January 6, 2005
Dear Mr. Akai:
In regard to your letter dated December 24, 2004, as supplemented by telephone conversations with the staff, this response is attached to the enclosed photocopy of your correspondence. By doing this, we avoid having to recite or summarize the facts set forth in your letter. Unless otherwise noted, each defined term in this letter has the same meaning as defined in your letter.
The United States Securities and Exchange Commission (the "Commission") hereby grants an exemption from Rule 14e-5 under the Securities Exchange Act of 1934 (the "Exchange Act") on the basis of your representations and the facts presented, but without necessarily concurring in your analysis, particularly in light of the facts that:
The Commission grants this exemption from Rule 14e-5 under the Exchange Act to permit Nippon Broadcasting System, Incorporated to comply with the Commercial Code and purchase shares in the event that one or more odd-lot holders exercise their Statutory Puts during the offer.
The foregoing exemption from Rule 14e-5 under the Exchange Act is based solely on your representations and the facts presented, and is strictly limited to the application of this rule to the proposed transactions. Such transactions should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations.
In addition, your attention is directed to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 10(b) and 14(e) of the Exchange Act, and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the participants in the offer. The Division of Market Regulation expresses no view with respect to any other questions that the proposed transactions may raise, including, but not limited to, the adequacy of disclosure concerning, and the applicability of any other federal or state laws to, the proposed transactions.
For the Commission,
James A. Brigagliano
December 24, 2004
Securities and Exchange Commission
Office of Trading Practices and Processing
Re: Request for Exemption from Rule 14e-5
Dear Mr. Brigagliano:
We are writing on behalf of our client, Fuji Television Network, Incorporated ("Fuji"), a Japanese joint stock corporation, to follow up on our recent telephone conversations and to request that the Securities and Exchange Commission (the "Commission") grant a limited exemption from compliance with the provisions of Rule 14e-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") for certain purchases required by Japanese law in connection with the proposed tender offer by Fuji, for the outstanding shares of common stock, no par value, of Nippon Broadcasting System, Incorporated ("Target"), a Japanese joint stock corporation, which is likely an affiliate of Fuji.
As previously discussed with members of the staff of the Commission, the offer will be made in cash to all holders of common stock and is expected to be for the number of shares of Target necessary to increase Fuji's shareholding to a majority of Target's issued and outstanding common stock, with settlement occurring in Japan and the cash purchase price expressed in Japanese yen. The offer will be structured so as to comply with the laws of Japan, the jurisdiction with the primary nexus to both Target and Fuji, and the greatest interest in the conduct of the offer. See "Background". In addition, except for the limited exemption requested, the offer will also comply with the applicable provisions of Regulation 14E under the Exchange Act and the other applicable rules and regulations promulgated under the Exchange Act. The offer will be coordinated by Daiwa Securities SMBC Co. Ltd. as the tender offer agent.
Fuji, a joint stock corporation organized under the laws of Japan, is one of Japan's leading broadcast television and media companies. It engages primarily in television broadcasting, television and movie production and related businesses, as well as direct marketing, software development, publishing and other businesses. The principal trading market for Fuji's common stock is the Tokyo Stock Exchange. Fuji is a foreign private issuer as defined in Rule 3b-4(c) under the Exchange Act. Fuji has no class of securities registered under Section 12 of the Exchange Act and is not and has never been subject to the periodic reporting requirements of the Exchange Act.
Target, a joint stock corporation organized under the laws of Japan, is a radio broadcast company in Japan engaged primarily in AM radio broadcasting, radio program and event production and related businesses. Substantially all of Target's operations are conducted in Japan. Substantially all of Target's properties and executive offices are located in Japan, and substantially all of its revenues are derived from its radio broadcasting and production activities in Japan. The principal trading market for Target's common stock is the Tokyo Stock Exchange. Target is a foreign private issuer as defined in Rule 3b-4(c) under the Exchange Act. Target has no class of securities registered under Section 12 of the Exchange Act and is not and has never been subject to the periodic reporting requirements of the Exchange Act.
Relationship between Fuji and Target
Fuji believes that Target is likely an affiliate of Fuji for purposes of Rule 14e-5 under the Exchange Act. At September 30, 2004, Target owned 573,704 shares, or approximately 22.51%, of the 2,548,608.40 outstanding shares of Fuji and was Fuji's largest shareholder of record. At September 30, 2004, Fuji owned 4,064,660 shares, or approximately 12.39%, of the 32,800,000 outstanding shares of Target. According to Target's most recently available semi-annual report in Japan, the largest shareholder of Target is MAC Co., which owned 16.64% of Target's outstanding shares as of September 30, 2004.
The Common Stock and the Statutory Put
The Commercial Code of Japan (the "Commercial Code") provides for a unit share system under which a certain number of shares of a joint stock corporation as specified in its articles of incorporation constitute a unit. Target's articles of incorporation provide that ten shares constitute a unit. The Commercial Code imposes significant restrictions and limitations on holdings of common stock that do not represent one unit or integral multiples of a unit. For example, under the Commercial Code, companies may choose not to issue certificates for shares representing less than one unit by providing so in their articles of incorporation, in which case certificates for shares representing less than one unit may only be issued in certain limited circumstances. Because the transfer of shares requires delivery of share certificates, fractions of a unit for which no certificates have been issued are not transferable. In addition, a holder of shares representing less than one unit cannot exercise any voting rights with respect to such shares.
Due to such limitations and restrictions, the Commercial Code grants a holder of shares representing less than a unit a right to require the company to purchase such shares. Pursuant to such provision of law, Target is required to purchase, at any time, at the request of a holder, such holder's common stock representing less than a unit (the "Statutory Put"). Target must make such purchases at a price equal to the closing price of the shares on the relevant market or markets on the day when such request is served on Target's transfer agent.
With respect to the number of shares of Target held as less than a unit, the semi-annual report of Target indicates that as of September 30, 2004, there were 30 such odd-lot shares, representing less than .000001% of Target's outstanding shares.
The Japanese laws and regulations governing tender offers are set forth in the Securities and Exchange Law of Japan ("SEL"), as amended, the Securities and Exchange Law Enforcement Order, various Ministerial Ordinances issued by the Cabinet Office of Japan, the Commercial Code of Japan relating to joint stock corporations and certain related legislation, and the business regulations of the stock exchanges in Japan.
At a meeting of the Board of Directors of Fuji to be held on or around January 17, 2005, the Board of Directors is expected to consider taking appropriate action to conduct the offer for the number of the outstanding publicly held shares of the common stock of Target necessary to increase Fuji's shareholding to a majority of Target's issued and outstanding common stock in accordance with the SEL. The cash purchase price will be expressed in yen with settlement in Japan.
It is presently contemplated that the offer will commence on or around January 18, 2005. Fuji will not tender its shares in response to the offer.
In Japan, holders of common stock may tender shares pursuant to the offer by submitting to the tender offer agent a completed tender offer application form, accompanied by share certificates representing the number of shares to be tendered pursuant to the offer. In order to participate in the offer, holders of common stock outside of Japan will have to notify their respective standing agents in Japan. Such standing agents will submit completed tender offer application forms and share certificates to the tender offer agent on behalf of such foreign holders who wish to tender into the offer.
Request for Exemption Under Rule 14e-5
Pursuant to Rule 14e-5 under the Exchange Act, as an affiliate of Fuji, Target may not purchase any shares outside of the offer while the offer remains open. As noted above, the Commercial Code mandates the Statutory Put for all holders of shares constituting less than a unit. The Statutory Put enables a holder of less than a unit to require Target to purchase such shares at any time, including during the offer. As discussed above under "The Common Stock and the Statutory Put," the aggregate number of shares held in such odd-lots is less than .000001% of the number of shares outstanding.
Basis for Exemption
It is our view that a limited exemption from the application of Rule 14e-5 with respect to purchases by Target pursuant to the Statutory Put is consistent with policy statements of the Commission in connection with the adoption of Rule 14e-5 in January 2000. We note also that in the past the Commission has granted substantially similar requests for exemptive relief for the Statutory Put under Rule 14e-51 and, prior to the adoption of Rule 14e-5, under Rule 10b-13.2
Rule 14e-5 is designed to protect the investors by "preventing an offeror from extending greater or different consideration to some security holders by offering to purchase their shares outside the offer, while other security holders are limited to the offer's terms.3 The Commission has recognized that a strict application of Rule 14e-5 could disadvantage U.S. security holders in some situations. In this context, the Commission has noted that "flexible application of Rule 14e-5 is necessary and appropriate to encourage offerors for the securities of foreign private issuers to extend their offers to U.S. security holders."4 In addition, we note that, in adopting Rule 14e-5, the Commission excepted other purchases by a covered person which, like the Statutory Put, are made pursuant to an obligation that existed prior to the public announcement of a tender offer without any exercise of discretion during the offer period on the part of the covered person.5
As a result of the statutory requirements of the Commercial Code and the immaterial number of shares held by odd-lot holders, Fuji requests that the Commission grant a limited exemption from Rule 14e-5 under the Exchange Act to enable Target to comply with the Commercial Code in the event that one or more odd-lot holders exercise the Statutory Put prior to the expiration of the offer. In the event that this exemption is granted, Fuji intends to include appropriate disclosure in the Japanese offering materials regarding the possibility of the exercise by odd-lot holders of the Statutory Put during the offer.
Pursuant to 17 C.F.R. 200.81(b), we respectfully request on behalf of Fuji that this exemptive request and the response be accorded confidential treatment until 120 days after the date of the response to such request or such earlier date as the staff of the Commission is advised that all of the information in this letter has been made public. This request for confidential treatment is made on behalf of Fuji for the reason that certain of the facts set forth in this letter have not been made public.
* * *
Should you have any questions regarding the foregoing, please contact Bradley Edmister at 81-3-3213-6138 or me at 81-3-3213-6145.
Very truly yours,
/s/ Izumi Akai
cc: Bradley Edmister
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