With SEC comment and response letters now available on the SEC’s website, Kevin Miller of Alston & Bird sent over the following example of the level of detail that you sometimes see in SEC comments regarding fairness opinions. In a note to Comment 22 below, Kevin highlights an issue that still seems to catch many companies – and their counsel – by surprise.
The comments and responses below relate to IAC/Interactive’s Form S-4 filed on April 26, 2005 and are excerpted from this response letter (and here is the Amended Form S-4 filed in connection with the responses):
Opinions of Ask Jeeves’ Financial Advisors, page 39
20. Comment: Please disclose why the board chose to hire two financial advisors. Also, disclose the amounts known or estimated to be received by Allen & Company and Citigroup and their affiliates for services rendered to the Company for the previous two years. See Item 1015(b) of Regulation M-A.
Response: In response to the Staff’s comment, the disclosure has been revised on page [•]. [Note: See Risk Factor on Page 26 of amended S-4 regarding Allen & Company conflicts.]
21. Comment: Please supplementally send us a copy of the board book and any other materials prepared by Allen & Company and Citigroup to assist the board in evaluating the transaction. Also, provide us with a copy of the engagement letters.
Response: Ask Jeeves has informed the Company that Allen & Company and Citigroup will be sending to the Staff under separate cover copies of their respective engagement letters and Board Books that were delivered to the Ask Jeeves board of directors.
22. Comment: To the extent Allen & Company and Citigroup relied on management projections in their analyses, these projections should be disclosed in this filing.
Response: Ask Jeeves has informed the Company that although in the course of their respective due diligence each of Allen & Company and Citigroup reviewed certain Ask Jeeves’ projections, Ask Jeeves has been advised by Allen & Company and Citigroup that neither relied upon any of such projections in its analysis.
[Kevin’s Note: The issue here is the SEC’s propensity to seek disclosure of projections even if they were only disclosed to a party’s own financial advisor – In connection with the Sprint/Nextel Merger, the SEC comment read in part: “Please note that disclosure of financial forecasts prepared by management is generally required if the forecasts were provided to a third-party financial advisor, including a merging party’s advisor. Accordingly, please disclose all material projections that were exchanged among Sprint, Nextel and their respective financial advisors, or advise us why they are not material. For example, please disclose the “certain financial forecasts and other information and data relating to Sprint and Nextel which were provided to or otherwise reviewed by or discussed with Citigroup by the respective managements of Sprint and Nextel…” Also disclose the potential pro forma impact of the merger, including cost savings, operating synergies and non-cash purchase accounting adjustments. You may explain the limited purpose of the prepared forecasts and provide other information so that shareholders better understand the forecasts` scope and purpose.”]
Opinion of Allen & Company LLC, page 39
23. Comment: Please describe the relationships, discussed on page 40, between Allen & Company and IAC and Ask Jeeves and the potential conflicts of interest arising from these relationships in the risk factors section.
Response: In response to the Staff’s comment, the disclosure has been revised on page 62.
24. Comment: Please revise the discussion of the various analyses used by Allen & Company so that recipients of the proxy statement/prospectus can understand exactly what each analysis indicates. What are they used to show? We offer some additional guidance in the comments below. As a general matter, for each analysis, please provide sufficient explanation of each step of the analysis and its conclusion such that an investors will understand how this analysis supports a conclusion that the transaction is fair.
Response: In response to the Staff’s comment, the disclosure has been revised. See page 56 through 61 (with respect to the opinion of Allen & Company) and pages 62 through 73 (with respect to the opinion of Citigroup).
25. Comment: Also, for each analysis, indicate what observations or conclusions the Ask Jeeves board reached with respect to the information that these calculations provide.
Response: Ask Jeeves has informed the Company that its board of directors did not make any specific observations or reach any specific conclusions with respect to any of the individual analyses presented by their financial advisors, but rather the board of directors reviewed and digested the analyses in their totality in reaching the board’s conclusions with respect to the advisability of the merger. The disclosure has been revised on page 54 to reflect the foregoing.
Analysis of Historical Trading Activity, page 40
26. Comment: To assist an investors understanding of the Historical Trading Analysis, please revise to use a graphical or tabular format.
Response: In response to the Staff’s comment, the disclosure has been revised on page 56.
Analysis of IAC Based on its Business Segments, page 41
27. Comment: Please clarify what OIBA refers to in the first column.
Response: In response to the Staff’s comment, the disclosure has been revised on page 57.
Analysis of Premium Paid in Comparable Merger Transactions, page 42
28. Comment: When you speak of an implied premium that the instant exchange ratio represents to comparable merger transactions, disclose the price implied by this exchange ratio.
Response: In response to the Staff’s comment, the disclosure has been revised on page 58.
Analysis of Premium Reflected in the Exchange Ratio, page 42
29. Comment: If Allen & Company calculated the premium of the merger consideration in comparison to additional average closing prices besides the 30 day trailing average (for instance, 90 day and 180 day trailing averages), please disclose these figures also.
Response: Ask Jeeves has informed the Company that neither Allen & Company nor Citigroup compared the premium of the merger consideration to the average closing prices for any other or longer period of time than the 30 day trailing average.
30. Comment: Include a textual discussion explaining the point of the graphs on page 43. In particular, describe how the instant transaction compares to others included in the survey. Also, explain what you mean by the statement that the instant exchange ratio indicates a premium “within the range of premiums paid in the comparable merger transactions”—it appears that this transaction falls at the lower end of each of the ranges provided.
Response: In response to the Staff’s comment, the disclosure has been revised. See pages 58 through 59 (with respect to the opinion of Allen & Company) and pages 69 through 71 (with respect to the opinion of Citigroup).
Analysis of Selected Comparable Merger Transactions…, page 44
31. Comment: Describe the criteria used to select comparable companies.
Response: In response to the Staff’s comment, the disclosure has been revised. See page 61 (with respect to the opinion of Allen & Company) and page 66 (with respect to the opinion of Citigroup).
32. Comment: Discuss the results of Allen & Company’s comparable transaction analysis. For instance, how does this transaction compare to the low, mean and high.
Response: In response to the Staff’s comment, the disclosure has been revised. See page 61 (with respect to the opinion of Allen & Company) and page 66 (with respect to the opinion of Citigroup).
Opinion of Citigroup Global Markets Inc., page 46
33. Comment: Please revise to conform with above comments regarding Allen & Company’s opinion. Generally, provide a textual discussion that describes what each of the analyses, including the graphical and tabular content, means to an average investor.
Response: In response to the Staff’s comment, the disclosure has been revised on pages 54-62.
From ISS’ Friday Report: The Pension Fund Association (PFA), which represents Japan’s corporate pension funds, plans to vote against directors who adopt “poison pill” plans and other takeover defenses without seeking shareholder approval.
The influential PFA manages 12 trillion yen in assets (approximately $104 billion), 4 trillion yen of which are invested in major domestic, exchange-listed corporations. While the association’s investments represent only a small fraction of Japanese corporate pensions, it acts as a manager of last resort for insolvent funds.
Beginning with annual meetings in May, the PFA said it will vote against incumbent directors at companies that adopt poison pills without seeking shareholder approval of such provisions. The PFA also will oppose takeover defenses that can be implemented at the sole discretion of the board of directors, according to the Nihon Keizai Shimbun.
The PFA is responding to the increasing number of Japanese companies that have implemented takeover defenses or have announced plans to do so this year.
The PFA is focusing on companies with the “advance notice” (or “advance warning”) poison pill, such as the defense announced by Matsushita Electric in March. These defenses may or may not appear on corporate ballots, and contain limited detail on how options or other securities would be used to dilute the value of a raider’s equity position, or precisely what would trigger the issuance. Following court rulings last year that invalidated more detailed poison pill plans at Nireco and other firms, the “advance notice” model appears to be gaining currency among a small but growing number of Japanese firms.
In the past, the PFA has supported “chewable” plans–those put forth for shareholder approval, that have a sunset provision of at most three years, and other features designed not to deter well-financed bids that an “independent committee” deems to be in the interest of shareholders. But the new advance notice pills appear to leave considerable discretion to the board of directors to determine whether and how to deploy the pill.
So far, there have been seven advance notice pills and one “trust type” pill (where warrants are issued to a trustee) among the 265 firms that held their meetings during the first three months of the year, according to ISS data. Of those eight firms, five put their defenses in place without a shareholder vote. Approximately 80 percent of Japanese firms will not hold their annual meeting until June.
The PFA is calling on companies to provide a full description of their plans and to put them to a shareholder vote at their annual meetings. The association has set four conditions for supporting any poison pill, but those standards still leave the PFA with significant discretion that may invite corporate lobbying:
– Management must provide “adequate explanation” of how the defense would be “useful” in boosting long-term shareholder value.
– The firm must seek advance shareholder approval of the pill plan’s details.
– The pill plan must clearly spell out what would actually trigger the action to dilute a raider’s position, as well as conditions that would preclude such action, “such as oversight by a committee of non-executive directors.”
– Any plan must have a two- to three-year sunset provision.
In addition, the PFA said it will “in principle oppose” these other defensive proposals by management:
– Issuance of “golden shares” (a share class with veto power over major company policies), shares with multiple voting rights, or any “dead hand” takeover defenses.
– Increases in authorized shares outstanding, or changes to the bylaws giving the board discretion to move the record date for the right to vote at shareholder meetings. However, the PFA said it would consider voting for these resolutions if management provides an “adequate explanation” that the changes would not be used as a takeover defense.
The PFA is also opposing article changes that would make it more difficult for shareholders to oust directors. Japan’s Company Law was recently amended to allow shareholders to oust a director by a simple majority. However, companies may alter their bylaws to restore the two-thirds requirement that applied before April. There have been four such proposals this year–at Senshu Electric, SBS Co., Internet service provider GMO Internet and network equipment manufacturer Allied Telesis Holdings–as well as 11 such bylaw changes in late 2005.
This report updates my blog from Monday on this topic: Earlier this week, several news reports suggested that Goldman Sachs had sworn off financing hostile takeovers because of concern that its recent participation in some uninvited bids was hurting its relations with clients. A spokesman for the securities firm, however, is making the case that Goldman’s policy has not changed.
Here is how the spokesman, Lucas van Praag, was quoted by Bloomberg News.
“We have a longstanding policy that we will not invest as a principal in the takeover of a public company without a board recommendation,” Mr. van Praag said in an interview. “That policy remains unchanged.”
But Mr. van Praag’s statements also acknowledged that there a fine line between unsolicited bids — which Goldman will help finance — and hostile bids — which it says it will not.
He explained it this way to Dow Jones Newswires:
“Some boards have a view that any unsolicited approach constitutes hostility. We don’t want our franchise to be damaged because other people mischaracterize what we’re doing.”
Goldman in recent weeks participated in a spate of unsolicited offers for British companies. The offers weren’t hostile, because Goldman didn’t bypass the companies’ boards and directly solicit shareholders, van Praag said.
Given “heightened sensitivities in London,” however, Goldman Sachs’ chief executive, Henry Paulson, felt it worth restating Goldman’s philosophy on hostile deals. “We will act as an adviser and provide debt financing, but our longstanding policy is that we will not invest as a principal in the takeover of a public company without a recommendation of that company’s board,” Van Praag said.
Meanwhile, The Financial Times is giving some background to Goldman Sachs’ decision to drop out of the consortium bidding for British pub chain Mitchells & Butlers. The newspaper reports that the move was prompted by the chairman of Mitchells & Butlers after he told the investment bank its proposed offer was “hostile and inappropriate.”
April 18, 2006 11:40 PM ET
Goldman exit triggered by ‘hostile’ comment
Goldman Sachs’ withdrawal from the consortium bidding for Mitchells & Butlers was triggered by the chairman of the UK pub chain after he told the investment bank its proposed offer was “hostile and inappropriate”.
According to people familiar with the matter, Roger Carr delivered his message to Goldman last week after the bank approached M&B with a £4.6bn debt-and-equity offer on behalf of a consortium in which it was one of the largest participants.
Since then Hank Paulson, Goldman’s chairman and chief executive, has told bankers that the bank’s principal investment funds should not be used in hostile situations.
The warning follows several setbacks in which Goldman was a participant in consortia that made unsolicited approaches to UK companies including ITV, Associated British Ports and BAA. Mr Paulson’s move highlights the need for Goldman to balance private equity investments with long-established corporate client relationships.
Mr Carr is also chairman of Centrica, the UK energy supplier, and deputy chairman of Cadbury Schweppes, the food and soft drink group. Goldman acts as corporate broker to both Centrica and Cadbury. Last year it advised Cadbury on the sale of its European beverages arm.
There had been concerns that even though none of the bids in which Goldman was recently involved in turned fully hostile, they were perceived as such.
Goldman insiders on Tuesday stressed the bank would not invest in hostile bids. “If a chairman of a company we have made an approach to says he is not interested then we go away,” said one executive. “We do not engage our equity in hostile public bids.” Nevertheless, Mr Paulson’s intervention signals concerns that Goldman’s involvement in recent bids for public companies was straining relationships with corporate clients.
The bank has been at the vanguard of pursuing private equity investments on its own account, many of which have been highly profitable. Last year Goldman raised a $8.5bn fund, making it one of the largest players in the private equity industry.
Goldman’s withdrawal has left R20, the private equity investment vehicle being used in the bid for M&B, looking for an adviser and a debt provider to fully finance a formal approach.
R20 said last week it intended to follow its informal approach with a formal offer. However, Mr Carr said that, in the interests of transparency and clarity, he would only consider a formal written offer – something the consortium is currently unable to provide.
The NY Times’ DealBook has this interesting story: Goldman Sachs‘ C.E.O. has reportedly ordered an end — with some exceptions — to the firm’s financing of hostile takeovers, a move that suggests the investment bank is not immune to the kinds of conflicts of interest that have snagged its peers.
The Financial Times reported on Tuesday that Henry Paulson told Goldman executives that funding unsolicited takeovers “threatened the bank’s standing with corporate clients, which he said was more important than profits from any single deal.”
Reuters, confirming the general gist of the story, reported that Mr. Paulson had “asked bankers in the firm to consider carefully its actions when it is putting its money behind unsolicited or hostile transactions.”
Goldman has taken a role in several large, unsolicited bids of late, including a proposal to buy British airport operator BAA. Though that approach was portrayed as a “white knight” effort to fend off hostile suitor Ferrovial, BAA did not welcome the move. Goldman Sachs also backed bids for United Kingdom-based television network ITV and Associated British Ports.
One potential danger of participating in these kind of deals is that Goldman may seem to be competing, as a bidder, with the same clients it advises on mergers and acquisitions.
But there could be other reasons to dial back such activities, according to Breakingviews. For one thing, these kinds of private equity-backed “bear hugs” often fail because, ironically, the players are afraid to go fully hostile. For another, Goldman might end up offending its private equity co-investors — also important clients — if it drops out of the running while they want to press on.
From an ISS article: Media giant News Corp. and an international group of institutional shareholders have settled a lawsuit concerning the company’s poison pill takeover defense, according to an April 6 announcement by lawyers representing the shareholders.
The investors’ suit, filed in October by U.S., European, and Australian pension funds, including the Connecticut Retirement Plans and Trust Funds and the Australian Council of Super Investors (ACSI), argued that the media company broke a promise to shareholders when it decided in August 2005 to extend its poison pill for another two years. In 2004, management, seeking shareholder approval to incorporate in Delaware, pledged that the company would refrain from activating a pill for more than 12 months without the prior approval of shareholders.
The settlement averts a trial in Delaware Chancery Court that was to start April 24. Under the accord, News Corp. will put a management proposal on the ballot at its October annual meeting to extend the pill by two years. That proposal would also allow management to extend the pill by an additional year, but only if necessary to address concerns over moves by Liberty Media to acquire a controlling interest in News Corp. The company has said the pill was extended without shareholder approval to ward off the possibility of a hostile takeover by Liberty.
Lawyers representing the investor plaintiffs also said the proposal would give shareholders the “right to vote on subsequent poison pill provisions for the next 20 years.”
“Concerns about conflicts of interest and the current buoyant state of the debt markets have meant fewer M&A deals so far this year have come with much-criticized, but lucrative “stapled” financing attached, according to M&A professionals. “Banks are moving away from stapled financing,” said Philip Richter, a corporate partner with Fried Frank in New York.
Shifting free dynamics make this quite clear. Financing has been generating a growing share of the total fees in LBOs-up to 50% in 2005 from 38% in 2003, according to Freeman & Co., which estimates fees. But in deals in which advisers offer stapled financing, that financing accounted for 34% of total fees in 2005, down from 52% in 2003, according to Freeman.
Stapled financing is an offer to finance an acquisition made by an adviser to the target. The name comes from a sheet offering financing that is sometimes literally stapled to the term sheet of the deal.
By providing stapled financing, the adviser stands to collect both advisory fees from the target and financing fees from the buyer, which are usually larger. However, the staple generally offers less aggressive terms than the buyers could get by going to other banks, so many say that in the current easy financing market, a staple is often more trouble than it’s worth.
One reason that companies and banks are pulling back is that the practice recently has attracted some legal scrutiny, most prominently from a Delaware judge in a shareholder lawsuit over the buyout of Toys R Us, in which Credit Suisse worked both sides of the deal. The bank advised Toys R Us on its sale to a consortium of private equity funds, and also took part in the financing. While the Delaware judge did not say there was a conflict, he said the bank’s work raised eyebrows as it gave the appearance of conflict.
Critics, mostly independent boutiques, say that the practice can be downright harmful to the target. Because the fees on the staple are lucrative, the target’s bankers may show preference to the buyer that opts for the stapled package. And because the package is usually less aggressive, some argue that the target could end up being valued for less than it would be had a different buyer with a competing bid won the deal.
In fact, this argument also can be used against boards that go along with a stapled deal-some M&A lawyers now advise boards of companies that consider selling themselves to turn down stapled financing offers for fear of shareholder suits. In fact, shareholders in the Toys R Us case claimed that the company did not get as high a price as it could have.
In any event, lawyers believe a board offered a staple by its adviser should protect itself by getting another opinion. “If a bank provides stapled financing, the board will almost always bring another adviser because the target adviser may be conflicted,” said Richter.
That is not to say stapled financing is dead. One recent deal that has caught Wall Street’s attention is the $3 billion buyout of Education Management by a private equity consortium. It is not clear whether a formal stapled financing package is attached to the deal, but Merrill Lynch, which is advising the target, is reported to be also part of the financing group for the buyers. Merrill Lynch did not return a call.
Some large investment banks, such as Goldman Sachs and Morgan Stanley, say they continue to offer staples, but only when the client stands to benefit. Sometimes a staple can be used strategically to establish a floor for the financing, and buyers will then take the terms and shop around. Or it can be used when a company has a unique market niche or product that is not widely understood.”
Yesterday, the SEC released the NASD’s proposed new Rule 2290 for comment on disclosures and procedures concerning the issuance of fairness opinions. Comments are due 21 days after publication in the Federal Register.
A quick glance does not indicate that the proposed rule upon which the SEC is soliciting comment is materially different than the rule proposal submitted by the NASD (as amended), though there is some interesting commentary, particularly regarding the NASD’s rationale for insisting that the proposed new required procedures include “a process to evaluate whether the relative compensation to corporate insiders versus other shareholders in a contemplated transaction is a factor in reaching a fairness opinion.”
Interestingly, the SEC is requesting comment on whether to expand the disclosure requirements to cover material relationships with affiliates of members (potentially including commercial banks, asset managers, insurance companies, etc.). This differs from Amendment No. 1 to the proposed rule in which the NASD said it wanted to review comments on whether to expand the disclosure requirements to cover material relationships with affiliates of the transaction participants rather than just the transaction participants themselves. (see bottom of page 3, top of page 4).
This issue goes back to the November 2004 NASD Notice to Members soliciting comment on whether the NASD should propose a new rule regarding fairness opinions, without specifying any specific rule text. The NASD received 20 comment letters, of which 12 favored rules, 7 were opposed and 1 expressed no opinion. The NASD then filed the proposed rule with the SEC on June 24, 2005, and Amendments Nos. 1 and 2 on November 30, 2005 and January 25, 2006, making certain changes following discussions with the SEC Staff. Amendment No. 3 was filed with the SEC on March 1, 2006.
Conducted since 1999, the Annual Deal Points Study is now available for ABA members. Published for the first time under the auspices of the ABA, the study is split into public and private targets. [I have pushed this study since way back when I was editor of The M&A Lawyer; it’s a great piece and I will get Wilson and Larry on a podcast soon as you may find some of the statistics surprising. Here’s an interview with them regarding the results of an older study.]
The Public Target Deal Points Study examines 97 transactions with transaction values greater than or equal to $100 million in 2004 based on information from LivEdgar (of which 7 were tender offers), plus two additional tender offer transactions with transaction values of less than $100 million. The study looks at percentages of transactions that included certain provisions or variations on certain types of provisions in the context of public company transactions including:
1. Target Reps and Warranties (e.g., financial statements – fair presentation; no undisclosed liabilities; full disclosure)
2. Closing Conditions and Termination Rights (e.g., accuracy of target reps; no MAC; legal opinions; retention of employees, no governmental litigation; no non-governmental litigation; resignation of directors; availability of financing; decrease in buyer’s stock price)
3. Deal Protection (e.g., fiduciary out to no-talk; fiduciary out to board recommendation; fiduciary/superior proposal termination right; breakup fee triggers)
4. Other data (D&O indemnification and insurance)
5. Tender offer data
[Note: The Public Target Deal Points Study didn’t look at acquisitions by private equity buyers.]
The Private Target Deal Points Study examines 128 transactions with transaction values between $25 million and $2.5 billion completed in 2004 based on information from LivEdgar, of which 59% were all cash, 11% were all stock and 30% involved mixed consideration. In addition, 16% signed and closed immediately. The study looks at percentages of transactions that included certain provisions or variations on certain types of provisions in the context of private company transactions including:
1. Target Reps and Warranties (e.g., SOX-influenced representations; no undisclosed liabilities; full disclosure)
2. Conditions to Closing (e.g., accuracy of Target reps; no MAC; legal opinions)
3. Knowledge qualifiers
4. Indemnification (e.g., sandbagging; survival of reps and warranties; baskets; caps; exclusive remedy; escrows)
From the April Issue of GovernanceMetrics International’s “In Focus”: The European Commission has urged against “nationalist rhetoric” and promised to uphold laws against protectionism. However, recent months have seen extraordinary protectionist and anti-takeover stances taken by governments around Europe.
– Germany’s power group Eon is bidding to acquire Spain’s Endesa S.A., the former Spanish electric monopoly, and the EU has cautioned Spain’s government not to use illegal anti-takeover measures. The EU’s regulators are seeking to build a single European energy market, but Spain clearly wants to keep its leading power and gas company under its own control. The Spanish government had backed a rival bid for Endesa by Barcelona-based Gas Natural, but Eon’s bid of 29.1B Euros ($34.7B) is the largest ever bid in the utilities industry, and few believe that any other industry players can match the German’s all-cash offer. The Spanish government holds a golden share in Endesa, but Spain’s prime minister said it would be used only in extraordinary circumstances. The EU has warned that any attempts by Spain to block the merger would be a violation of EU regulations. However, Spain recently overhauled its energy laws
– France recently announced that the country is amending its takeover laws to allow companies to launch poison pill defenses in response to hostile takeovers. The measure entails a reciprocity requirement whereby the poison pill could be used only if the hostile bidder has a similar right and only if the poison pill were approved by a shareholder vote. Still, the move has aroused accusations of protectionism. France has also taken measures to protect French-Belgian utility Suez, which may be the target of Italian utility giant Enel. France has begun a merger between Suez and state-controlled French utility Gaz de France, which would effectively fend off Enel’s bid. EU regulators have stated that France may have broken market rules by engineering the $40B merger.
– Luxembourg, where steelmaker giant Arcelor is the target of a hostile takeover by Mittal Steel, also recently adopted a “reciprocal” law in an effort to strengthen Arcelor’s defense. Moreover, the country is also working on a bill to allow companies, and Arcelor in particular, to adopt poison pills without shareholder approval. France and Spain, where Arcelor also has main locations, is joining Luxembourg in opposing Mittal’s $22.3B bid, but Mittal has stated that the deal would not entail job losses or changes to labor agreements. Critics of the deal have questioned Mittal’s governance profile. Lakshmi Mittal holds both the chairman and CEO positions, his 28-year-old son is the company’s CFO, and the family owns 88% of the company’s stock.
– Italy has also considered toughening its takeover laws, as the country already holds golden shares in many of its largest utility companies.
– Poland has been warned not to impede Italy’s UniCredito Italiano from acquiring BPH, Poland’s third-largest bank. Poland has opposed the takeover, claiming that UniCredito already owns Poland’s second largest bank and that the merger would violate privatization agreements and disrupt the stability of the country’s banking system.
While Japan Introduces Approval Requirements on Anti-Takeover Measures
The Tokyo Stock Exchanged announced in early March that listed companies must gain approval from the TSE before adopting anti-takeover measures, such as golden shares or poison pills. The TSE will consult neutral third parties before granting approval to such defenses in the interest of protecting the rights of investors. The TSE stated that it will disclose the names of firms that introduce defensive measures without seeking approval first, and companies face the threat of delisting if golden shares are not removed after the TSE has denied the approval request. The TSE plans to grant approval for golden shares only in limited cases, such as for privatized companies.