KDDI, J:COM deal under review

Financial Services Agency looking at transaction's legality

TOKYO -- The Financial Services Agency is examining the legality of telecom giant KDDI’s $4 billion purchase of Liberty Global’s stake in cable operator Jupiter Communications (J:COM).

If the FSA determines that the deal amounts to acquiring more than a third of J:COM’s voting rights in an off-market transaction, it will force KDDI to make an open tender offer on the market.

This could incur huge costs for KDDI, operator of Japan’s second-largest wireless carrier, as it announced on January 25 it would pay a hefty 65% premium over the market price for Liberty’s shares in J:COM. A large number of shareholders would be likely to cash in on the inflated offer price.

The deal, which involves KDDI taking over three Liberty Global subsidiaries which between them hold 37.8% of J:COM, appears to have been structured to try and avoid the Financial Instruments and Exchange Law that would force them into a tender offer.

"It is our understanding that the deal's structure is in compliance with the rules," said KDDI in a statement.