Division of Market Regulation:
Matsushita Electric Works, Ltd.
Sullivan & Cromwell LLP
Otemachi First Square East 16F
5-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo 100-0004
Re: Matsushita Electric Works, Ltd.
File No.: TP 04-22
Dear Mr. Akai:
In regard to your letter dated December 19, 2003, 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 (Commission) hereby grants an exemption from Rule 14e-5 under the Securities Exchange Act of 1934 (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:
- Matsushita Electric Works, Ltd. is a foreign private issuer within the meaning of Rule 3b-4 (b) under the Securities Exchange Act of 1934 (Exchange Act);
- The tender offer is required to be conducted in accordance with applicable Japanese statutory and regulatory requirements governing tender offers;
- The Commercial Code of Japan (Commercial Code) provides for a Statutory Put for all holders of Shares constituting less than one unit.
The Commission grants this exemption from Rule 14e-5 under the Exchange Act to permit Matsushita Electric Works, Ltd. 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 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, by the Division of Market Regulation, pursuant to delegated authority,
James A. Brigagliano
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Office of Risk Management and Control
Division of Market Regulation
Attention: James A. Brigagliano
Re: Request for Exemption from Rule 14e-5
Dear Mr. Brigagliano:
We are writing on behalf of our client, Matsushita Electric Industrial Co., Ltd. ("Matsushita"), a Japanese joint stock corporation, to follow up on our recent telephone conversations and to request that the Securities and Exchange 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 Matsushita, for the outstanding shares of common stock, no par value, of Matsushita Electric Works, Ltd. ("Target"), a Japanese joint stock corporation and affiliate of Matsushita.
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 Matsushita's shareholding to 51% of Target's issued 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 Matsushita, 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 Nomura Securities Co., Ltd. ("Nomura") as the tender offer agent.
Matsushita, a joint stock corporation organized under the laws of Japan and best known for its "Panasonic" brand name, is one of the world's leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. The principal trading market for Matsushita's common stock is the Tokyo Stock Exchange ("TSE"). Matsushita is a foreign private issuer as defined in Rule 3b-4(b) under the Exchange Act and is subject to the periodic reporting requirements of the Exchange Act. Shares of its common stock are registered under Section 12 of the Exchange Act and American Depositary Shares representing its shares of common stock are listed on the New York Stock Exchange.
Target, a joint stock corporation organized under the laws of Japan, is a manufacturer of lighting products, information equipment and wiring products, home appliances, building products, electronic and plastic materials, and automation control products. The majority of Target's operations are conducted in Japan, the majority of Target's assets and its executive offices are located in Japan, and the majority of its revenues are derived from its sales activities in Japan. The principal trading market for Target's common stock is the TSE. Target is a foreign private issuer as defined in Rule 3b 4(b) 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.
The Common Stock and the Statutory Put
At May 31, 2003, Target had outstanding 717,355,586 shares. Matsushita and one of its affiliates own 233,405,537 shares, or approximately 32.5% of Target's outstanding shares. Based upon Target's most recently available semi-annual securities report and large shareholder filings in Japan, other than Nomura and its affiliates, which held 43,317,252 shares or 6.0% of Target's outstanding shares, including unexercised warrants, at November 30, 2003, there are no holders of five percent or more of Target's common stock other than Matsushita and its affiliate.
The Japanese 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 1,000 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 the Target indicates that as of May 31, 2003, there were 6,149,014 such odd-lot shares, representing less than 0.1% 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 TSE.
At a meeting of the Board of Directors of Matsushita to be held on or around December 19, 2003, 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 Matsushita's shareholding to 51% of Target's issued 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 in late January 2004. Matsushita 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 Matsushita, Target may not purchase any shares outside of the offer while the offer remains open. As noted above, the Japanese 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 0.1% 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 Japan's Commercial Code and the immaterial number of shares held by odd-lot holders, Matsushita 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, Matsushita 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.
In accordance with Rule 0-12 of the Exchange Act, five copies of this letter have been submitted to the Commission.
* * *
Should you have any questions regarding the foregoing, please contact Andrew Winden at 81-3-3213-6137 or Eric Sibbitt at 81-3-3213-6149, in our Tokyo office.
Very truly yours,
Eric C. Sibbitt