than 90% of shares of Sotsu and go through the Demand for Shares Cash-Out process that is specified in the Companies Act of Japan to justify the squeeze-out of the general shareholders.

2. However, at least 10% of the shareholders expressed their opposition to the tender offer

RMB identified at least 10% of Sotsu’s shareholders who oppose the unfair tender offer by Bandai Namco. As a result, RMB asserts that Bandai Namco may not only fail to clear the 90% threshold, but also may fail to secure the majority of minority threshold. While Bandai Namco plans to force the full consolidation of Sotsu with the Share Consolidation process, RMB believes such an action would not be justified when the aforementioned parties collectively own over 70% of Sotsu’s total shares outstanding, and that it would undermine the original intent of the local tender offer rules.

3. RMB urges Bandai Namco to initiate a follow-on tender offer at a higher price for the general shareholders

RMB proposes that Bandai Namco initiate a follow-on tender offer at a higher price (at least more than 4,600 yen per share, which is RMB’s estimate of fair value) for general shareholders while maintaining the current tender offer for Sotsu’s founding family. Bandai Namco should acquire more than 90% of the Sotsu’s shares through these two tender offer processes and fully consolidate the firm under the Demand for Share Cash-Out process with respect to the tender offer rules in Japan.

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