A Comparative Critique of Cash-Out Mergers in Japan and the US

Abstract

This article first concisely illustrates the contemporary boom of cash-out mergers and the latest rapid evolution of cash-out takeover experimental legislation in Japan. Japanese lawmakers are currently considering a proposal of the Committee of Modernisation of Corporate Law established by the Japanese Ministry of Justice to include a permanent provision that would also reform appraisal proceedings to the minority shareholders who are cashed out. Following the Delaware approach in the Weinberger case, the Committee proposes that the valuation for appraisal purposes should include the value of potential synergies to replace the present Japanese law which excludes synergy values. The article argues that the synergy values should be excluded—in part to encourage cash-out mergers; that the pre-merger market price should be the touchstone for appraisal rights for publicly held firms; and that a Final Offer Arbitration mechanism and inspector system should be adopted for unlisted firms. The article dismisses the anxiety of the Committee which arises from lifting the ban on short-form merger transactions.