## Facts

- A listed holding company experienced substantial losses and downward revisions of earnings forecasts, followed by a sharp decline in share price.
- A private equity sponsor formed a special-purpose vehicle to acquire the company through a management buyout (MBO) and launched a tender offer at ¥230,000 per share, which the board supported.
- The transaction contemplated a two-step squeeze-out: (1) tender offer, then (2) compulsory acquisition of remaining shares through a call-feature class-share mechanism.
- Over 90% of shareholders tendered, but a minority refused, contending the offer price was too low and objecting to the timing of earnings revisions shortly before the tender offer.
- Dissenting shareholders petitioned for judicial determination of the acquisition price payable for the compulsory acquisition under the governing corporate statute.
- The trial court largely accepted the tender-offer price as appropriate.
- The intermediate appellate court raised the acquisition price to ¥336,966 per share by using a six-month pre-announcement average market price and adding a 20% premium for lost upside and coercive aspects of the squeeze-out process.
- The company sought further review, arguing constitutional error and inconsistency with precedent.

## Issues

1. In an MBO-related squeeze-out using call-feature class shares, what does “acquisition price” mean, and does it correspond to a “fair price” standard?
2. May a court determine a fair acquisition price by relying on a defined pre-announcement market-price average and adding a premium for lost expected gains and the compulsory character of the transaction?
3. To what extent may procedural fairness concerns in an MBO (conflicts of interest, disclosure quality, and potentially pressuring communications) be considered when fixing the acquisition price?

## Decision

- The Supreme Court dismissed the company’s challenges and affirmed the intermediate appellate court’s price determination.
- The Court held there was no constitutional violation and no conflict with controlling precedent.
- The Court treated the lower court’s valuation approach as within the permissible range of judicial discretion in an acquisition-price determination proceeding.
- The acquisition price was fixed at ¥336,966 per share.

## Legal Principles

- In a compulsory acquisition following an MBO, the judicially determined “acquisition price” functions as a fair-price measure compensating dissenting shareholders for the value taken by forced transfer.
- A fair acquisition price may be analyzed as: (1) the value shareholders would have enjoyed absent the MBO, plus (2) the portion of value increase expected from the MBO that shareholders should appropriately receive.
- Courts may use market-based measures (including averaging over a pre-announcement period) as evidence of stand-alone value and may add a premium to address lost expected gains and the compulsory nature of a squeeze-out.
- Because MBOs involve structural conflicts between management and shareholders, courts may consider the transparency and fairness of the transaction process—such as disclosure of valuation materials and whether shareholder communications exert improper pressure—when assessing whether the price is fair.
- Appellate review of acquisition-price determinations is limited; absent constitutional error, conflict with precedent, or clear abuse of discretion, the lower court’s valuation judgment will stand.

## Conclusion

The Supreme Court upheld a substantially increased squeeze-out price in an MBO, confirming that acquisition-price determinations rest largely within lower-court discretion and may incorporate both market-based valuation methods and process-based considerations tied to conflicts of interest and shareholder treatment.


In re Rex Holdings Co., Inc., 1326 Kinyu Shoji Hanrei 35 (Japan Sup. Ct. May 29, 2009)