Line Corporation Introduces Employee Stock Ownership Plan (Determination of the Details)

TOKYO--()--LINE Corporation (NYSE:LN) (TOKYO:3938) (Headquarters: Shinjuku-ku, Tokyo, Japan; President & CEO: Takeshi Idezawa; hereinafter the “Company”) announced on February 23, 2017, the introduction of an Employee Stock Ownership Plan (J-ESOP; hereinafter called the “Plan”; and the trust to be established based on the trust agreement concluded with Mizuho Trust & Banking Co., Ltd. for the Plan, hereinafter called the “Trust”) and has now determined the details, including the date of establishment of the Trust, etc. at the Board of Directors Meeting held today.

In conjunction with the introduction of the Plan, the Company has simultaneously decided to assign 1,007,810 new shares (3,999,997,890 yen) to Trust & Custody Services Bank, Ltd. (Trust E). For details, please refer to “Notice Regarding the Offering of Shares to Be Issued through Third-Party Allotment in Accordance with the Introduction of the Employee Stock Ownership Plan” dated today.

 

1. Overview of the Trust

 
(1) Type of Trust: Trust of money other than money trust (third-party trust)
(2) Purpose of Trust:   To provide stock of the Company and other assets to beneficiaries, in accordance with the Regulations on Stock Compensation
(3) Trustor: The Company
(4) Trustee: Mizuho Trust & Banking Co., Ltd.
    (Mizuho Trust & Banking Co., Ltd. will conclude a comprehensive trust agreement with Trust & Custody Services Bank, Ltd., which will become the successor trustee)

(5) Beneficiary:

 

Persons who have acquired the right to receive assets pursuant to the provisions of the Regulations on Stock Compensation

(6) Trust Agreement Date: June26, 2017
(7) Trust Period: From June 26, 2017 to the termination of the Trust
(The Trust termination date is not yet decided; the Trust will continue as long as the Plan continues.)
(8) Plan Start Date: July 18, 2017 (tentative)
(9) Share Acquisition Date: July 18, 2017 (tentative)
(10) Share Acquisition Amount: 3,999,997,890 yen (tentative)
 

Notice Regarding the Offering of Shares to Be Issued through Third-Party Allotment in Accordance with the Introduction of the Employee Stock Ownership Plan

LINE Corporation (Headquarters: Shinjuku-ku, Tokyo, Japan; President & CEO: Takeshi Idezawa; the “Company”) announces that it passed a resolution at its board meeting held today to conduct an offering of shares by means of a third-party allotment (the “Third-Party Allotment”), in accordance with the introduction of an Employee Stock Ownership Plan (J-ESOP; the “Plan”) that was announced on February 23, 2017, as follows.

 

1.        Overview of the offering

   

(1)

 

Payment date

  Tuesday, July 18, 2017

(2)

 

Type and number of shares to be issued

1,007,810 shares of common stock

(3)

 

Issue price

3,969 yen per share

(4)

 

Total issue price

3,999,997,890 yen

(5)

 

Method of offering or allotment

Third-party allotment

(6)

 

Prospective Allottee

Trust & Custody Services Bank, Ltd. (Trust E)

(7)

 

Other

  The offering is subject to notification in accordance with the Financial Instruments and Exchange Act being effective.
 

2. Purpose and reasons for the offering

The Company announced its introduction of the Plan on February 23, 2017, and then passed a resolution regarding detailed matters of the Plan at its board meeting held today. (For a summary of the Plan, please see the “Notice Regarding Introduction of Employee Stock Ownership Plan (Determination of the Details)” announced today.

The new shares to be issued through the Third-Party Allotment will be allotted to Trust & Custody Services Bank, Ltd. (Trust E) (the successor trustee entrusted by Mizuho Trust & Banking Co., Ltd., the trustee for the Plan) that is in charge of holding and disposing of the Company’s shares and is established upon introduction of the Plan.

3. Amount, use, and scheduled timing of use of funds to be procured

 

(1)       Amount of funds to be procured (estimated net amount after expenses)

 
Total amount to be paid (yen)  

Estimated expenses of
issuance (yen)

 

Estimated net amount after expenses
(yen)

3,999,997,890 yen     3,999,997,890 yen

Notes)

1.

The “Estimated expenses of issuance” are paid apart from “Total amount to be paid,” and the “Total amount to be paid” wholly becomes the “Estimated net amount after expenses.”

2.

The “Estimated expenses of issuance” are 21,250,000 yen, and they do not include consumption tax or the like. They includes estimated registration expenses, advisory fees and expenses of listing on a stock exchange.

 

(2) Use of the funds to be procured

The estimated net amount after expenses of 3,999,997,890 yen mentioned above will be appropriated entirely to operating funds, including payment of expenses on and after the payment date. The funds will be managed in the Company’s bank account until they are used for the above purpose.

4. View on reasonableness of use of funds

The Company believes that the planned use of the funds to be procured by issuing new shares through the Third-Party Allotment is reasonable, as it will contribute to the operation of the Company’s business.

5. Reasonableness of issuance terms and conditions

(1) Basis for calculation of issue price and details thereof

In order to determine the issue price non-arbitrarily, the Company set the issue price at 3,969 yen (any fraction less than one yen is rounded off), the average closing price of the Company’s common stock traded on Tokyo Stock Exchange, Inc. during the one-month period from May 24, 2017, to the day immediately preceding the Board of Directors meeting at which the resolution for the Third-Party Allotment was passed (June 23, 2017). The reason for adopting the average closing price of the Company’s common stock traded on the Tokyo Stock Exchange during the one-month period immediately preceding the resolution at the Board of Directors meeting is because the Company considers that it is more objective and reasonable as a calculation base to use the leveled value of the average share price over a certain period, rather than using the price at a specific point, since special factors such as temporary fluctuations in the share price are eliminated. In addition, the reason why the Company has adopted the most recent one-month period as the calculation period is that the Company believes it is more reasonable to adopt a certain period in which the average share price is closest to the most recent market price than to adopt the most recent three or six months.

The issue price of 3,969 yen is equal to (i) the closing price (3,995 yen) of the Company’s stock on the business day immediately preceding the date of the resolution at the board meeting multiplied by 99.35%; (ii) the average of the closing prices (3,988 yen, any fraction less than one yen is rounded off) of the Company’s stock during the three months starting from the business day immediately preceding the date of resolution at the board meeting multiplied by 99.52%, and (iii) the average of the closing prices (3,935 yen, any fraction less than one yen is rounded off) of the Company’s stock during the six months starting from the business day immediately preceding the date of resolution at the board meeting multiplied by 100.86%. Taking these into consideration, the Company believes that the issue price for the Third-Party Allotment is not especially favorable to the prospective allottee and is reasonable.

Regarding the issue price stated above, 3 Corporate Auditors who attended the board meeting (2 of which are outside Corporate Auditors) have expressed their opinion that the price is not especially favorable to the prospective allottee.

(2) Basis for assessing that the number of shares to be issued and level of share dilution are reasonable

The number of shares to be issued through the Third-Party Allotment corresponds to the number of shares expected to be granted to the employees of the Company and those of its subsidiaries (“Relevant Employees”) during the trust period in accordance with the Regulations on Stock Compensation; and it will be 0.46% of the total issued and outstanding shares (219,309,500 shares) as of May 31, 2017 (rounded off to two decimal places) and 0.46% of the total voting rights (2,192,959 voting rights) as of May 31, 2017 (rounded off to two decimal places). It is unlikely that the shares involving the Third-Party Allotment may be placed on a stock market all at once. In addition, the Third-Party Allotment will enhance morale and motivation of the Relevant Employees and contribute to securing excellent human resources and their long-term success, thereby enhancing the Company’s corporate value. As such, the Company believes that the level of share dilution is reasonable, and there will only be a minor effect on the secondary market.

6. Reason for selection of prospective allottee

 
(1)   Overview of the prospective allottee
 
1) Name:   Trust & Custody Services Bank, Ltd. (Trust E)
 
2) Details of Trust Agreement (J-ESOP Agreement):
Type of Trust: Trust of money other than monetary trust (third-party trust)
Purpose of Trust: To provide stock of the Company and other assets to beneficiaries, in accordance with the Regulations on Stock Compensation
Trustor: The Company
Trustee: Mizuho Trust & Banking Co., Ltd.
Mizuho Trust & Banking Co., Ltd. will conclude a comprehensive trust agreement with Trust & Custody Services Bank, Ltd., which will become the successor trustee.
Beneficiaries: Persons who have acquired the right to receive assets pursuant to the provisions of the Regulations on Stock Compensation
Trust Agreement Date: June 26, 2017
Trust Period: From June 26, 2017 to the termination of the Trust
Share Acquisition Date: July 18, 2017 (tentative)
 
3) Relationship between the listed company and the prospective allottee:
 
There is no capital relationship, personnel relationship or business relationship between the Company and the prospective allottee. The prospective allottee is not a related party of the Company.

 
(1) Name   Trust & Custody Services Bank, Ltd.
(2) Address Tower Z, Harumi Triton Square, 8-12, Harumi 1-chome, Chuo-ku, Tokyo

(3) Name and title of
representative

Akira Moriwaki, President & CEO
(4) Business description Master trust services, asset administration services for securities, asset administration services for defined contribution pensions
(5) Capital 50,000 million yen
(6) Date of establishment January 22, 2001

(7) Number of shares issued and
outstanding

1,000,000 shares
(8) Fiscal year end March 31
(9) Number of employees 653 (as of September 30, 2016)
(10) Main business partners Business corporations and financial corporations
(11) Main banks -

(12) Major shareholders and their
shareholding ratio

Mizuho Financial Group, Inc. 54%

The Dai-ichi Life Insurance Company, Limited 16%

Asahi Mutual Life Insurance Company 10%

(13) Relationship between the
parties

Capital relationship: N/A
Personnel relationship: N/A
Business relationship: N/A
Ties to related parties: N/A
(14) Business results and financial conditions over the last three fiscal years (unit: million yen, unless otherwise specified)
Fiscal year ended   March 31, 2015   March 31, 2016   March 31, 2017
Net assets 59,419 60,385 60,771
Total assets 1,993,528 5,473,232 11,424,703
Net assets per share (yen) 59,419 60,385 60,771
Ordinary revenue 23,785 24,500 23,462
Ordinary income 1,792 1,721 990
Net income 1,129 1,129 674
Net income per share (yen) 1,129.20 1,129.27 674.44
Dividends per share (yen)   230.00   230.00   135.00
*   Trust & Custody Services Bank, Ltd. is a subsidiary of Mizuho Financial Group, Inc.; based on our research on public information posted on Mizuho’s website and disclosure materials (such as the Business Code of Conduct), the Company confirmed that none of the prospective allottee nor its officers or major shareholders (major contributors) have any connection with anti-social forces, and submitted a confirmation letter to that effect to Tokyo Stock Exchange, Inc.
 

(2) Reason for selecting the prospective allottee

In accordance with the introduction of the trust to be created under the trust agreement to be executed with Mizuho Trust & Banking Co., Ltd. regarding the Plan, the Company allots the shares to the Trust E opened at Trust & Custody Services Bank, Ltd., the successor trustee, pursuant to the trust agreement.

(3) Prospective allottee’s policy on holding shares

In accordance with the above-mentioned trust agreement, the prospective allottee, Trust & Custody Services Bank, Ltd. (Trust E), will possess the shares of the Company in order to provide the trust assets (such as shares of the Company) to the beneficiaries during the Trust Period, in accordance with the Regulations on Stock Compensation.

If the prospective allottee, Trust & Custody Services Bank, Ltd. (Trust E), transfers all or part of the allotted shares within two years from the payment date (July 18, 2017), the Company will obtain from the prospective allottee informal consent to concluding a pledge agreement with the Company, under which the prospective allottee shall immediately report to the Company, in writing, the purchaser’s name and address, the number of shares transferred, the transfer date, transfer price, transfer reason, transfer method, etc., thereof, and the Company shall report the details of the report to the Tokyo Stock Exchange, Inc.; and the details of the report shall be made available for public inspection.

(4) Confirmation that the prospective allottee has the funds required for payment

The Company has confirmed through the J-ESOP Trust Agreement that with respect to the monetary equivalent to the funds required for payment by the prospective allottee, the initial trust money to be contributed by the Company to the Plan will exist within the trust assets as of the allotment date, as stated in the “Notice Regarding Introduction of Employee Stock Ownership Plan (Determination of the Details)” announced today.

For details, please refer to the “Notice Regarding Introduction of Employee Stock Ownership Plan (Determination of the Details)” announced today.

7. Major shareholders and shareholding ratios after the offering

 
Before the offering (as of May 31, 2017)   After the offering
NAVER CORPORATION   79.80% NAVER CORPORATION   79.43%
MOXLEY & CO LLC 5.13% MOXLEY & CO LLC 5.11%

CBHK-KOREA SECURITIES
DEPOSITORY -SAMSUNG

0.72%

CBHK-KOREA SECURITIES
DEPOSITORY -SAMSUNG

0.71%

The Master Trust Bank of Japan, Ltd.
(trust account)

0.45%

Trust & Custody Services Bank, Ltd.
(Trust E)

0.46%

BNY GCM CLIENT ACCOUNT
JPRD AC ISG (FE -AC)

0.37%

The Master Trust Bank of Japan, Ltd.
(trust account)

0.45%

Japan Trustee Service Trust Bank, Ltd.
(trust account)

0.32%

BNY GCM CLIENT ACCOUNT
JPRD AC ISG (FE -AC)

0.37%

BNP PARIBAS SECURITIES
SERVICES LUXEMBOURG/
JASDEC/ HENDERSON HHF SICAV

0.25%

Japan Trustee Service Trust Bank, Ltd.
(trust account)

0.32%

STATE STREET BANK WEST
CLIENT -TREATY 505234

0.24%

BNP PARIBAS SECURITIES
SERVICES LUXEMBOURG/
JASDEC/ HENDERSON HHF SICAV

0.25%
THE BANK OF NEW YORK 134168 0.24%

STATE STREET BANK WEST
CLIENT -TREATY 505234

0.24%

RBC IST 15 PCT LENDING
ACCOUNT - CLIENT ACCOUNT

  0.22%   THE BANK OF NEW YORK 134168   0.24%
Note)   1.   The major shareholders and shareholding ratios after the offering are based on the register of shareholders as of May 31, 2017.
2. The foregoing shareholding ratios are the ratios of voting rights held against the total number of voting rights.
 

8. Outlook for the future

There will be a minor impact on the business prospect for the current fiscal year.

9. Procedures under the Business Code of Conduct

Since the Third-Party Allotment (i) results in share dilution of less than 25%, and (ii) does not cause a change in controlling shareholder, obtaining an opinion from an independent third party and confirming the intention of the shareholders as set forth in Article 432 of the Securities Listing Regulations established by the Tokyo Stock Exchange, Inc. are not required.

10. Business results and equity finance position for the past three fiscal years

 

(1)       Results for the past three years (Consolidated)

Fiscal year ended   December 31, 2014   December 31, 2015   December 31, 2016
Revenue 86,366 million yen 120,405 million yen 140,704 million yen

Profit before tax from
continuing operations (△
shows loss)

6,262 million yen △530 million yen 17,989 million yen

Profit for the period (△
shows loss)

2,004 million yen △7,972 million yen 7,103 million yen

Profit attributable to the
shareholders of the
Company (△ shows
loss)

4,206 million yen △7,581 million yen 6,762 million yen

Basic earnings per share
(△ shows loss)

24.05 yen △43.33 yen 34.84 yen
Dividends per share - yen - yen - yen

Equity attributable to the
shareholders of the
Company

  71.41 yen   101.39 yen   738.53 yen
Note)   The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS).
 

(2)       Number of issued and outstanding shares and number of potential shares (as of May 31, 2017)

    Number of shares   Percentage of issued and outstanding shares
Number of issued and outstanding shares 219,309,500 100.0%
Number of potential shares at current conversion price (strike price) 21,371,500 9.74%
Number of potential shares at lower-limit conversion price (strike price) - -
Number of potential shares at upper-limit conversion price (strike price)   -   -
Note)   “Potential shares” refers to shares convertible from stock options.
 

(3) Recent stock prices

 

1)        Most recent three years

 
Fiscal year ended   December 31, 2014   December 31, 2015   December 31, 2016
Opening price - yen - yen 4,900 yen
High - yen - yen 5,230 yen
Low - yen - yen 3,780 yen
Closing price   - yen   - yen   4,010 yen
Note)   The Company listed on Tokyo Stock Exchange on July 15, 2016, therefore there are no applicable stock prices before that.

 

2)        Most recent six months

 
   

December
2016

  January 2017  

February
2017

 

March
2017

 

 

April
2017

 

 

May
2017

 

Opening price 4,450yen 3,990yen 3,590yen 3,830yen 4,245yen 3,810yen
High 4,465yen 4,195yen 3,950yen 4,320yen 4,370yen 3,935yen
Low 3,930yen 3,530yen 3,490yen 3,805yen 3,795yen 3,655yen
Closing price   4,010yen   3,625yen   3,870yen  

4,275yen

  3,865yen   3,810yen

3) Stock prices on the transaction day immediately preceding the date of resolution to issue new shares

 
   

As of June 23,
2017

Opening price 4,000yen
High 4,035yen
Low 3,980yen
Closing price   3,995yen
 

(4) Equity finance position during the most recent three years

  • Issuance of new shares by public offering (domestic offering and overseas offering)
 
Payment date   For overseas offering: July 14, 2016

For domestic offering: July 15, 2016

Amount of funds to be procured 109,402,000,000 yen (estimated net amount after expenses)
Issue price 2,295 yen
Number of shares issued at the time of offering 174,992,000 shares
Number of shares issued through such offering 35,000,000 shares

(For overseas offering: 22,000,000 shares; for domestic offering:13,000,000 shares)

Total number of shares issued after the offering 209,992,000 shares
Initial plan regarding use of funds upon issuance For repayment of short-term borrowings and corporate bonds;

For capital investment;

For operating funds;

For investment in and financing for LINE Mobile Co., Ltd. (formerly LMN Co., Ltd.) that operates LINE mobile services, and LINE MUSIC Co., Ltd.;

For investment and financing through investment funds of the Company’s group, and investment under the growth policy via the LINE business portal service.

Planned timing of use of funds at the time of issuance Repayment of short-term borrowings: FY ended December 2016

Repayment of corporate bonds: FY ended December 2016

Capital investment: FYs ended December 2016, December 2017, and December 2018

Operating funds: FYs ended December 2016, December 2017, and December 2018

Investment in and financing for LINE Mobile Co., Ltd. and LINE MUSIC Co., Ltd.: FY ended December 2016

The specific timing of the investment under the growth strategy was not determined.

Current status regarding use of funds   As originally planned, the funds are being used for the repayment of short-term borrowings and corporate bonds, capital investment, operating funds, investment in and financing for LINE Mobile Co., Ltd. and LINE MUSIC Co., Ltd., and investment under the growth strategy.
 

  • Issuance of new shares through third-party allotment in accordance with domestic and overseas offering via over-allotment
 
Payment date   August 16, 2016

Amount of funds to be
procured

16,545,375,000 yen (estimated net amount after expenses)
Issue price 2,295 yen

Number of shares issued
at the time of offering

209,992,000 shares

Number of shares issued
through such offering

5,250,000 shares

Total number of shares
issued after the offering

215,242,000 shares
Allottees (i) Nomura Securities Co., Ltd. 1,950,000 shares

(Capital increase by domestic third-party allotment)

(ii) Morgan Stanley & Co. LLC 3,300,000 shares

(Capital increase by overseas third-party allotment)

Initial plan regarding use
of funds upon issuance

For investment under the growth policy via the LINE business portal service

Scheduled timing of use
upon issuance

The timing was not determined.

Current appropriation
status

  The funds are being used for investment under the growth strategy regarding the LINE business portal segment.
 

11. Terms and Conditions of Issuance

 
(1)   Type and number of shares to be issued   1,007,810 shares of common stock
(2) Issuance price 3,969 yen per share
(3) Total issuance price 3,999,997,890 yen
(4) Amount of stated capital to be increased 1,999,998,945 yen
(5) Amount of capital reserve to be increased 1,999,998,945 yen
(6) Payment date Tuesday, July 18, 2017
(7) Method of offering or allotment Third-Party Allotment
(8) Prospective allottees Trust & Custody Services Bank, Ltd. (Trust E)
(9)   Other   The issuance is subject to notification in accordance with the Financial Instruments and Exchange Act being effective.
 

Contacts

LINE
Icho Saito, +81-3-4316-2104
Global PR
dl_gpr@linecorp.co

Contacts

LINE
Icho Saito, +81-3-4316-2104
Global PR
dl_gpr@linecorp.co