The FamilyMart buyout and the fight over a fair price for minority shareholders (2020)

Unwinding a parent-child listing, and the weight of minority-shareholder protection

The core of this decision is the question of who sets the buyout price, and how, when a parent holding a majority takes a listed subsidiary private. In a deal where Itochu, holding 50.1%, buys up the rest, the choice left to minority shareholders narrows to two — sell at the offered price, or be squeezed out compulsorily at that same price. The fairness of the price is therefore the linchpin of the mechanism. The tender offer succeeded and the take-private was completed, but because the district court allowed a $3 (¥300) addition, it was settled after the fact that the original $22 (¥2,300) had not been enough for the minority shareholders.

For Itochu, the strategic aim of folding the convenience-store business into an integrated trading-house operation was achieved. What remained was the question of how far a special committee and a third-party valuation can protect minority interests when a controlling shareholder takes a company private. This case left concrete material for the debate over how to secure minority-shareholder protection in unwinding parent-child listings and in MBOs. That the courts, three years after the deal closed, re-examined whether the acquisition price had been appropriate itself mirrors the tension that trails the take-private of any company with a controlling shareholder.