Issues Facing Fujisoft
・
Fujisoft's Board of Directors is currently in the process of receiving a serious takeover offer and considering the process of going private.
・
However, from the following perspectives, there is doubt as to whether the Board of Directors and the Special Committee have gone through a sufficient review process necessary to realize the maximization of corporate value.
1
Failing to maximize the value of the acquisition proposals:
a. Unsolicited acquisition proposals (The Board has not solicited acquisition proposals other than those submitted by 3D)
b. Failure to raise the proposed price (The Board has failed to facilitate an increased offer price by not disclosing critical due diligence materials)
c. Material changes not reflected in the takeover proposal (Material changes in circumstances since July 2011 have not been reflected)
2
Applying an unreasonable method for comparison of value：
a. Inappropriate comparables
(Instead of using post-announcement stock price plus premium, they propose using "intrinsic value" for the acquisition price, potentially overestimated due to underestimated risk of nonachievement and excessively low capital costs.)
What we are looking for
We are requesting a thorough and sufficient privatization review process from Fujisoft to maximize corporate value.
1
Maximizing the value of takeover bids：Maximize the value of takeover bids by formally soliciting takeover bids in light of changing circumstances and by providing sufficient information to potential acquirers
2
Applying an appropriate comparative approach：Evaluate the appropriateness of going private by examining if the proposed purchase price is at an adequate premium to the share price after the announcement of the new medium-term plan
Proposal
No.１
Appointment of Stephen Givens as an Outside Auditor
‐
The appointment of additional auditors can prevent inappropriate management decisions during the review process for privatization
‐
In supervising management decisions during the review of privatization, extensive knowledge and experience in M&A and corporate governance are required
‐
Mr. Steven Gibbons, as a U.S. lawyer, possesses deep knowledge and experience in those areas, making him well-qualified as an auditor.
No.2
Share buyback of approximately 75 billion yen within one year in the event that the Board of Directors rejects a takeover bid
‐
If the board of directors rejects the acquisition proposal, it indicates that the stock price is significantly discounted from its "intrinsic value," making it clear that an immediate buyback of shares would substantially increase the value per share.
‐
Furthermore, Fujisoft's ROE is well below the industry average, making the elimination of surplus capital through share buybacks a rational move from the perspective of improving ROE.
‐
The amount of 75 billion yen is reasonable based on the excess capital needed to elevate to the ROE level of competitors, the amount of treasury shares buyback announced by Fujisoft in their new MTP, distributable amounts, and from the perspective of Net Cash level.
‐
The 75 billion yen treasury share buyback is feasible over the next year from a liquidity standpoint, and considering the potential significant change in capital structure within the next 1-2 years due to the execution of the real estate liquidation plan, the one-year timeframe is also reasonable.
You can view the detailed proposal document by clicking here (click "here" to display the PDF).
Below is an excerpt from the detailed document.
Outside Auditor Candidate Profile
Mr. Stephen Givens
Lawyer
1982-1987 Associate, Debevoise & Plimpton, LLP
1987-1990 Associate, Gibson, Dunn & Crutcher LLP
1990-1996 Partner, Gibson Dunn & Crutcher LLP
1996-2001 Special Counsel, Nishimura & Partners (now Nishimura&Asahi)
2001-Present Principal, Givens Gaikokuho Jimu Bengoshi Jimusho / JLX Partners Foreign Law Joint Enterprise
Other
2004-2014 Adjunct Professor, Keio Law School
2005-2014 Professor, Law Faculty, Aoyama Gakuin University
2009-2013 Adjunct Professor, Law Faculty, Sophia University
2014 Adjunct Professor, Faculty of Business and Commerce, Keio University
2014-2020 Professor, Law Faculty, Sophia University
2015-2019 Outside Member of Advisory Board, Dai-ichi Life Holdings, Inc.
2017-2019 Advisor, Investment Strategy Division, Hitachi, Ltd.
2018-2019 Advisory Board Member, Nakano Refrigerators Co., Ltd.
2019-2023 Adjunct Professor, Keio Law School
Reason for Proposal
-
Expanding the corporate auditor function may lead to enhanced supervision of management decisions via the auditors’ use of their authority to investigate and request reports
-
The management decision to be made is the consideration of acquisition proposals, and knowledge of M&A and corporate governance is essential for auditors
-
Consideration of acquisition proposals is highly specialized and requires sufficient M&A expertise
Knowledge of corporate governance is also essential for effective supervision as a corporate auditor with strong auditing authority
-
-
Mr. Givens has substantial knowledge and experience in M&A and corporate governance
-
As a U.S. corporate lawyer based in Tokyo for over 30 years, he has been involved in numerous mergers and acquisitions and has advised investors and public companies on a variety of governance and M&A matters
-
Author of numerous articles and books on M&A and corporate governance
-
Has served on advisory boards of publicly traded companies
-
-
With his extensive experience in the U.S. and knowledge of U.S. corporate law, Mr. Givens is able to leverage best practices in governance and M&A
-
Stephen Givens is completely independent of Fuji Soft and 3D
-
Stephen Givens has no past or present commercial or business relationship with Fuji Soft or 3D
-
