Recruit Holdings Announces Share Repurchase through Self Tender Offer

TOKYO, JAPAN (January 28, 2022) - Recruit Holdings Co., Ltd. (TSE: 6098) (the "Company") announced that its Board of Directors resolved today to conduct a share repurchase of its common stock of up to 34,000,000 shares through a tender offer (the "Self Tender Offer") as the specific purchase method pursuant to Article 156, Paragraph 1 of the Companies Act as applied by replacing certain terms pursuant to Article 165, Paragraph 3 of the said Act, and the provisions of the Company's Articles of Incorporation. The Self Tender Offer will be conducted at the purchase price of 4,581 yen, a 10% discount from the closing price of the Company's common stock as of January 27, 2021, the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer, which has been previously agreed with a few Japanese business shareholders who intend to reduce their holdings of the Company's common stock.

The Company recognizes that there has been concern in the capital markets regarding the possibility of uncoordinated sales by its Japanese business shareholders and the potential for downward pressure on its stock price. Previously, when the Company was notified that several of its shareholders intended to reduce their holdings, the Company conducted secondary equity offerings to provide these shareholders with an opportunity to sell a large volume of shares at the same time in a coordinated manner.

Recently, three Japanese business shareholders notified the Company of their intention to reduce their stake in the Company's common stock. The Company has considered the priorities of these shareholders, the potential impact on the Company's share price from large uncoordinated sales of shares over a short period, the capacity to pursue strategic business investments, the capital market environment, and the outlook for its financial position and has determined it is appropriate to acquire its own shares in accordance with the Company's capital allocation policy. Upon examining multiple transaction alternatives, the Company has decided to acquire the shares from these shareholders through the Self Tender Offer at the purchase price of 4,581 yen and has entered prospective tender offer agreements with the three Japanese business shareholders.

The Self Tender Offer at a discounted price from the market price enables the Company to minimize the cash outflow of acquiring its own shares, while enhancing shareholder value.

Outline of the Self Tender Offer

(1)

Class of Shares to be repurchased

Common Stock of the Company

(2)

Method of the purchase

Self Tender Offer

(3)

Purchase price

4,581 yen (10% discount to the base price1)

(4)

Total number of shares to be

34,000,000 shares (Maximum) (up to 2.06% of total

repurchased

number of shares issued excluding treasury stock)

(5)

Total purchase price

155,754 million yen (Maximum)

(6)

Self tender offer period

From Monday, January 31 to

Tuesday, March 1, 2022 (20 business days)

(7)

The prospective tendering shareholders

NTT DATA CORPORATION,

HAKUHODO DY HOLDINGS INCORPORATED,

TOKYO BROADCASTING SYSTEM TELEVISION, INC.

  • 5,090 yen, the closing price of the Company's common stock as of January 27, 2022, the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer.

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The Self Tender Offer will not be conducted, directly or indirectly, in or targeted at the United States, nor through the U.S. postal mail services or other interstate or international commercial methods or means (including, but not limited to, telephone, telex, facsimile, e-mail, and Internet communication), nor through any stock exchange facilities in the United States. No tender in the Self Tender Offer may be made through any of the aforementioned methods or means, through those stock exchange facilities, or from the United States. In addition, neither the press releases related to the Self Tender Offer nor other relevant documents will, or may, be sent or distributed in, to, or from the United States by the postal mail services or other means. No tender in the Self Tender Offer that violates, directly or indirectly, any of the aforementioned restrictions will be accepted. No solicitation to purchase securities or other equivalent instruments is being made to residents in the United States or within the United States. Even if such securities or other equivalent instruments are sent to the Company by residents in the United States or from the United States, they will not be accepted.

1. Purpose of the Share Repurchase

The Company's primary use of capital is to invest for its long-term business strategy in order to achieve sustainable profit growth and increase enterprise value. The Company believes that this approach will contribute to the common interests of shareholders. The Company also considers the return of capital to its shareholders to be an important part of its capital allocation strategy. The Company strives to continuously pay stable dividends considering its long-term cash needs and financial position forecast. The provisions of the Company's Articles of Incorporation provides that the Company can repurchase shares of the Company through market sales pursuant to a resolution at the meeting of its Board of Directors pursuant to Article 165, Paragraph 2 of the Companies Act in order to make it possible to implement flexible capital strategies in response to changes in the business environment and the Company may consider implementing share repurchase programs, depending on the capital market environment and the outlook of its financial position.

For the fiscal year ended March 31, 2021, the Company paid a total annual dividend of 20.00 yen per share, which consists of an interim dividend of 9.50 yen per share and a year-end dividend of 10.50 yen per share, based on a consolidated dividend payout ratio which had been set at approximately 30% of profit attributable to owners of the parent excluding non-recurring income/losses. For the fiscal year ending March 31, 2022, the Company paid an interim dividend of 10.50 yen per share based on the Company's current dividend policy which aims to continue to pay stable dividends, and plans to pay a year-end dividend following its policy.

In order to mitigate the impact on the balance of supply and demand of its shares in the aftermarket and to implement flexible capital policies in response to changes in the business environment, the Company has conducted share repurchases in conjunction with previously announced secondary offerings. The Company repurchased its common stock pursuant to the resolution at the meeting of the Board of Directors held on August 24, 2016 through the Tokyo Stock Exchange Trading Network Off-Auction Own Share Repurchase Transaction System (ToSTNeT-3), which was the specific method of repurchase determined on August 24, 2016 (Period for the share repurchase: Friday, August 26, 2016; Total number of shares repurchased: 7,643,300 shares (ownership ratio as of the share repurchase1: 1.35%); Total purchase price: 29,999,952,500 yen). In line with the capital allocation policy regarding share repurchases that considers the investment, dividend, strategic M&A, market environment and financial outlooks announced on May 14, 2019, the Company conducted share repurchases following the secondary offerings pursuant to the resolutions at the meetings of the Board of Directors held on August 28, 2019 and November 30, 2020, upon consideration of multiple factors including the balance of supply and demand of its shares in the aftermarket following the secondary offerings and enhancement of the return of capital to its shareholders. ((1) Share repurchase by market purchases on the Tokyo Stock Exchange, Inc. through an appointed securities dealer with investment discretion from Thursday, September 19, 2019 through Friday, November 29, 2019 (Total number of shares repurchased:

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22,259,600 shares (ownership ratio as of the share repurchase2: 1.33%); Total purchase price: 79,999,688,129 yen) and (2) Share repurchase by market purchases on the Tokyo Stock Exchange, Inc. through an appointed securities dealer with investment discretion from Monday, December 7, 2020 through Friday, February 26, 2021 (Total number of shares repurchased: 15,157,100 shares (ownership ratio as of the share repurchase3: 0.91%); Total purchase price: 68,576,962,887 yen)).

At the end of October 2021, NTT DATA CORPORATION ("NTT Data", the ninth largest shareholder of the Company, number of shares owned as of the date of the announcement: 28,350,000 shares (ownership ratio4: 1.71 %)) notified the Company of its intention to sell 19,700,000 shares, which is a portion of its owned shares, held in the Company's common stock (ownership ratio4: 1.19%) (the "Shares Intended to be Sold by NTT Data ") resulting from an assessment of their cross-shareholdings, which are held for the purpose of maintaining medium- to long-term relationships and to create synergy with clients and business partners, while expanding trading volume, etc.

Note:

  • The percentage of shares of the number of shares in the Company (rounded down to the third decimal place. The same shall apply to calculations of ownership ratio hereinafter.) of 564,777,539 shares, which is calculated by deducting the number of the Company's treasury stock of 542,471 shares from the total number of the shares issued and outstanding of 565,320,010 shares as of June 30, 2016.
  • The percentage of shares of the number of shares in the Company of 1,672,167,061 shares, which is calculated by deducting the number of the Company's treasury stock of 23,792,969 shares (which does not include the shares held in the Board Incentive Plan Trust ("BIP Trust") (1,353,822 shares)) from the total number of the shares issued and outstanding of 1,695,960,030 shares as of June 30, 2019 .
  • The percentage of shares of the number of shares in the Company of 1,650,711,397 shares, which is calculated by deducting the number of the Company's treasury stock of 45,248,633 shares (which does not include the shares held in BIP Trust (1,397,998 shares)) from the total number of the shares issued and outstanding of 1,695,960,030 shares as of September 30, 2020 .
  • The "ownership ratio" represents the percentage of owned shares of the number of shares in the Company of 1,648,568,285 shares, which is calculated by deducting the number of the Company's treasury stock of 47,391,745 shares (which does not include the shares held in BIP Trust (1,719,165 shares) or the shares held in an Employee Stock Ownership Plan Trust ("ESOP Trust") (12,794,100 shares), which is mainly for employees in the HR Technology Strategic Business Unit ("SBU"), which is a business segment in the Recruit Group (the Company, 324 consolidated subsidiaries of the Company, and 8 affiliated companies (as of December 31, 2021))), from the total number of the shares issued and outstanding of 1,695,960,030 shares as of September 30, 2021 , which is described in "the Consolidated Financial Statements for the Second Quarter of the Fiscal Year Ending March 31, 2022 (IFRS accounting standards)" released by the Company on November 15, 2021.

In response to this, at the end of October 2021, the Company started considering possible measures regarding the Shares Intended to be Sold by NTT Data. The Company recognizes that there has been concern in the capital markets regarding the possibility of uncoordinated sales by its Japanese business shareholders and the resulting potential for downward pressure on its stock price. In order to address these concerns, the Company believes it is effective to provide an opportunity for multiple shareholders to sell a substantial amount of the Company's common shares in a coordinated manner, while also reducing the possibility of irregular market sales of the Company's common shares by shareholders for a certain period of time. As one of the measures, the Company has organized coordinated equity offerings three times in the past (the secondary offerings pursuant to the resolution at the meeting of the Board of Directors held on August 24, 2016, August 28, 2019 and November 30, 2020) when many of the Japanese business shareholders reached the Company around the same time with their intention to reduce their holdings in the Company. Also, in order to mitigate the impact on the balance of supply and demand of its shares in the aftermarket and to enhance shareholder return, the Company repurchased its own shares.

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Based on the Company's intention to create an opportunity for orderly sales of the Company's shares with consideration for NTT Data's intention and as a result of considering several factors including the potential for downward pressure on the Company's share price from large uncoordinated sales of shares over a short period, its capital allocation policy, its capacity to pursue strategic business investments mainly for its HR Technology business which operate online HR platforms in the HR Matching market and for continuous growth of its existing business, the capital market environment, and the outlook for its financial position, in early November 2021, the Company concluded that purchasing of the Shares Intended to be Sold by NTT Data through a share repurchase would be the most appropriate measure.

With regard to the specific method for purchasing the Shares Intended to be Sold by NTT Data, the Company concluded that the most appropriate method was a purchase through a self tender offer, which provides the opportunity for shareholders other than NTT Data to participate in the tender offer. The Company believes this is the most appropriate method from the viewpoint of equitable treatment of shareholders, transparency of transactions, maximizing the certainty to sell all of the Shares Intended to be Sold by NTT Data through a repurchase at a price representing a certain discount to the market price, as well as, minimizing the cash outflow of the Company as much as possible. As described above, we have conducted share repurchases in conjunction with the secondary offerings with the purpose of mitigating the impact on the balance of demand and supply of the Company's common shares as a result of the secondary offerings together with improving shareholder return. Previously, we have conducted share repurchases at the market price. However, a self tender offer enables the Company to repurchase its common shares at a discounted price from the market price. Therefore, the Company believes that the total number of shares to be tendered will not exceed the planned number of tendered shares, and as a result, the Company determined that it is appropriate to use the tender offer method in order to increase the certainty of the sale of Shares Intended to be Sold by NTT Data. Additionally, in determining the purchase price for the Self Tender Offer (the "Tender Offer Price"), considering that the Company's common shares are listed on financial instruments exchanges, the Company emphasizes the clarity and objectivity of the criteria and has decided to place emphasis on the market price of the Company's common shares. The Company also determined that it was desirable to purchase tendered shares at a price representing a certain discount to the market price, from the perspective of enhancing shareholder value as well as minimizing the cash outflow of the Company as much as possible.

Based on the above considerations and decisions, in the middle of December 2021, the Company asked NTT Data whether it would intend to tender its shares if the Company made a tender offer at a price representing a certain discount to the market price of the Company's common shares on the First Section of the TSE.

The Company also decided that the appropriate price of the Company's common stock forming the basis of the discount rate would be desirable to be determined by taking into account the market price fluctuations during a certain period. The Company notified NTT Data that it was intending to make a tender offer at a price representing a discount to the simple average of the closing price of the Company's common shares on the First Section of the TSE during the one-month or three-month period ending the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer or the closing price of the Company's common shares on the First Section of the TSE on the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer. For this decision, the Company referred to previous examples of tender offers for repurchasing shares at a discounted market price during the period from January 2021 to November 2021 which shows out of 13 examples, 11 were calculated using either of the above options, and therefore determined that it is appropriate to select these as a possible measure to determine the tender price.

To determine the discount rate, the Company considered that the higher the discount rate, the higher the probability that the market price will not fall below the Tender Offer Price during the Self Tender Offer period (hereinafter, the "Self Tender Offer Period"). A market price below the Tender Offer Price minimizes the probability that the total number of tendered shares will exceed the planned number of

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tendered shares and increases the certainty of the sale of Shares Intended to be Sold by NTT Data and minimizes the cash outflow of the Company as much as possible. However, NTT Data would not likely agree on an unreasonably high discount rate. In order to determine a reasonable discount rate, we have decided to refer to previous examples of tender offers for repurchasing shares. The Company referred to previous examples of tender offers for repurchasing shares at a discounted market price during the period from January 2021 to November 2021 which shows 8 out of 13 examples are around a 10% discount. The Company decided that a discount around 10% to the market price would be desirable taking into account the market price fluctuations during a certain period as the market price may fluctuate on a daily basis due to economic conditions and various other factors, pursuing the certainty of the sale of the Company's common shares by shareholders who apply for the Self Tender Offer and reducing the possibility that the market price falls below the Tender Offer Price as well as minimizing the cash outflow of the Company as much as possible, and the Company notified NTT Data to that effect. In response to this, the Company received NTT Data's intention to apply the Shares Intended to be Sold by NTT Data for the Self Tender Offer.

In addition, as the trend of earnest action towards enhancing corporate governance in recent years has increased and in the course of discussion with its Japanese business shareholders, who have held common shares of the Company since before listing on the First Section of the TSE and have business relationships with the Company, regarding appropriate sales of the Company's common stock and confirming their holding policy and intention to sell the Company's common stock, the Company approached TOKYO BROADCASTING SYSTEM TELEVISION, INC. ("TBS", the 12th largest shareholder (September 30, 2021); number of shares owned as of the date of the announcement: 24,997,500 shares (ownership ratio: 1.51%)) and HAKUHODO DY HOLDINGS Inc. ("Hakuhodo", the 22th largest shareholder (September 30, 2021); number of shares owned as of the date of the announcement: 10,710,000 shares (ownership ratio: 0.64 %)) about applying for the Self Tender Offer in the middle of December 2021 (NTT data, Hakuhodo DY Holdings Inc. and Tokyo Broadcasting System Television, Inc. collectively the "Prospective Tendering Shareholders") and a tender offer Price at a price representing a discount around 10% to the simple average of the closing prices of the Company's common shares on the First Section of the TSE during the one-month or three-month period ending the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer or the closing price of the Company's common shares on the First Section of the TSE on the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer. The Company received Hakuhodo's intention to tender 5,355,000 shares held in the Company's common stock (ownership ratio : 0.32%) in order to improve asset efficiency and strengthen financial position at the end of December 2021 and TBS' intention to tender 1,500,000 shares held in the Company's common stock (ownership ratio: 0.09%) in order to provide a source of strategic investment to be made by TBS in early January 2022,(the number of shares intended to be sold by Prospective Tendering Shareholders collectively called the "Shares intended to be Sold").

In response to this, after further consultations with the Prospective Tendering Shareholders, the Company proposed to make a tender offer at 4,581 yen, a 10% discount from the closing price of the Company's common shares on the First Section of the TSE on the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer, January 27, 2022. The Company decided that the appropriate price of the Company's common stock forming the basis of the discount rate would be desirable to be determined by reflecting the most recent financial results in the stock price, and as such the Company notified the Prospective Tendering Shareholders that it was intending to make a tender offer at 4,581 yen, a 10% discount from the closing price of the Company's common shares on the First Section of the TSE on the business day immediately preceding the date of the meeting of the Board of Directors resolving the Self Tender Offer (January 27, 2022) instead of using the simple average of the closing prices of the Company's common shares during the one-month or three-month period ending January 27, 2022 in order to pursue increased certainty of the sale of the Company's common shares by shareholders who apply for the Self Tender Offer and reducing the possibility that the market price falls below the Tender Offer Price as well as minimizing the cash outflow of the Company as much as possible. On the same day, the Prospective Tendering Shareholders

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Recruit Holdings Co. Ltd. published this content on 28 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 January 2022 06:25:35 UTC.