LN LINE Corporation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

December 23, 2019

To whom it may concern,

Announcement of Opinion Regarding the Planned Commencement of the Joint Tender Offer for the Shares of LINE Corporation by SoftBank Corp. and NAVER Corporation,
the Controlling Shareholder of LINE Corporation

LINE Corporation (the “Company”), SoftBank Corp. (CEO and Representative Director: Ken Miyauchi) (“SoftBank”), NAVER Corporation (“NAVER,” and together with SoftBank, the “Tender Offerors” (Note)) (President and CEO: Han Seong-sook), which is the Company’s controlling shareholder, and Z Holdings Corporation (President and Representative Director: Kentaro Kawabe) (“ZHD”), a consolidated subsidiary of SoftBank, agreed on the business integration of the Company and its subsidiaries and ZHD and its subsidiaries, founded upon a spirit of equality (the “Business Integration”), and entered into a legally non-binding memorandum of understanding concerning the Business Integration (the “Integration MOU”) with respect to a series of transactions relating to the Business Integration on November 18, 2019, as announced by the Company and ZHD on that day in the press release entitled “Announcement Regarding Capital Alliance MOU on Business Integration.”

As announced by the Company and ZHD today in the press release entitled “Announcement Regarding Definitive Agreement on Business Integration” (the “Definitive Integration Agreement Press Release”), the Company, the Tender Offerors and ZHD entered into a business integration agreement, a definitive agreement regarding the Business Integration (the “Definitive Integration Agreement”) today pursuant to the resolutions of the respective boards of directors meetings of the Company, NAVER and ZHD, and the board of directors of SoftBank, duly authorizing its Representative Director, President and CEO, which each of the four companies held today.

Furthermore, the Company resolved at its Board of Directors meeting held today to express, with respect to the tender offers to be made jointly by the Tender Offerors, consisting of (i) a tender offer to be carried out in Japan pursuant to the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended from time to time, the “Act”) to acquire all outstanding shares of common stock (the “Company Common Shares” (Note)), the Share Options and the Convertible Bonds (as “Share Options,” “Convertible Bonds” and each share option and convertible bond is defined in “2. Purchase Price” ) (the Common Shares, together with the Share Options and the Convertible Bonds (other than those owned by NAVER or owned by the Company as treasury shares), being referred to as the “Company Shares”) of the Company (the “Japan Tender Offer”), and (ii) a tender offer to be carried out in the United States pursuant to the U.S. Securities Exchange Act of 1934 (as amended from time to time, the “Exchange Act”), which also includes the American depositary shares, each representing one Company Common Share (the “American Depositary Shares,” together with the Company Shares, the “Target Shares”) (the “U.S. Tender Offer”; and together with the Japan Tender Offer the “Tender Offer”), the Company’s opinion as of today that, in the event that the Tender Offer is commenced, it will: express an opinion endorsing the Tender Offer, recommend that the Company’s shareholders and the holders of the American Depositary Shares tender their Company Common Shares in the Tender Offer, and defer to the judgment of the holders of the Share Options (the “Share Option Holders”) and Convertible Bonds (the “Convertible Bond Holders”) regarding whether or not to tender their Share Options and Convertible Bonds in the Tender Offer.

The commencement of the Tender Offer is conditioned on the satisfaction of the Conditions Precedent (as defined below in “(7) Important Agreement Concerning the Tender Offer” of “3. Details, Grounds, and Reasons for the Opinion Regarding the Tender Offer”) under the Definitive Integration Agreement, and the commencement of the U.S. Tender Offer is conditioned on the commencement of the Japan Tender Offer. According to “Notice Concerning the Planned Commencement of the Joint Tender Offer for Shares of LINE Corporation (Securities Code: 3938)” issued by the Tender Offerors today, the Tender Offer is expected to be carried out promptly upon the satisfaction of the Conditions Precedent, including the completion of the procedures required in connection with the domestic and foreign competition authorities. As of today, the Tender Offerors are aiming to commence the Tender Offer between May and June 2020. However, it is difficult to accurately predict the period required for domestic and foreign competition authority procedures. Therefore, we are told that the details of the schedule of the Tender Offer will be announced as soon as they are decided.

Given the above, the Board of Directors of the Company also resolved at its meeting mentioned above that, as set out below in “③ Decision-making process leading to and reasons for the Company’s decision to endorse the Tender Offer” in “(2) Grounds and Reasons for the Opinion” within “3. Details of and Grounds and Reasons for the Opinion Regarding the Tender Offer,” before the Tender Offer commences, (i) it will request that the Special Committee established by the Company consider whether there are any changes to its opinion expressed to the Company’s Board of Directors today, and if there are no changes, the committee will advise the Board of Directors to that effect; and if there are any changes, the committee will issue a revised opinion reflecting such change, and (ii) the Company will express its opinion regarding the Tender Offer again when the Tender Offer is commenced based on the opinion of the Special Committee.

It is noted that the board of directors adopted the above resolution based on the assumption that it is contemplated that the Tender Offerors will become the sole shareholders of the Company through the Tender Offer and a series of subsequent procedures, and the Company Common Shares will be delisted.

1. Outline of the Tender Offerors

(1) Outline of SoftBank

(2) Outline of NAVER

2．Purchase Price

① Common stock                   JPY 5,380 per share

②　Share Options

③ Convertible Bonds

3. Details, Grounds, and Reasons for the Opinion Regarding the Tender Offer

(1) Details of the Opinion

The Company resolved at its Board of Directors meeting held today to express, with respect to the Tender Offer, the Company’s opinion as of today that, in the event that the Tender Offer is commenced, it will: recommend that the Company’s shareholders and the holders of the American Depositary Shares tender their shares in the Tender Offer and defer to the judgment of the Share Options Holders and Convertible Bond Holders regarding whether or not to tender their Share Options and Convertible Bonds in the Tender Offer, based on the grounds and reasons described in “(2) Grounds and Reasons for the Opinion ” below.

According to the Tender Offerors, the Tender Offer is expected to be implemented promptly upon the satisfaction of the Conditions Precedent. As of today, the Tender Offerors are aiming to commence the Tender Offer between May and June 2020. However, we are told that it is difficult to accurately predict the period required for domestic and foreign competition authority procedures.

Given the above, the Board of Directors of the Company also resolved at its meeting mentioned above that, as set out below in “③ Decision-making process leading to and reasons for the Company’s decision to endorse the Tender Offer” in “(2) Grounds and Reasons for the Opinion”, before the Tender Offer commences, (i) it will request that the Special Committee established by the Company consider whether there are any changes to its opinion expressed to the Company’s Board of Directors today, and if there are no changes, the committee will advise the Board of Directors to that effect; and if there are any changes, the committee will issue a revised opinion reflecting such change, and (ii) the Company will express its opinion regarding the Tender Offer again when the Tender Offer is commenced based on the opinion of the Special Committee.

The above resolution of the Board of Directors has been adopted in the manner described below in “⑦ Approval of all the directors of the Company without interests and the opinion of all the statutory auditors of the Company without interests that they have no objection” in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest.”

(2) Grounds and Reasons for the Opinion

The descriptions regarding the Tender Offerors in “Grounds and Reasons for the Opinion” are based on explanations from the Tender Offerors.

According to the Tender Offerors, as of today, SoftBank is a subsidiary of SoftBank Group Corp. (“SBG”) which holds 66.49% of the voting rights of SoftBank through SoftBank Group Japan Corporation, its wholly owned subsidiary, and its shares are listed on the First Section of the Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”). We are told that as of today, SoftBank does not hold any Target Shares and does not plan to acquire any Target Shares until the commencement of the Tender Offer. On the other hand, we are told that NAVER holds 174,992,000 Company Common Shares (Ownership Ratio (Note 1): 66.37%), 3,658 options related to the convertible bonds due 2023 (the total number of Company Common Shares to be issued upon exercise of such share options: 4,898,888 shares; Ownership Ratio: 1.86%), and 3,658 share options related to the convertible bonds due 2025 (total number of the Company Common Shares to be issued upon exercise of such share options: 4,865,655; Ownership Ratio: 1.85%) (Company Common Shares and the Convertible Bonds owned by NAVER are collectively referred to as “NAVER-Owned Company Shares.”).

The Tender Offerors, ZHD and the Company entered into the Definitive Integration Agreement as of today and have decided that the Tender Offerors will jointly carry out the Tender Offer for all of the Target Shares (excluding the NAVER-Owned Company Shares and the treasury shares held by the Company; the same applies hereinafter), as part of a series of transactions to realize the Business Integration, subject to the Conditions Precedent being satisfied. Also, following the Tender Offer, a series of procedures in order to take the Company private (such procedures and the Tender Offer are collectively referred to as the “Delisting Procedures”) is scheduled to be implemented. As for the details of the Definitive Integration Agreement, please refer to “(7) Important Agreement Concerning the Tender Offer”.

According to the Tender Offerors, since the Tender Offerors did not set an upper or lower limit of shares to be purchased in the Tender Offer, the Tender Offerors will purchase all of the Share Certificates, etc. tendered in the Tender Offer (hereinafter, the “Tendered Share Certificates, etc.”)  (Note 2). We are told that for each type of the Tendered Share Certificates, etc., SoftBank will purchase the number equivalent to 50% of the Tendered Share Certificates, etc., and the NAVER Party will purchase the number equivalent to the remaining 50% of the Tendered Share Certificates, etc., respectively (if there is a fraction in the number of any type of the Tendered Share Certificates, etc. that each of the Tender Offerors will purchase, the number of such type of the Tendered Share Certificates, etc. that SoftBank will purchase will be rounded up, and the number of such type of the Tendered Share Certificates, etc. that NAVER Party will purchase will be rounded down).

According to the Tender Offerors, when carrying out the Tender Offer, the Tender Offerors will carry out the U.S. Tender Offer, the target of which includes the American Depositary Shares. The U.S. Tender Offer is expected to be implemented on terms and conditions that are substantially the same as the terms and conditions of the Japan Tender Offer to the extent possible in light of the Exchange Act and the tender offer practices in the United States. As of today, the terms and conditions that can specifically be set for the U.S. Tender Offer are to be confirmed. The purchase price of each American Depositary Share for the U.S. Tender Offer is expected to be set as the same (JPY 5,380) as the price of the Company Common Shares for the Japan Tender Offer (the “Tender Offer Price”), but since the settlement of the U.S. Tender Offer will be made in U.S. dollars, such settlement will be made in U.S. dollars by applying the exchange rate determination method that will be set at the commencement of the U.S. Tender Offer. We are told the details of the terms and conditions of the U.S. Tender Offer will be disclosed at the time of implementing the Tender Offer.

According to the Tender Offerors, in the event that the Tender Offerors are unsuccessful in acquiring all of the Target Shares through the Tender Offer, the Tender Offerors intend to implement the series of procedures described in “(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)” below.

We are told that the Tender Offer is expected to be carried out as part of the Business Integration, and the Tender Offerors, ZHD and the Company plan to implement the series of transactions described in “(i) Method of the Business Integration” in “(7) Important Agreements Concerning the Tender Offer” below following the Tender Offer. For the details of the Business Integration, please refer to the Definitive Integration Agreement Press Release.

② Purpose and Background of the Tender Offer

(i) Background, Purpose and Decision-making Process of the Decision to Implement the Tender Offer

A.                    Background and Reasons for the Tender Offer

We are told that, SoftBank is a corporate group composed of SoftBank Group (SBG, its 1,302 subsidiaries and 423 affiliates (the number of companies as of the end of March 2019), the same applies hereafter), and the main businesses are “Consumer” (provision of mobile communications and broadband services and ancillary businesses for individual customers), “Corporate” (provision of telecommunications services and resolutions for corporate customers), “Distribution” (provision of direct sales and wholesale of IT products, mobile accessories, etc.), the Yahoo business (provision of e-commerce and advertising-related services, etc.) and other businesses (businesses not included in the aforementioned segments, such as provision of services of settlement agency and smartphone specialized securities). We are told that, under the management philosophy of “Information Revolution — Happiness for everyone,” SoftBank Group maximizes corporate value, aiming to become a corporate group that provides the most needed technologies and services to people around the world, and engages in a variety of businesses in the information technology field. Among others, having advanced sales and marketing know-how cultivated in the telecommunications field, by fully leveraging knowledge in world-class, cutting edge technology SoftBank Group as a whole was able to obtain, SoftBank’s strategy is to expand its customer base and establish a new revenue base while providing benefits not only to existing customers but also to society as a whole.

We are told that NAVER provides the most widely used web search engine in South Korea and the “NAVER” (www.naver.com) service, well known for its internet portal services. As of the end of September 2019 it was composed of 119 group companies. An “aggregation of global challenges” that continually provides innovative services to the global marketplace, NAVER provides not only a variety of innovative content, but also advanced technology platforms such as SNOW (video messaging app), NAVER WEBTOON (digital manga platform), and BAND (group social media platform). By focusing on new technology research and development, NAVER is positioning its strategy to lead new technology trends such as AI (Note 1), robotics, and Mobility (Note 2).

On the other hand, the Company is based on the mobile messenger platform “LINE,” and also provides content services such as games and music distribution services, as well as general services including advertising, mobile remittances, and payment services. The Company Group has made “CLOSING THE DISTANCE” its corporate mission, and is striving to create a world in which users will have seamless online and offline access to all the people, information and services they need in their daily lives, with LINE as the gateway. The Company uses the word “WOW” to express the core value necessary for realizing this mission. “WOW” refers to the “first experience that impresses users” and refers to a “surprise that people cannot help but share with their friends,” and the Company Group has positioned the pursuit of “WOW” as its strategy in order to continue to grow over the medium- to long-term and create social value.

The Company and the Tender Offerors believe that the social and industrial situations around us are changing in major ways globally and on a daily basis. In particular, overseas companies, mainly in the U.S. and China, dominate the internet market, and comparing the size of the companies, there is a significant gap from countries in Asia (excluding China) and Japan

Furthermore, the Company and the Tender Offerors believe that in Japan, there is a need to improve productivity due to the shrinking labor force, and to respond swiftly to natural disasters, and we believe that the use of AI and technology in these fields has great potential.

According to the Tender Offerors, under these circumstances, through further expanding the telecommunications business, growth of Yahoo (ZHD) and expanding into new fields, under the “Beyond Carrier” strategy which aims to achieve sustainable growth, SoftBank goes beyond its role as a telecommunications carrier, and, through collaboration with each group company and prominent companies in which it has invested, aims to develop new businesses that leverage cutting-edge technology such as AI and IoT (Note 3). In addition, NAVER aims to transform and innovate its state-of-the-art technological platforms in order to provide services that transcend the boundaries of South Korea’s largest search portal engine. According to the Tender Offerors, this Business Integration aims for ZHD Group (the corporate group consisting of ZHD, its 79 subsidiaries and 26 affiliates (as of September 30, 2019), same applies hereafter) with its loyal user base (average number of users 60,743,000 per month, 140 million MAU in total across all the applications), having a variety of services in Japan and rich assets (total of JPY 2,795,895 million in consolidated assets), and the Company Group (which consists of the Company, its 64 subsidiaries and 68 affiliates) with a customer base of 82 million active users per month in Japan and 104 million active users per month abroad, and with a rich lineup, to integrate management resources, and, by strengthening each business domain and investing in growth of new business domains, provide convenient experiences to Japanese user and update Japan’s society and industries; and, by expanding this innovative model to Asia and further to the world, become a leading company to lead the world from Japan and Asia. Regarding this Business Integration, the Tender Offerors, ZHD and the Company are expecting to collaborate in a variety of fields, including AI, search, communications, advertising, payments, and communications. According to the Tender Offerors, SoftBank, through further growth of ZHD which plays a key role in its “Beyond Carrier” strategy, and through creating new business opportunities in the 5G era, and NAVER, through accelerating the growth of Fintech services (Note 4) utilizing cutting-edge technologies and through establishing its position as a leading IT company based on AI technologies, consider this a significant transaction that will contribute to increasing the corporate value of both SoftBank and NAVER.

The Companies are undertaking the Business Integration in the spirit of equal partnership, with the aim of taking a great leap forward to become a corporate group capable of facing and prevailing against fierce competition in Japan and the global market through the ZHD Group and the Company Group bringing together their respective businesses’ resources, as well as pursuing synergies in their respective business domains and investing in businesses with the aim of growing in AI, commerce, Fintech, advertising, O2O, and other new business domains in the Integrated Company Group (which consists of ZHD as the integrated company after the Business Integration, as well as the entities that will become its subsidiaries and affiliates, namely ZHD Group other than ZHD and Company Group).

Through this Business Integration, the Integrated Company Group brings together the management resources of the ZHD Group and the Company Group, by combining the ZHD Group slogan of “Make our users’ lives convenient to a surprising (!) extent” and the Company Group’s value standard of “WOW,” to provide a richer and more convenient life to users through AI and internet-based technologies.

The Integrated Company Group will first update Japanese society and industry by providing the best user experience in Japan, then expanding into Asia, and then to the rest of the world, with the aim to become the “AI Tech company leading the world from Japan and Asia.”

B. Background to the execution of the Integration MOU

Under the background as described above, SoftBank, ZHD, NAVER and the Company began discussions on various possibilities, including business alliances, in mid-June 2019. After that, and since around early August of the same year, the four companies began in earnest to engage in broad-ranging discussions and meetings to understand all of their available options, focusing on the feasibility of the Business Integration and the methods for its achievement, while fully bearing in mind potential restrictions, etc. under applicable foreign and domestic laws and regulations. In the course of these discussions, from mid- to late August, the four companies decided to conduct a series of initial discussions, focusing on the feasibility of a series of transactions as a method of conducting the Business Integration, including a tender offer with respect to the Company jointly conducted by the Tender Offerors, an absorption-type company split in which the Company will transfer all of its business to a wholly owned subsidiary newly established by the Company (hereinafter, the “LINE Successor”), and a share exchange in which ZHD becomes the share exchange wholly-owning parent company, LINE Successor becomes the share exchange wholly-owned subsidiary, and the consideration is ZHD shares (hereinafter, the “Share Exchange”), etc. In early September 2019, each party shared an understanding of the significance of the transaction, and decided to conduct further deliberations including the carrying out of due diligence. As a result, from late September to early November 2019, discussions on the objectives of the Business Integration including synergies continued and due diligence on the Company by the Offerors and ZHD and due diligence on ZHD by NAVER and the Company were conducted. As a result of this process, a basic common understanding was reached among the four companies that the method described in “① Overview of the Tender Offer” above including the take-private of the Company by SoftBank and NAVER was to be mainly considered. Accordingly, as announced in “Announcement Regarding Capital Alliance MOU on Business Integration” disclosed on November 18, 2019, the Company and ZHD, as of the same date, executed the Integration MOU. On the same day, the Offerors submitted to the Company a letter of intent regarding a proposal concerning the Tender Offer as a step towards the transactions for realizing the Business Integration. In the letter of intent, the Tender Offerors proposed to the Company that the Tender Offer Price be 5,200 per Company Common Share, taking into account Business Integration synergies and premiums associated with the transfer of control.

C.       Background to the Execution of the Definitive Integration Agreement and the Implementation of the Tender Offer

After execution of the Integration MOU, SoftBank, ZHD, Naver, and the Company carried out further examination of the details of the series of transactions relating to the Business Integration and the methods of the procedures, working towards execution of the Definitive Integration Agreement. After completing such examination, the four companies reached agreement regarding the methods for carrying out the Business Integration set forth below in“① Method of the Business Integration”in the overview of “(7) Important Agreements Concerning the Tender Offer” including the Tender Offerors delisting the Company, and therefore the Company and ZHD gave notice thereof in the Definitive Integration Agreement Press Release issued today, and as of today entered into the Definitive Integration Agreement. In parallel with the aforementioned examination, the Tender Offerors have held multiple discussions and negotiations with the Company from early December 2019 regarding the Tender Offer Price. Specifically, the Company received a Tender Offer Price proposal of JPY 5,200 on December 10, 2019, and another Tender Offer Price proposal of JPY 5,320 on December 18; however, the Company determined that neither of those the proposed Tender Offer Prices were sufficient, and the Company requested that the Tender Offerors reconsider their proposal. Based on these negotiations, the Company received a final Tender Offer Price proposal of JPY 5,380 from the Tender Offerors on December 23, 2019. Subsequently, as a result of such discussions and negotiations, the Tender Offerors and the Company agreed on a Tender Offer Price of JPY 5,380 per share on December 23, 2019, and made the decision to implement the Tender Offer pursuant to the resolutions of the respective boards of directors of the Company, NAVER and ZHD and the board of directors of SoftBank, duly authorizing its Representative Director, President and CEO, which each of the four companies held today.

(ii) Management policy after the Tender Offer

This Tender Offer is to be conducted as part of the Business Integration, and after the Tender Offer, it is expected that ZHD and the Company will conduct a series of transactions as described in “① Method of the Business Integration” in the overview of “(7) Important Agreements Concerning the Tender Offer” below. Please refer to the Definitive Integration Press Release for basic policies and other details after the Business Integration.

③          Decision Making Process and Reasons for the Company Approving the Tender Offer

As discussed above in “(i) Background, Purpose and Decision-making Process of the Decision to Implement the Tender Offer” of “② Purpose and Background of the Tender Offer,” SoftBank, ZHD, NAVER, and the Company, began discussions on various possibilities, including business alliances, in mid-June 2019. After that, since around early August of the same year, the four companies have discussed and examined a wide range of options regarding Business Integration feasibility and means, bearing in mind limitations, etc. under applicable domestic and overseas laws and regulations.

As a result, a fundamental common understanding was reached among the four companies that the method described in “① Overview of the Tender Offer” above including the privatization of the Company by the Joint Offerors, was to be mainly considered, and the Integration MOU was executed as of November 18, 2019. On the same day, the Joint Offerors submitted to the Company a letter of intent regarding the proposal of the Tender Offer for transactions in furtherance of realizing the Business Integration, proposing a Tender Offer Price of 5,200 per Company Common Share.

In the course of such discussions and considerations, the Company determined that there was a structural conflict of interest between the Company’s controlling shareholder, NAVER, and the Company’s minority shareholders in carrying out the Business Integration and similarly there were issues regarding asymmetrical information, and therefore the Company began to implement a framework for conducting examination and negotiation, etc. of the Business Integration independently from NAVER, from the standpoint of improving the Company’s corporate value and securing the interests of the Company’s general shareholders, to ensure the appropriateness of the transaction terms and the fairness of the procedures of the Business Integration.

Specifically, as discussed below in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ④ Establishment of a Special Committee in the Company,” the Company established a special committee on October 15, 2019, which consists of three persons, Rehito Hatoyama (Chair of the Special Committee), Tadashi Kunihiro and Koji Kotaka, who have no interests with the Tender Offerors, ZHD, or the Company, are the outside directors of the Company and about whose status as independent officers the Tokyo Stock Exchange has been notified, and are deemed to have the experience and eligibility necessary to consider the Business Integration (the “Special Committee”). In considering the Business Integration, the Company consulted with the Special Committee with respect to (i) whether the Business Integration facilitates the improvement of corporate value and its purpose is reasonable, (ii) whether the fairness of procedures for the Business Integration is ensured, (iii) whether the appropriateness of the terms and conditions of the Business Integration is ensured, and (iv) whether it is considered based on the above (i) to (iii) that the Business Integration is disadvantageous to the minority shareholders of the Company.

After the proposal of the Tender Offer from the Tender Offerors, given that the Delisting Procedures will fall within transactions with a controlling shareholder, as provided in the Securities Listing Regulations of the Tokyo Stock Exchange, in the future if the Delisting Procedures including the Tender Offer are implemented, the Company continued to consult with the Special Committee, and made the following resolutions at the meeting of the Board of Directors held on November 18, 2019, changing the matters about which to consult with the Special Committee to (i) whether the Business Integration facilitates the improvement of corporate value and its purpose is reasonable, (ii) whether the fairness of procedures for the Business Integration is ensured, (iii) whether the appropriateness of the terms and conditions of the Delisting Procedures, including the Tender Offer Price of the Tender Offer, are ensured, (iv) whether it is considered based on (i) to (iii) above that the Business Integration is disadvantageous to the minority shareholders of the Company, and (v) whether it is believed that it is reasonable to announce the opinion endorsing the Tender Offer by the Board of Directors of the Company and recommend that the Company’s shareholders tender in the Tender Offer. The Board of Directors will accurately understand and comprehend the judgement of the Special Committee, and make decision with respect to the Business Integration including the Tender Offer with the highest regard for the contents of the decision of the Special Committee; and the Board of Directors will not agree to the Tender Offer if the Special Committee determines that the execution or the terms and conditions of the Tender Offer are not valid.

Furthermore, as discussed below in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ⑤Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm” and “⑥Acquisition of advice from independent law firms for the Special Committee,” the Special Committee appointed Merrill Lynch Japan Securities Co., Ltd. (“Merrill Lynch Japan”) as a financial advisor and Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho)/White & Case (Gaikokuho-Kyodo-Jigyo) as legal advisors, respectively independent from the Tender Offerors, ZHD, and the Company.

As explained below in “(3) Matters Concerning the Valuation” and “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ③ Acquisition of advice from an independent law firm by the Company,” the Company has appointed JPMorgan Securities Japan Co., Ltd. (“J.P. Morgan”) as a financial advisor and third-party valuation organization and Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho) as legal advisors, each independent from the Tender Offerors, ZHD, and the Company.

The Company received an initial proposal from the Tender Offerors on November 18, 2019, involving a Tender Offer Price of 5,200, and subsequently continued to discuss and negotiate the terms of the Delisting Procedures including the Tender Offer Price with the Tender Offerors. Specifically, the Company received a proposal of a Tender Offer Price of JPY 5,200 on December 10, 2019, the Tender Offer Price proposal of 5,320 on December 18, however, the Company determined those the proposed Tender Offer Price is not sufficient and the Company requested the Tender Offerors reconsider the proposal. Based on these negotiations, the Company received a final Tender Offer Price proposal of JPY 5,380from the Tender Offerors on December 20, 2019.

In the above examination and negotiation process, with respect to material aspects, the Company made timely reports to the Special Committee, decided negotiation policies based on directions and requests from the Special Committee, and as necessary, the Special Committee sat in on negotiations between the Company and the Tender Offerors. Firstly, with respect specifically to the negotiation policy regarding the Delisting Procedures, the Company provided advance explanations to the Special Committee, and as the Special Committee requested the Company to increase the Tender Offer Price based on the stand-alone share price of the Company and the premiums in similar case studies, the Company decided its negotiation policy based on such request. The Special Committee also sat in on negotiations regarding the Delisting Procedures between the Company and the Tender Offerors on three occasions, and the Special Committee voiced its opinion so that the Special Committee’s request would be clearly communicated to the parties.

On December 23, 2019, given assumptions about certain conditions, the Company received a report from the Special Committee to the effect that ①the Business Integration, including the Tender Offer, can be seen as contributing to an increase in corporate value and being for a reasonable purpose; ② the procedures for carrying out the Business Integration, including the Tender Offer, can be seen as having ensured fairness; ③ the terms of the Delisting Procedures, including the Tender Offer, including the price paid in the Tender Offer (but excluding the price of the Share Options and Convertible Bonds) can be seen as having ensured appropriateness; ④ taken in light of ① through ③ together, the resolutions of the Company’s Board of Directors, including the announcement of the opinion approving the Business Integration and the Business Integration including the Delisting Procedures using a share consolidation or other methods after the Tender Offer can be considered as not adverse to the interests of the Company’s minority shareholders; and ⑤ it can be considered reasonable for the Company’s Board of Directors to express its opinion in support of the Tender Offer, and recommend that the Company’s shareholders and American Depositary Share holders tender their shares in response to the Tender Offer. (the “Report”) (please see “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ④ Establishment of a Special Committee in the Company” for an outline of the Report). Please note that, together with the Report, the Special Committee submitted to the Company a share valuation report regarding the results of calculations of the value of Company Common Shares submitted to the Special Committee by Merrill Lynch Japan as well as a written opinion stating that the Tender Offer Price for the Company Common Shares etc. (as defined below in (6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ⑤ Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm”) is fair to the Company’s general shareholders of the Company Common Shares etc. (excluding the Tender Offerors and their related companies) from a financial perspective, both dated as of December 23, 2019 (the “Merrill Lynch Japan Valuation Report”) and a written opinion to the effect that the Tender Offer Price was fair to the Company’s general shareholders from a financial perspective (fairness opinion) (the “Merrill Lynch Japan Fairness Opinion”) (please see “(6) Measures to Ensure the Fairness of the Joint Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ⑤ Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm”) below).

With the background explained above, based on legal advice received from Anderson, Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho), advice from J.P. Morgan from a financial perspective, the content of the share valuation report regarding the calculation of the value of the Company Common Shares received from J.P. Morgan as of December 23, 2019 (the “JPM Valuation Report”), a fairness opinion received from J.P. Morgan to the effect that, under certain conditions precedent, the purchase price of the Company Common Shares in the Tender Offer is fair from a financial perspective for the common shareholders of the Company, excluding the Tender Offerors and their related parties (the “JPM Fairness Opinion”), and the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion, the Company conducted a reasoned discussion and examination at the meeting of the Board of Directors of the Company held on December 23, 2019 of whether the Delisting Procedures, including the Tender Offer, serve to improve the corporate value of the Company and whether the transaction terms of the Delisting Procedures, including the Tender Offer, were appropriate, while giving full respect to the content of the Special Committee’s judgment stated in the Report.

Consequently, as stated above in “② Purpose and Background of the Tender Offer; (i) Background, Purpose and Decision-making Process of the Decision to Implement the Tender Offer; C. Background to the Conclusion of the Definitive Integration Agreement and the Implementation of the Tender Offer,”the Company also came to the conclusion that by carrying out the Business Integration including the Tender Offer, the ZHD Group and the Company Group will integrate management resources, and, by strengthening business areas and investing in growth areas, respectively, the Company determined that it will serve to improve the corporate value.

The Company also determined from the following points, etc. that the Tender Offer Price of 5,380 yen per share was an appropriate price that ensured the benefit that should be received by the Company’s general shareholders and that the Company’s general shareholders are being provided with a reasonable opportunity to sell Company Common Shares with an appropriate premium.

(i)       The price is one that was agreed as a result of thorough, repeated negotiations with the Tender Offerors with the substantial involvement of the Special Committee, and subject to sufficient measures to ensure the fairness of the transaction terms pertaining to the Delisting Procedures, including the Tender Offer Price, stated in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest.”

(ii)       The price is above the valuation range of the valuation results based on the market share price analysis and within the valuation range of the discounted cash flow analysis (the “DCF Method”) of J.P. Morgan’s valuation of the Company Common Shares stated below in “(3) Matters Concerning the Valuation.” The fairness opinion has also been issued to the effect that the purchase price for Company Common Shares in the Tender Offer is fair for the Company’s common shareholders other than the Tender Offerors and their related parties, under certain conditions precedent.

(iii) The Tender Offer Price exceeds the top end of the range of the market price analysis in the Merrill Lynch Japan Valuation Report, and within the range of the DCF analysis of the valuation results of Company Common Shares by Merrill Lynch Japan pursuant to the Merrill Lynch Japan Valuation Report described below in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ⑤Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm”

(iv)       The price has a premium of 17.34% (rounded to three decimal places; same hereinafter when calculating the premium rate) compared to the closing price of Company Common Shares of JPY 4,585 on the First Section of the Tokyo Stock Exchange on November 13, 2019, which is regarded as not being influenced by speculative reports about the Business Integration by the media, a premium of 31.69% over the simple average closing price of JPY 4,085 (rounded to four decimal places; same hereinafter when calculating the simple average closing price) for the one month prior to November 13, 2019, a 36.75% premium over the simple average closing price of JPY 3,934 for the three months prior to November 13, 2019, and a 50.68% over the simple average closing price of JPY 3,570 for the six months prior to November 13, 2019, which are regarded as reasonable levels of premiums in case studies of other tender offers carried out for the purpose of delisting a subsidiary by a parent company.

(v)       As explained in “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ④ Establishment of a Special Committee in the Company,” the Report obtained from the Special Committee also found that the price ensured appropriateness.

Therefore, the Company has determined that the Delisting Procedures serve to improve the corporate value of the Company and that the transaction terms of the Delisting Procedures including the Tender Offer Price are appropriate. The meeting of the Company’s Board of Directors held on December 23, 2019 passed a resolution that it would announce an opinion to the effect that the Board of Directors approves of the Tender Offer and recommends that the Company’s shareholders and holders of the American Depositary Shares tender their shares into the Tender Offer.

Additionally, as the Company has not examined the appropriateness of the purchase, etc. price for Share Options and Convertible Bonds, and as the Share Options were issued to directors and employees of the Company and its Subsidiaries and the purchase, etc. price is 1 yen per Share Option, the Board of Directors has resolved to leave it to the discretion of each holder of Share Options and Convertible Bonds as to whether to tender their Share Options and Convertible Bonds.

Please note that with respect to commencement of the Tender Offer, in the Definitive Integration Agreement, commencement is conditioned upon satisfaction of the Conditions Precedent, and the U.S. Tender Offer will only commence if the Japan Tender Offer commences. According to the press release “Notice Concerning the Planned Commencement of the Joint Tender Offer for Shares of LINE Corporation (Securities Code: 3938)” issued by the Tender Offerors as of today, they plan to implement the Tender Offer promptly once the Conditions Precedent, including completion of procedures, etc. with Japanese and foreign competition authorities, are satisfied, and as of today the Tender Offerors aim to commence the Tender Offer between May and June, 2020, but it is difficult to accurately estimate the time required for procedures, etc. with Japanese and foreign competition authorities.

Therefore, the aforementioned meeting of the Company’s Board of Directors also passed a resolution that when the Tender Offer commences they will ask the Special Committee established by the Company to tell the Board of Directors whether there is any change in the Special Committee’s opinion the Report as of such date, and if there is no change, at the time that the Tender Offer commences, the Company will make an announcement to such effect, and if there is a change the Special Committee will be requested to state its changed opinion, and the Company will announce a new opinion regarding the Tender Offer based on such opinion of the Special Committee.

Please see “(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest; ⑦ Approval of all the directors of the Company without interests and the opinion of all the statutory auditors of the Company without interests that they have no objection” for details of the decision-making process of the Board of Directors.

(3) Matters Concerning the Valuation

In examining the Tender Offer Price presented by the Tender Offerors and forming the opinion of the Company with respect to the Tender Offer, in order to secure the fairness of the opinion, in July 2019, the Company retained J.P. Morgan, a third party valuation agent independent from the Tender Offerors, ZHD and the Company, as its financial advisor and requested J.P. Morgan to provide the valuation of the Company Common Shares and also requested J.P. Morgan to provide a fairness opinion to the effect that the agreed price for share of the Company Common Shares in the Tender Offer in Japan and the U.S. (i.e., JPY 5,380 per share of the Company Common Shares, the same applies to this Section (3) “Matters Concerning Valuation”).

J.P. Morgan performed a market share price analysis on the Company Common Shares considering that the Company Common Shares are listed on the First Section of the Tokyo Stock Exchange, as well as the DCF MEthod based on the standalone business plan (not including the impact of this transaction) and financial projections prepared furnished to J.P. Morgan by the management of the Company in order to reflect the situation of the future LINE business into the valuation, and presented to the Company the JPM Valuation Report concerning the value of the Company Common Shares (the “Share Value”) dated December 23, 2019. Furthermore, J.P. Morgan presented the JPM Fairness Opinion dated December 23, 2019 to the Board of Directors of the Company, to the effect that the agreed price for the Company Common Shares in the Tender Offer in Japan and the U.S. is fair to the holders of Company Common Shares (except for the Tender Offerors and their affiliates) under a certain set of assumptions from a financial perspective. The JPM Valuation Report and JPM Fairness Opinion were provided solely for the benefit of the Board of Directors of the Company in connection with the evaluation of the Tender Offer and for information purposes in performing such evaluation. It should be noted that J.P. Morgan is not a related party of the Tender Offerors, ZHD or the Company and has no material interest in the proposed Business Integration including the Delisting Procedure.

Based on the JPM Valuation Report, the calculated ranges of per share value of the Company Common Shares stock based on each method are as indicated in the table below.

In light of an article speculating about the Business Integration having been published after Tokyo Stock Exchange market hours on November 13, 2019, in performing the market share price analysis, J.P. Morgan used November 13, 2019 as the base date (“JPM Base Date”), and reviewed the per share closing price trading data of the Company on the JPM Base Date and the average daily closing share prices of the Company on the Tokyo Stock Exchange for the one-month, three-month and six-month periods concluding on the JPM Base Date.

The DCF Method was based on the business plan and financial projections of the Company for the fiscal year ending December 2019 through the fiscal year ending December 2029, earnings projections and investment plans as set forth in the business plans of the Company, the results of due diligence on and interviews with the Company, and other publicly available information and factors approved by the Company to be used by J.P. Morgan. In calculating the Share Value, a range of discount rates of either 6.0%~7.0% or 10.5%~12.5% depending on the business segment of the Company were applied to the free cash flows projected to be produced by each business segment of the Company for the periods after fiscal year ending December 2021, while a range of perpetual growth rates of 1.0%~2.0% were used to calculate the perpetual growth value. The business plan of the Company, which was used by J.P. Morgan for the purposes of the DCF Method with the approval of the Company, expects operating deficits for the fiscal years ending December 2019 and December 2020, due to investments and high marketing costs associated with the strategic businesses, and expects a substantial increase in its profits after the fiscal year ending December 2021 as a result of the improvement of the profitability due to, among other things, the decrease in marketing costs and positive impact from business investments. As Company Common Shares are listed on the New York Stock Exchange in addition to the Tokyo Stock Exchange, after carefully considering, among others, risks under U.S. securities regulations, it was decided that the business plan of the Company, upon which the DCF Method by J.P. Morgan is based, is not disclosed in this press release.

The JPM Fairness Opinion and the results of the share valuation of the Company Common Shares on which the JPM Fairness Opinion was based was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of the date of the JPM Valuation Report. It should be understood that subsequent developments may affect the JPM Fairness Opinion and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such valuation results or opinion.

The JPM Fairness Opinion was limited to expressing the opinion to the effect that the agreed price per Company Common Share in the Tender Offer in Japan and the U.S. is fair to the holders of the Company Common Shares (except for the Tender Offerors, and their affiliates) under a certain set of assumptions from a financial perspective, and J.P. Morgan expressed no opinion as to the fairness of the Tender Offer Price in the Tender Offer to the holders of any class of securities, creditors or other constituencies of the Company, or as to the underlying decision by the Company to engage in the Tender Offer Transactions. Furthermore, neither the JPM Fairness Opinion nor the results of the share valuation of the Company Common Shares on which the JPM Fairness Opinion was based are intended to recommend a certain tender offer price to the Company, its Board of Directors, Tender Offerors or their Board of Directors, nor are they intended to advise that a certain tender offer price is the only appropriate tender offer price. J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Tender Offer Transactions, or any class of such persons relative to the Tender Offer Price in the Tender Offer Transactions or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the Company Common Shares may trade at any future time. The JPM Fairness Opinion was limited to the amount payable in Japanese yen and was not made with respect to the U.S. dollar amount to be paid to holders of Company Common Shares by applying the applicable exchange rate.

The business plans and financial projections for the Company furnished to J.P. Morgan by the Company (the “Projections”) were prepared by management of the Company. The Company has not publicly disclosed the Projections provided to J.P. Morgan in connection with J.P. Morgan’s preparation of the JPM Fairness Opinion and the share valuation of the Company Common Shares on which the JPM Fairness Opinion was based, and the Projections were not prepared with a view toward public disclosure. The Projections are inherently uncertain and were based on numerous variables and assumptions that may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in the Projections.

The foregoing summary of the JPM Fairness Opinion and the results of share valuation of the Company Common Shares on which the JPM Fairness Opinion was based does not purport to be a complete description of data referenced or presented by J.P. Morgan. The preparation of the JPM Fairness Opinion and JPM Valuation Report is a complex process and the foregoing summary of the results of the share valuation of the Company Common Shares and the valuation methods thereof does not necessarily present all aspects of the analysis conducted in an accurate manner. J.P. Morgan believes that the results of its analyses must be considered as a whole and that selecting portions of such analyses, without considering all of such analyses as a whole, could create an incomplete view of J.P. Morgan's analyses and the processes underlying such analyses. In providing the JPM Valuation Report, J.P. Morgan considered each analysis and factor in a comprehensive and holistic manner, did not attribute any particular weight to any analyses or factors considered by it and did not form a view as to whether or how any individual analysis or factor, considered in isolation, supported or failed to support the JPM Valuation Report. None of the selected companies reviewed as described in the above analysis as a comparable company is identical to any operating units or subsidiaries of the Company. However, the companies selected were chosen because they are publicly traded companies with businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of the Company, as the case may be. The analyses necessarily involve complex considerations and judgments concerning differences in financial and business characteristics of the companies involved and other factors that could affect the companies compared to the Company.

J.P. Morgan has acted as financial advisor and third party valuation agent to the Company with respect to the proposed Business Integration including the Delisting Procedures and will receive a fee from the Company for its services, a substantial portion of which will become payable only if the proposed Business Integration including the Delisting Procedures is consummated. In addition, the Company has agreed to indemnify J.P. Morgan against certain liabilities arising out of its engagement.

During the two years preceding the date of the JPM Fairness Opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with the Company and SoftBank, for which J.P. Morgan and its affiliates have received customary compensation. Such services by J.P. Morgan and/or its affiliates during such period have included J.P. Morgan and/or its affiliates' acting as a Joint Active Bookrunner for the Company’s dual tranche Euro Yen Zero Coupon Convertible Bonds offering in September 2018, as a Lead Arranger and Lender for SoftBank’s Loan Agreement in August 2018, and as a Joint Global Coordinator for SoftBank’s Global Initial Public Offering in December 2018. In addition, J.P. Morgan and its affiliates own less than 1% of the outstanding common shares of the Company, ZHD, and the Tender Offerers in its own accounts. In the ordinary course of businesses of J.P. Morgan and its affiliates, they may actively trade the debt and equity securities of the Company, ZHD, NAVER or SoftBank for its own account or for the accounts of customers and, accordingly, J.P. Morgan and its affiliates may at any time hold long or short positions in such securities.

(4) Possibility of Delisting and Reasons Therefor

As of today, the Company Common Shares are listed on the First Section of the Tokyo Stock Exchange; however, as the Tender Offerors have not set an upper limit of shares to be purchased with respect to the Tender Offer, depending on the results of the Tender Offer, it is possible that the Company Common Shares may become delisted, pursuant to the designated procedures below, in accordance with the delisting standards established by the Tokyo Stock Exchange. Furthermore, even in the event that the delisting standards are not met as of the completion of the Tender Offer, the Tender Offerors will implement certain procedures so that they shall be the only shareholders of the Company as described in “(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)” below after the completion of the Tender Offer. In such cases, the delisting standards will then be invoked, and the Company Common Shares will become delisted pursuant to the designated procedures. Note that, after being delisted, it will be impossible to trade the Company Common Shares on the First Section of the Tokyo Stock Exchange.

Also, as of today, the American Depositary Shares are listed on the New York Stock Exchange, but, after the U.S. Tender Offer is complete, the Company will implement delisting procedures with respect to the American Depositary Shares with the approval of the relevant authorities as necessary based on procedures and methods permissible under the relevant laws and regulations. Note that, after being delisted, it will be impossible to trade the American Depository Shares on the New York Stock Exchange.

(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)

(i) Company Common Shares

According to the Tender Offerors, as stated above in “① Overview of the Tender Offer” in “(2) Grounds and Reasons for the Opinion,” if the Tender Offerors fail to acquire all of the Target Shares during the Tender Offer, once the Tender Offer is complete, the Tender Offerors plan to implement the procedures set forth below so that the Tender Offerors shall be the only shareholders of the Company.

In particular, according to the Tender Offerors, the Tender Offerors plan to request the Company to hold an extraordinary shareholders’ meeting (hereinafter, the “Extraordinary Shareholders’ Meeting”) to implement a share consolidation of the Company Common Shares (hereinafter, the “Share Consolidation”) and to partially amend its articles of incorporation such that provisions regarding the number of share units, subject to the condition that the Share Consolidation becomes effective, is deleted. Note that the Tender Offerors plan to support each of the resolutions described above at the Extraordinary Shareholders’ Meeting. If the resolution for the Share Consolidation is approved at the Extraordinary Shareholders’ Meeting, the Company shareholders shall each, as of the date on which the Share Consolidation is to take effect, own the number of the Company Common Shares corresponding to the Share Consolidation ratio approved at the Extraordinary Shareholders’ Meeting. If the Share Consolidation results in fractional shares that are less than 1 full share, the Company Common Shares, the number of which is equal to the sum of such fractional shares (if the total of fractional shares is less than 1 full share, the fractional shares shall be discarded), shall be sold to the Tender Offerors in accordance with the terms of Article 235 of the Companies Act (Law No. 86 of 2005 as amended; the same applies hereafter) and other relevant laws and regulations, and the owners of such fractional shares shall be provided with cash in exchange.

With respect to the sale price of the total number of fractional Company Common Shares, the plan is to request that the Company petition a court for permission for voluntary sale, after ensuring that, as a result of such sale of fractional shares, the monetary sum provided to Company shareholders who did not tender into the Tender Offer (excluding the Offerors and the Company) will be the same as the value obtained when the number of the Company Common Shares owned by such shareholders is multiplied by the Tender Offer Price. Furthermore, although the ratio of consolidation of the Company Common Shares is still undetermined as of today, the plan is to ensure that the decided-upon ratio will result in fractional shares owned by Company shareholders who did not tender into the Tender Offer totaling less than 1 full share so that the Tender Offerors will obtain all Company Common Shares (excluding treasury shares owned by the Company).

According to the Tender Offerors, in the interest of protecting the rights of minority shareholders in connection with the procedures above, if the Share Consolidation is made, and this results in fractional shares that are less than 1 full share, the Companies Act allows the shareholders of the Company to demand that the Company purchase any fractional shares less than 1 full share in their possession at a fair price, as well as to petition a court for a decision regarding the price of the Company Common Shares, all in accordance with the provisions of Articles 182-4 and 182-5 and all other relevant laws and regulations. As mentioned above, in the Share Consolidation, the number of shares to be held by the shareholders in the Company who have not tendered in the Tender Offer (excluding the Tender Offerors and the Company) is expected to be less than 1 full share. Therefore, the shareholders in the Company who do not support the Share Consolidation will be able to demand that the Company purchase any fractional shares less than 1 full share in their possession at a fair price, as well as to petition a court for a decision regarding the price of the Company Common Shares, all in accordance with the provisions of Articles 182-4 and 182-5 of the Companies Act and all other relevant laws and regulations. Of course, the price in response to such petition shall ultimately be determined by the courts.

According to the Tender Offerors, with respect to the procedures above, the implementation methods and timeline may be subject to change based on the status of amendments to, implementation of, and interpretation by relevant authorities of the relevant laws and regulations, and the Ownership Ratio of Share Certificates, etc. of the Tender Offerors and ownership of the Company Common Shares by Company shareholders other than the Tender Offerors. However, even in such cases, the Tender Offerors intend to take any measures to eventually pay cash to each Company shareholder who does not tender their shares in the Tender Offer (excluding the Tender Offerors and the Company), and cause the amount of cash to be paid to each such shareholder to be equal to the amount obtained by multiplying the Tender Offer Price by the number of Company Common Shares held by such shareholder. Specific procedures and the schedule thereof in the above cases will be announced by the Company once they are determined through mutual discussions between the Tender Offerors and the Company.

According to the Tender Offerors, it should be noted that, the Tender Offer is not in any way intended to solicit Company shareholders to approve the proposals at the Extraordinary Shareholders’ Meeting. All shareholders need to take sole responsibility for seeking advice from their tax accountants with regard to the tax consequences of tendering their shares into the Tender Offer or participating in the procedures outlined above.

According to the Tender Offerors, in addition, as described in “(7) Important Agreements Concerning the Tender Offer”, after the Share Consolidation, SoftBank and NAVER will make the ratio of voting rights in the Company held by the Tender Offerers 50:50 through the Share Transfer and the Merger (both are defined in “(7) Important Agreements Concerning the Tender Offer”). The price in the Share Transfer may differ from the Tender Offer Price. However, in order to exclude the impact on the stock price of speculative media reports by certain news agencies regarding the Business Integration, the Tender Offerors will determine such price based on the objective value of the Company Common Shares, referencing the average of the market price of the Company Common Shares during a certain period prior to November 13, 2019, which is considered not to be affected by such speculative media reports, and the Tender Offerors will not take into account any premium equivalent.

(ii)　Share Options

According to the Tender Offerors, if the Tender Offer is completed but the Tender Offerors fail to acquire all of the Share Options during the Tender Offer, the Tender Offerors will promptly request the Company to implement procedures reasonably necessary to implement the Delisting Procedures, such as acquiring the Share Options and encouraging holders of the Share Options to abandon the Share Options.

(iii)　Convertible Bonds

According to the Tender Offerors, with respect to the Convertible Bonds, the current conversion price of the convertible bonds due 2023 as of today is JPY 7,467 per share and the current conversion price of the convertible bonds due 2025 as of today is JPY 7,518 per share, both of which are higher than the Tender Offer Price of JPY 5,380. Therefore, it is not expected that the Convertible Bonds will be converted into the Company Common Shares during the Tender Offer Period. The Convertible Bonds have a provision to the effect that the current conversion price will be adjusted in the event of the acquisition of Company Common Shares through a tender offer that is conducted with the intent of delisting the Company Common Shares. The Tender Offer is a tender offer that is conducted in with the intent of delisting the Company Common Shares, and thus the current conversion price will be adjusted as a result of the settlement of the Tender Offer. In the Definitive Integration Agreement, NAVER has agreed not to convert the Convertible Bonds held by NAVER into the Company Common Shares.

In addition, the Convertible Bonds have early redemption provisions (Note) that essentially specify as redemption events such matters as a share consolidation where a delisting of the Company Common Shares is contemplated is approved at a shareholders’ meeting of the Company, as well as the acquisition of Company Common Shares through a tender offer that is conducted with the intent of delisting the Company Common Shares (which is also an event causing a conversion price adjustment as described above) (provided that the approval at a Company’s shareholders’ meeting as described above is not obtained within 60 days of the acquisition of the Company Common Shares through such tender offer). The Convertible Bonds that are not acquired through the Tender Offer and are not converted into Company Common Shares will be redeemed after the Tender Offer at a face value or higher in accordance with such early redemption provision. For details of the Convertible Bonds, please refer to “LINE Corporation Announces Issuance of Zero Coupon Convertible Bonds Due 2023 and Zero Coupon Convertible Bonds Due 2025” and “LINE Corporation Announces Determination of Terms of Issue, etc. of Zero Coupon Convertible Bonds due 2023 and Zero Coupon Convertible Bonds due 2025”, which were published on September 4, 2018 by the Company.

(6) Measures to Ensure the Fairness of the Tender Offer, such as Measures to Ensure the Fairness of the Tender Offer Price and to Avoid Conflicts of Interest

Taking into the account the Company is the consolidated subsidiary of NAVER as of today, and structural conflicts of interest may arise in the consideration of the Delisting Procedures of the Company, the Tender Offerors and the Company have implemented the following measures from the perspective of ensuring the fairness of the Tender Offer.

The following descriptions that relate to the measures taken by the Tender Offerors are based on the explanations the Company received from the Tender Offerors.

①　Acquisition of a share valuation report from an independent third party valuation organization by Tender Offerors

(i) Common stock

(Basis of valuation by NAVER)

According to the Tender Offerors, in order to ensure the fairness of the Tender Offer Price in determining the Tender Offer Price, NAVER requested Deutsche Bank, its financial advisor, as a third-party valuation institution independent from the Tender Offerors, ZHD or the Company, to evaluate the share value of the Company. According to the Tender Offerors, Deutsche Bank is not a related party to the Tender Offerors, ZHD or the Company, nor does it have any material interests in relation to the Tender Offer (except for the receipt of fees in connection with its engagement in a series of transactions relating to the Business Integration).

According to the Tender Offerors, Deutsche Bank has evaluated the value of the Company Common Shares by using the average market price method due to the fact that the Company Common Shares are listed on Tokyo Stock Exchange, and a DCF Analysis in order to reflect financial forecasts and other information and data related to the Company provided by the management of NAVER in the evaluation. According to the Tender Offerors, NAVER received a report on the valuation of the Company Common Shares from Deutsche Bank (hereinafter, the “DB Valuation Report”) on December 22, 2019.

According to the Tender Offerors, NAVER has not requested or received any opinion concerning the fairness of the Tender Offer Price (a fairness opinion) from Deutsche Bank. According to the Tender Offerors, the analyses prepared by Deutsche Bank and furnished to NAVER are not an opinion to NAVER or holders of the Company Common Shares as to the fairness of the Business Integration or the Tender Offer Price, do not constitute a recommendation to the Tender Offerors, ZHD, the Company, or holders of the Company Common Shares as to the Business Integration, or as to whether holders of the Company Common Shares should tender the Company Common Shares in the Tender Offer or as to how to vote or act with respect to any other matter, and should not be relied on as the basis for any investment decision.

According to the Tender Offerors, the results of valuation made by Deutsche Bank with respect to the value of each common share of the Company is as follows: 

According to the Tender Offerors, under the average market price method, Deutsche Bank reviewed the historical trading prices of the Company Common Shares on Tokyo Stock Exchange and chose November 13, 2019 as the “record date” in order to avoid any impact on the share value due to speculative press reports regarding the Business Integration that was reported after such date. According to the Tender Offerors, based on the closing price of the Company Common Shares of JPY 4,585 on Tokyo Stock Exchange as of the record date, the simple average closing price over the month-long period ending November 13, 2019 of JPY 4,085, the simple average closing price over the 3-month-long period ending November 13, 2019 of JPY 3,934, and the simple average closing price over the 6-month-long period ending November 13, 2019 of JPY 3,570 (rounded off to the nearest one yen; hereinafter the same applies to calculation of the simple average closing price ), Deutsche Bank derived a range of implied value per the Company Common Share of JPY 3,570 to JPY 4,585.

According to the Tender Offerors, under the DCF Analysis, Deutsche Bank performed a DCF Analysis of the Company using various factors including the Company’s business plans and financial forecasts for the fiscal years ending December 31, 2019 to December 31, 2024 approved for Deutsche Bank’s use by the management of NAVER, earnings projections and investment plans as prescribed in the Company’s business plans, and other publicly available information. According to the Tender Offerors, Deutsche Bank evaluated equity value and corporate value of the Company by discounting the Company’s projected free cash flow for the period on and after the fourth quarter of the fiscal year ending December 31, 2019 to present value using a specific discount rate, and based on such calculations, derived a range of implied value per the Company Common Share of JPY 3,819 to JPY 5,497. According to the Tender Offerors, the business plans and financial forecasts of the Company that were provided to Deutsche Bank by NAVER for purposes of the DCF Analysis assumed that operating losses will be recorded during the fiscal years ending December 31, 2019 and December 31, 2020 due to the investments and high marketing costs associated with the strategic businesses, and that a significant increase in profits will be recorded for the period after the fiscal year ending December 31, 2021 due to the decrease in marketing costs and positive impacts of the business investments. Deutsche Bank did not take into account the synergies or tax impacts anticipated by the management of NAVER to result from a series of transactions relating to the Business Integration, and assumed that there are no off-balance sheet liabilities.

According to the Tender Offerors, NAVER resolved at the meeting of its Board of Directors held on December 23, 2019 that the Tender Offer Price will be JPY 5,380 per share, based on a comprehensive review of various factors, including the results of due diligence in respect of the Company that took place from late October 2019 to early November 2019, precedent examples of premiums paid in tender offers by parties other than the Issuer where the parent company took or intended to take its listed subsidiary private upon completion of such tender offer, the likelihood of approval of the Tender Offer by the Company’s Board of Directors, the market trends of the price of the Company Common Shares and the prospects of subscription for the Tender Offer, as well as taking into account results of the discussions and negotiations with the Company.

According to the Tender Offerors, in preparing the DB Valuation Report, Deutsche Bank reviewed certain publicly available financial and other information concerning the Company, certain internal analyses, financial forecasts and other information relating to the Company prepared by the management of the Company, and certain internal analyses, financial forecasts and other information relating to the Company prepared by the management of NAVER. According to the Tender Offerors, Deutsche Bank did not assume any responsibility for independently verifying, nor did it independently verify, any of the information of the Company, including any financial information or financial forecasts that were analyzed (regardless of whether such information were publicly available, or provided by NAVER or the Company). According to the Tender Offerors, accordingly, Deutsche Bank has assumed and relied upon the accuracy and completeness of all such information. According to the Tender Offerors, Deutsche Bank has not verified any assets or liabilities of the Tender Offerors, ZHD or the Company, nor has it independently appraised or valued any assets or liabilities of the Tender Offerors, ZHD or the Company. According to the Tender Offerors, in relying on the financial forecasts that were provided by NAVER or the Company, including analyses and forecasts concerning the financial impacts that the Tender Offer may have on the Company, Deutsche Bank assumed that such information was reasonably prepared and reflected the best currently available estimates and judgment of NAVER or the Company, as applicable. According to the Tender Offerors, in preparing the DB Valuation Report, Deutsche Bank did not express any view as to such analyses or forecasts or the reasonableness of the assumptions on which they were based. According to the Tender Offerors, the DB Valuation Report is based on financial, market and other conditions in effect as of December 22, 2019, as well as information that Deutsche Bank received by such date. According to the Tender Offerors, events that occur after the date of the DB Valuation Report may affect the valuation results contained in the DB Valuation Report, however Deutsche Bank does not have any obligation to revise, modify or reaffirm the contents of the DB Valuation Report.

According to the Tender Offerors, in respect of the DB Valuation Report, Deutsche Bank has assumed that the Tender Offerors and the Company will each take appropriate actions to comply with the restrictions and agreed terms necessary for the consummation of the Tender Offer, and that all conditions and obligations to which the Tender Offerors and the Company are subject in respect of the Tender Offer will be completed or satisfied without being waived. According to the Tender Offerors, Deutsche Bank has further assumed that all material consents and approvals by government, regulatory authority or other parties (hereinafter, the “Authorities”) necessary for the commencement of the Tender Offer will be obtained, and that neither the obtaining of such consents, approvals or orders by the Authorities nor any revisions, modifications or waiver of any contracts to which the Tender Offerors or the Company is a party will have any adverse effect on the Tender Offerors or the Company, nor will they impose any restrictions, regulations or conditions that may reduce the profits resulting from the Tender Offer for the Tender Offerors or the Company, nor will the profits expected to be earned from the Tender Offer be revised, modified or relinquished.

According to the Tender Offerors, Deutsche Bank does not provide legal, tax or regulatory advice. According to the Tender Offerors, with respect to such matters, NAVER relied on the advice of specialists who are professionals in such fields.

According to the Tender Offerors, the DB Valuation Report was provided solely for the information of the Board of Directors of NAVER and to assist the Board of Directors of NAVER in connection with its consideration of the Tender Offer Price. According to the Tender Offerors, Deutsche Bank has not recommended any specific purchase price to NAVER or its Board of Directors, shareholders, creditors or other relevant parties, and does not recommend or guarantee that any specific purchase price is the only appropriate purchase price. According to the Tender Offerors, the DB Valuation Report does not constitute a recommendation as to whether or not NAVER should commence the Tender Offer, whether any holder of the Company Common Shares should tender shares into the Tender Offer, or as to how any holder of the Company Common Shares or any other securities should vote or act with respect to any matter.

According to the Tender Offerors, by submitting the DB Valuation Report to the Board of Directors of NAVER, Deutsche Bank did not guarantee the business plans or financial forecasts as provided by the Company or NAVER, nor did it guarantee that the earnings projections and investment plans as contained therein will be realized or implemented.

According to the Tender Offerors, Deutsche Bank did not have the authority to solicit, and did not solicit, investments in securities or other financial products issued by the Company. According to the Tender Offerors, Deutsche Bank will not provide any opinion in respect of the values of the Company’s shares after the announcement or consummation of the Tender Offer.

According to the Tender Offerors, Deutsche Bank has acted as NAVER’s financial advisor in connection with the Tender Offer and will be paid a fee for its services. According to the Tender Offerors, NAVER has also agreed to reimburse Deutsche Bank for its expenses, and to indemnify Deutsche Bank against certain liabilities, in connection with its engagement. According to the Tender Offerors, Deutsche Bank is an affiliate of Deutsche Bank AG (hereinafter, together with its affiliates, the “DB Group”). According to the Tender Offerors, one or more of the members of the DB Group may provide, or may be providing, investment banking, commercial banking (including credit financing) or other financial services to the Tender Offerors, ZHD, the Company or their affiliates, and may receive, or may be receiving, fees with respect to such services. According to the Tender Offerors, in the ordinary course of its business, a member of the DB Group may exercise its voting rights in respect to the Company’s shares, or actively trade the Company’s shares, bonds or other marketable securities (or related transactions) for Deutsche Bank’s own account or for the accounts of its customers. According to the Tender Offerors, accordingly, the DB Group may at any time hold a long or short position in such securities, instruments and obligations.

According to the Tender Offerors, subject to its internal rules and procedures, such as policies concerning conflicts of interest, DB Group may provide investment banking, commercial banking or financial advisory services to clients that may have, currently or in the future, a conflict of interest with NAVER or the Company, and may receive fees for such services. According to the Tender Offerors, in such case, DB Group will not owe any duty to disclose any confidential information to NAVER, the Company or their affiliates.

(Basis of valuation by SoftBank)

According to the Tender Offerors, in determining the Tender Offer Price, in order to ensure the fairness of the Tender Offer Price, SoftBank requested Nomura Securities Co., Ltd. (hereinafter, “Nomura Securities”), its financial advisor, as a third-party valuation institution independent from the Tender Offerors, ZHD, or the Company, to evaluate the share value of the Company. According to the Tender Offerors, Nomura Securities is not a related party to the Tender Offerors, ZHD, or the Company, nor does it have any material interests in relation to the Business Integration including the Tender Offer.

According to the Tender Offerors, upon conducting a valuation of the Company Common Shares among several share price valuation methods, Nomura Securities considered that it was appropriate to evaluate the Company Common Shares from multiple angles. According to the Tender Offerors, therefore, Nomura Securities has evaluated the value of the Company Common Shares on the assumption that the Company is a going concern by using the average market price method due to the fact that the Company Common Shares are listed on the First Section of the Tokyo Stock Exchange and DCF Analysis in order to reflect future business activities in the valuation. According to the Tender Offerors, SoftBank received a report on the valuation of the Company Common Shares (hereinafter, the “Nomura Valuation Report”) from Nomura Securities dated December 23, 2019. Note that SoftBank has not received a fairness opinion regarding the fairness of the Tender Offer Price.

The results of valuation made by Nomura Securities with respect to the value of each common share of the Company is as follows.

For the average market price method, setting a record date of November 13, 2019, before speculative press reports were released (after the close of regular trading hours on November 13, 2019), in order to exclude the effect of speculative press reports on the share price, the closing price on the record date for the Company Common Shares on the First Section of the Tokyo Stock Exchange was JPY 4,585, the simple average closing price over the 5 business days ending November 13, 2019 was JPY 4,427 (rounded off to the nearest one yen; hereinafter the same applies to calculation of the simple average closing price), the simple average closing price over the month-long period ending November 13, 2019 was JPY 4,085, the simple average closing price over the 3-month-long period ending November 13, 2019 was JPY 3,934, the simple average closing price over the 6-month-long period ending November 13, 2019 was JPY 3,570. According to the Tender Offerors, based on those values, Nomura Securities evaluated the range of the share value per each common share of the Company as being between JPY 3,570 and JPY 4,585.

According to the Tender Offerors, for the DCF Analysis, calculations were based on the revenues and investment plans described in business plans over 6 fiscal years from the fiscal year ending December 2019 to the fiscal year ending December 2024 and publicly available information, from which the Company’s corporate value and equity value were derived by discounting the free cash flow expected to be generated by the Company in the future from the third quarter of the fiscal year ending December 2019 by a certain rate in order to determine the present value, which resulted in a per-common share price range of JPY 3,412 to JPY 5,142. According to the Tender Offerors, the business plan based on which the DCF Analysis was conducted contemplates a significant fluctuation in operating profit and loss. According to the Tender Offerors, specifically, it anticipates an operating loss due to the post of large marketing expenses and investments to strategic businesses in the fiscal years ending December 2019 and 2020 and a significant fluctuation in revenue due to the reduction of marketing expenses and the improvement of profit and loss according to the emergence of the effect through business investments after the fiscal year ending December 2021. According to the Tender Offerors, the expected synergies to be realized through the implementation of the Business Integration including the Tender Offer are not taken into account because it is difficult to specifically estimate them at the current point.

According to the Tender Offerors, SoftBank decided to set the Tender Offer Price at JPY 5,380 per share as of today generally taking into account the result of initial due diligence conducted during the period from late September to early November, 2019, precedent examples of premium paid upon determining price of purchase in the past tender offers to Share Certificate, etc. in the issuers other than ones which are similar to the Tender Offer, market trend of share price of the Target Company Common Shares, the likelihood for the Board of Directors of the Company to endorse the Tender Offer and the prospect of the tender to the Tender Offer in addition to the valuation result of the Nomura Valuation Report acquired from Nomura Securities as of December 20, 2019, as well as taking into account the result of the discussion and negotiation with NAVER and the Company.

(ii)       Share Options

According to the Offerors, in light of the fact that the Share Options were issued as incentive plans for directors and employees of the Company and the fact that the Tender Offerors would be unable to exercise such Share Options even after the Tender Offerors acquired such Share Options, the Tender Offerors have set the price of purchase of the Share Options as JPY 1 per share option. In determining the price of Purchase of the Share Options, the Tender Offerors have not obtained a valuation report or a fairness opinion from a third party valuation organization.

(iii)       Convertible Bonds

According to the Offerors, the Tender Offerors have decided to acquire the Convertible Bonds due 2023 at a price of JPY 7,203,820, which is calculated by multiplying 1,339 common shares (the quotient of the face value of JPY 10,000,000 divided by the effective conversion price of JPY 7,467, a fractional share shall be omitted) with the Tender Offer Price of JPY 5,380. According to the Offerors, this price of JPY 7,203,820 represents a discount of 27.96% on the face value of such Convertible Bonds.

According to the Offerors, the Tender Offerors have decided to acquire the Convertible Bonds due 2025 with a face value of JPY 10,000,000 at a price of JPY 7,155,400, which is calculated by multiplying 1,330 common shares (the quotient of the face value of JPY 10,000,000 divided by the effective conversion price of JPY 7,518, a fractional share shall be omitted) with the Tender Offer Price of JPY 5,380. According to the Offerors, this price of JPY 7,155,400 represents a discount of 28.45% on the face value of such Convertible Bonds.

As stated in "(5) Post-Tender Offer Reorganizations (Two-Step Acquisition Items)" in “1. Purpose of Purchase” abovementioned, the Convertible Bonds provide that, in the event that a tender offer is made to the Target Company Common Shares for delisting, the conversion price will be adjusted due to the settlement of the tender offer. In addition, the Convertible Bonds have the Early Redemption Provision, and the Convertible Bonds that are not acquired by the Tender Offer and are not converted into the Target Company Common Shares are scheduled to be redeemed after the Tender Offer at or above par value in accordance with the Early Redemption Provision.

②　Acquisition of share valuation report and a fairness opinion from an independent third party valuation firm

Please refer to “(3) Matters Concerning the Valuation” above.

③ 　Acquisition of advice from an independent law firm by the Company

Prior to the proposal of the Tender Offer by the Tender Offerors, the Company selected Anderson Mori & Tomotsune in July 2019, and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho) in August 2019 as legal advisors that are independent from the Tender Offerors, ZHD and the Company. The Company received legal advice from those firms with respect to the procedures of the Business Integration and the decision-making process of the Board of Directors of Company and the method thereof.

Given that the Company received the proposal of the Tender Offer from the Tender Offerors, in ensuring the fairness of the Tender Offer, the Company received legal advice from Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho)with respect to the procedures of the Business Integration and the Company’s Board of Directors’ decision-making process and methods.

Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho) are not related parties to the Tender Offerors, ZHD or the Company, nor do they have any material interests to be described in respect of the Delisting Procedures, including the Tender Offer.

④ 　Establishment of a Special Committee in the Company

In order to ensure the appropriateness of the terms and conditions of a transaction and the fairness of procedures from the standpoint of improving the corporate value of the Company and the benefit of its general shareholders in the Business Integration, the Company established a Special Committee on October 15, 2019, which consists of three persons, Rehito Hatoyama (Chair of the Special Committee), Tadashi Kunihiro and Koji Kotaka and who have no interests with the Tender Offerors, ZHD or the Company, whose status as independent and outside directors of the Company has been notified to the Tokyo Stock Exchange, and are judged to have the experience and eligibility necessary to consider the Business Integration. In considering the Business Integration, the Company consulted with the Special Committee with respect to (i) whether the Business Integration facilitates the improvement of corporate value and its purpose is reasonable, (ii) whether the fairness of procedures for the Business Integration is ensured, (iii) whether the appropriateness of the terms and conditions of the Business Integration is ensured, and (iv) whether it is considered based (i) to (iii) above that the Business Integration is disadvantageous to the minority shareholders of the Company.

After the proposal of the Tender Offer from the Tender Offerors, given that the Business Integration will constitute a transaction with a controlling shareholder, as provided in the Securities Listing Regulations of the Tokyo Stock Exchange, in the future if the Delisting Procedures including the Tender Offer is implemented, the Company continued to consult with the Special Committee, and resolved at the meeting of the Board of Directors held on November 18, 2019 to change the matters about which to consult with the Special Committee to (i) whether the Business Integration facilitates the improvement of corporate value and its purpose is reasonable, (ii) whether the fairness of procedures for the Business Integration is ensured, (iii) whether the appropriateness of the terms and conditions of the Delisting Procedures, including the Tender Offer Price of the Tender Offer, are ensured, (iv) whether it is considered based on (i) to (iii) above that the Business Integration is disadvantageous to the minority shareholders of the Company, and (v) whether it is considered that it is reasonable for the Company’s Board of Directors to announce an opinion endorsing the Tender Offer and recommend that the Company’s shareholders tender in the Tender Offer. The Board of Directors also resolved on such date that, when making a decision with respect to the Business Integration, including the Tender Offer, it will appropriately understand and comprehend the contents of the judgment of the Special Committee, and will respect it to the maximum extent, and that the Board of Directors will not endorse the Business Integration, including the Tender Offer, if the Special Committee determines that the terms and conditions of the Tender Offer and the Delisting Procedures are not appropriate.

Moreover, it has been determined that each member of the Special Committee will be paid a fixed amount of remuneration, regardless of the content of the report, as consideration for their duties.

The Special Committee held 18 meetings (28 hours in total) between October 15, 2019 and December 23, 2019. In between these meetings, the Special Committee also shared reports/information, deliberated and made decisions, among other actions, via email. It was through these means that the Special Committee carefully discussed and considered the Consultation Matters.

Specifically, the Special Committee confirmed the independence and experience of and appointed Nakamura, Tsunoda & Matsumoto and White & Case Gaikokuho-Jimu-Bengoshi-Jimusho/White & Case Law Offices (Registered Association) as the legal advisors to the Special Committee. After interviewing multiple candidates and confirming independence and experience through a submitted disclosure letter which included information about what if any services have been provided to other parties involved in the Business Integration for matters other than the Business Integration, and having received such information from Merrill Lynch Japan and comparing it to others, determined that when considered comprehensively Merrill Lynch Japan has a wealth of experience and is of repute, and would be independent such that its rendering of services to the Special Committee regarding the Business Integration would not cause any impediments, and the Special Committee appointed Merrill Lynch Japan as the financial advisor and third party valuation firm for the Special Committee.

Moreover, the Special Committee confirmed the independence and wealth of experience of Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho), the legal advisors to the Company, based on an accounting delivered by each firm regarding such independence and experience, as well as the independence and experience of J.P. Morgan, the financial advisor and third party valuation firm for the Company, based on an accounting delivered by J.P. Morgan regarding such independence and experience.

In addition, regarding the Company’s internal review structure on the Delisting Procedures, the Special Committee requested explanations from the Company’s management and Anderson Mori & Tomotsune, the legal advisor to the Company, with respect to the number of directors that have conflicts of interest. The Special Committee reviewed Anderson Mori & Tomotsune’s response based on the advice from Nakamura, Tsunoda & Matsumoto, the legal advisor to the Company, and considered carefully whether the Company’s internal review structure has any problems from a fairness point of view.

Given that, the Special Committee received explanations from the Company’s management on the preparation process / objectives, contents and important assumed conditions of the Company’s stand-alone business plan (excluding the effects of the Business Integration) (the “Business Plan”), together with the integration synergies of the Business Integration, and had a question and answer session.

The Special Committee received advice from Merrill Lynch Japan, Nakamura, Tsunoda & Matsumoto and White & Case Gaikokuho-Jimu-Bengoshi-Jimusho/White & Case Law Offices (Registered Association), as well as explanations with respect to the Business Integration from the Tender Offerors. In response, the members of the Special Committee asked various questions on the operation / governance policy of the Company after the Business Integration and the integrated company (meaning ZHD, hereinafter so referred to, which will be the integrated company after the Business Integration), the evaluation of the Business Plan, the integration synergies of the Business Integration, the synergies anticipated between the Tender Offerors, the tender offer price of the Tender Offer proposed by NAVER and SoftBank, and the planned procedures of the Tender Offer and the steps for Delisting Procedures, that will come after the Tender Offer. The Special Committee received answers to these questions. Moreover, the Special Committee received advice from Merrill Lynch Japan, as well as explanations from ZHD, which is the other party to the Business Integration. In response, the Special Committee asked various questions with respect to the Business Integration, including the operation / governance policy of the Company after the Business Integration and the Integrated Company, the evaluation of the Business Plan and the integration synergies of the Business Integration. The Special Committee received answers to these questions from ZHD and others.

Thereafter, as described below in “⑤ Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm from an Independent Third-Party Valuation Firm” the Special Committee obtained the Merrill Lynch Japan Valuation Report regarding the Company’s Common Shares from Merrill Lynch Japan on December 23, 2019 prepared under certain prescribed conditions, and received explanations from Merrill Lynch Japan on the method for calculating the value of the Company’s Common Shares, the reasons for choosing such method, the results of calculations based on stock market price analysis and Discounted Cash Flow analysis (the “DCF Analysis”) and the premium levels etc. in similar recent transactions in the Japan and US markets, as well as the details and assumptions related to such matters, deliberated those matters, and conducted a question and answer session.

Moreover, as described below in “⑤ Special Committee’s Procurement of Share Valuation Report and Fairness Opinion from an Independent Third-Party Valuation Firm from an Independent Third-Party Valuation Firm” on December 23, 2019, the Special Committee received the Merrill Lynch Japan Fairness Opinion from Merrill Lynch Japan stating that the Tender Offer Price of the Company Common Shares are fair to the Company’s general shareholders (excluding the Tender Offerors and their related companies) from a financial perspective, both dated December 23, 2019, prepared under certain prescribed conditions, received explanations regarding its contents and assumed conditions, deliberated those matters and conducted a question and answer session.

The Special Committee received a statement of intent that included the initial price proposal from the Offerors on November 18, 2019, and the Special Committee received a direct explanation from the Tender Offerors of the rationale for the tender offer price. The Special Committee deliberated and considered the financial advice received from Merrill Lynch Japan and requested the Tender Offerors to increase the tender offer price, considering the Company’s stand-alone stock value and the premiums in similar cases. Moreover, in order to clearly convey this request to the relevant parties, the Special Committee, of its own accord, requested its attendance at negotiations with the Offerors on three occasions, and, having received the opportunity to express its opinion, the Special Committee did so.

The Special Committee received an explanation of a summary of the Integration Agreement and Capital Alliance Agreement, to which the Company was to become a party, from the Company’s management and Anderson Mori & Tomotsune, the Company’s legal advisor, and a question and answer session was conducted.

The Special Committee received advice from its legal advisors Nakamura, Tsunoda & Matsumoto and White & Case Gaikokuho-Jimu-Bengoshi-Jimusho/White & Case Law Offices (Registered Association) regarding the Company and ZHD’s press release titled “Announcement Regarding Capital Alliance MOU on Business Integration,” dated November 18, 2019, SoftBank and NAVER’s press release titled “Notice Concerning the Entry into a Memorandum of Understanding Regarding the Business Integration of Z Holdings Corporation (Securities Code: 4689) and LINE Corporation (Securities Code: 3938), and the Submission of a Letter of Intent in Relation to a Joint Tender Offer for the Shares of LINE Corporation,” dated the same day and the Company’s draft press release at the time of the 17th meeting of the Special Committee titled “Announcement of Opinion Regarding the Planned Commencement of the Joint Tender Offer for the Shares of LINE Corporation by SoftBank Co., Ltd. and NAVER Corporation, the Controlling Shareholder of LINE Corporation,” dated December 23, 2019, collectively, the “Disclosure Documents”), requested and received explanations from the management of the Company and Anderson Mori & Tomotsune, the legal advisors to the Company, regarding the contents of the information scheduled to be disclosed by the Disclosure Documents, and conducted a question and answer session.

Following the procedures noted above, the Special Committee received advice from Nakamura, Tsunoda & Matsumoto and White & Case Gaikokuho-Jimu-Bengoshi-Jimusho/White & Case Law Offices (Registered Association), the legal advisors to the Special Committee, and deliberated the draft of this Report multiple times.

C.       The Decision

Under the background circumstances discussed above, and as a result of the Special Committee carefully discussing and considering the consultation matters based on (i) legal advice from Nakamura, Tsunoda & Matsumoto, the Special Committee’s legal advisor on Japanese law, and White & Case Gaikokuho-Jimu-Bengoshi-Jimusho/White & Case Law Offices (Registered Association), the Special Committee’s US legal advisor on U.S. law, and (ii) financial advice received from the Special Committee’s exclusive financial advisor and third-party valuation firm, Merrill Lynch Japan, as well as on the Merrill Lynch Japan Valuation Report and Merrill Lynch Japan Fairness Opinion dated December 23, 2019, obtained, the Special Committee unanimously agreed and submitted its report dated December 23, 2019 (the “Report”) to the Company’s Board of Directors, the details of which are outlined below.

(i) Report

Please note that preparation of the Report regarding the tender offer in the U.S. also covering the American Depositary Shares and statement of the determinations and opinions stated in the Report (irrespective of whether they relate to the fairness of procedures or the price in the Tender Offer and the Delisting Procedures, or relating to any other matter) are based on the following assumptions reported by the Company and its advisors.

For the avoidance of doubt, the Special Committee notes that since the Company is listed on stock exchanges in both the U.S. and Japan, the terms used in the Report are used within the meanings ascribed to them by the laws and regulations (including the Companies Act) of Japan that directly apply to the Company as a stock company listed in Japan.  In particular, the terms used by the Special Committee such as “independence” (including, without limitation, those relating to the financial advisor and legal advisors of the Company), the discussions by the Special Committee concerning a “majority of the minority” condition, the discussions by the Special Committee concerning an indirect “market check” and its meaning are all used within the meanings ascribed to them by Japanese law and the Ministry of Economy, Trade and Industry’s “Fair M&A Guidelines ― Enhancing Corporate Value and Securing Shareholders’ Interests ―” dated June 28, 2019.  There may be terms that are similar to those used in the U.S. and its states, but those terms and how they are used in the context of the deliberations of the Special Committee differ from such terms and uses in the context of the U.S. or its states, and therefore, in any disclosure, such terms and uses in the Special Committee context and any similar terms in the context of U.S. or its states should not be conflated without supplementary explanation based on the views of the Special Committee.

(ii) Considerations

(a) The Business Integration, including the Tender Offer, can be recognized to contribute to the advancement of the Company’s corporate value and be for a reasonable purpose due to the following.

(i) It was decided that the Company’s understanding regarding the purpose and significance of the Business Integration stated in “② Purpose and Background of the Tender Offer” in “(2) Grounds and Reasons for Opinion” in “3. Details, Basis, and Reasons for Opinion Regarding the Tender Offer” is consistent with the objective reality, and even from the understanding of the members of the Special Committee, the Company’s outside directors, regarding the Company’s circumstances such as actively operating businesses in Asia, it is reasonable for the Company Group to seek to carry out the Business Integration upon a spirit of equality with the ZHD Group and play a proactive role in the operation of the Integrated Company after the Business Integration.

(ii) Even though the Business Integration may be for a reasonable purpose as discussed above, in order to determine whether the Business Integration will in fact contribute to an increase in corporate value, the Special Committee considered it important to review the basic strategy and integration synergies of the Integrated Company and thus interviewed the Company’s management, as well as ZHD and the Tender Offerors. As a result of the interviews, the Special Committee concluded that overall, there are no particularly unreasonable issues with respect to the basic strategy of the Integrated Company, and that commensurate integration synergies can be expected from the Business Integration.

After reviewing comprehensively the facts that it received explanations from the Company’s management that compared with other possibilities (including growth through the execution of business on a stand-alone business basis and without conducting an integration with another company), the Business Integration brings great integration synergies to the Company and contributes to an increase of the Company’s corporate value, and from NAVER that transactions like selling the Company Common Shares without relying on the Business Integration are not anticipated, and received a response from both the Company and NAVER that they recognize that there are no realistic alternatives to the Business Integration, as well as factors such as the business environment faced by the Company, the risks associated with growth through the execution of business on a stand-alone basis without carrying out a integration with another company, and the possibilities of integrating with a third party other than ZHD, the Special Committee concluded that in order to improve the Company’s corporate value, the Business Integration would be more effective than executing business on a stand-alone basis and there are no alternatives to the Business Integration that are more realistic than the Business Integration.

(b) The Business Integration, including the Tender Offer, can be recognized as having ensured fairness in the procedures related to the Business Integration, and fair procedures were implemented in order to ensure the interests of ordinary shareholders, from the perspective of ensuring (1) a situation that one could view as being the same as if it were a transaction between independent parties as indicated in the M&A Guidelines, and (2) an opportunity for ordinary shareholders to make an appropriate judgment based on adequate information, due to the following points.

(c) Based on the following, it is acknowledged that the appropriateness of the transaction terms of the Delisting Procedures, including the Tender Offer (excluding the price of the Share Options and the Convertible Bonds) has been ensured.

(i)    With respect to the method of acquisition, the Delisting Procedures are conducted for the purpose of taking the Company private by making the Company’s shareholders consist solely of NAVER and SoftBank. The Special Committee carefully discussed whether or not the method of conducting a share consolidation as the second step, following a first step of a Tender Offer, is an appropriate method to achieve that purpose. The Special Committee also carefully discussed the reasonableness of the type of purchase consideration used in the Tender Offer. One might have considered using shares of NAVER, SoftBank or the integrated company (ZHD) in lieu of cash consideration. However, the businesses of NAVER, SoftBank and ZHD are quite a bit different from the business of the Company. In addition, it may be thought that the use of cash consideration enables shareholders of the Company to avoid the risk of a decrease in the share price compared with what could occur were the consideration to be in the form of shares instead of cash. After comprehensively considering the afore-mentioned discussion, the Special Committee concluded that the type of purchase consideration used in the Tender Offer to be appropriate.

(ii)  The Tender Offer Price can be recognized as appropriate based on the following factors: ① Regarding the Business Plan that forms the basis of the valuation by the DCF Analysis in the Merrill Lynch Japan Valuation Report, the Special Committee, having received explanations from the Company’s management about the preparation process, objectives, and important assumptions, etc., asked questions to the Company’s management about the key factors of business growth potential related to each key point, core business synergies and other key points, etc., received their responses, and carefully discussed the reasonableness of the Business Plan based on these explanations and responses from the Company’s management; ② the Merrill Lynch Japan Valuation Report does not contain points that can be recognized as unreasonable regarding the content of the valuation or the method of valuation, and the Tender Offer Price is above the top end of the range of market price analysis in Merrill Lynch Japan Valuation Report and within the range of the DCF Analysis; ③ the premium provided in the Tender Offer Price is considered a significant premium in comparison with the levels of the premiums provided in similar transactions; ④ obtained the Merrill Lynch Japan Fairness Opinion, and ⑤ the Tender Offer Price was agreed as a result of sincere negotiation between the Company and the Tender Offerors with the substantive involvement of the Special Committee, which of its own accord, requested its attendance at negotiations, attended negotiations on two occasions, and expressed its opinion.

While the Share Options and Convertible Bonds are subject to the Tender Offer, the purchase price for the Share Options is 1 yen, and the purchase price for the Convertible Bonds is at a discount to face value. Further, the Company plans to express the opinion that the Company defers to holders of the Share Options and Convertible Bonds with respect to whether to tender their Share Options and Convertible Bonds in the Tender Offer. In light of the above, the Special Committee reserves its opinion with regarding the appropriateness of the Tender Offer price for the Share Options and Convertible Bonds.

(d) As discussed above, we recognize that the Business Integration contributes to the advancement of the Company’s corporate value and that its purpose is reasonable, fairness has been ensured in the procedures related to the Business Integration, and appropriateness of the terms of the Delisting Procedures (excluding the price of the Share Options and the Convertible Bonds), including the Tender Offer, has been ensured. Accordingly, we think that the Company’s Board of Directors expressing its opinion in support of the Tender Offer and the resolutions of the Company’s Board of Directors regarding the Business Integration that involves the Delisting Procedures using a share consolidation or other methods after the Tender Offer, are not against the interests of the Company’s minority shareholders.

(e) Accordingly, we believe it to be appropriate for the Company’s Board of Directors to express its opinion in support of the Tender Offer, and recommend that the Company’s shareholders and American Depositary Share holders tender their shares in response to the joint tender offer.

In order to obtain professional advice and support regarding the matters such as the valuation of corporate value and price negotiations, the Special Committee retained Merrill Lynch Japan, a financial advisor and third-party valuation firm independent of the Tender Offerors and the Company, to calculate the share value of the Company Common Shares　(including the American Depositary Shares, herein after the “Company Common Shares etc.”) and submit an opinion as to whether or not the tender offer price of the Company Common Shares etc. in the Tender Offer Price is fair to the holders of the Company Common Shares etc. (excluding the Tender Offerors and their related companies) from a financial perspective (fairness opinion), and obtained the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion dated December 23, 2019 to the effect that the tender offer price of the Company Common Shares etc. is fair to holders of the Company Common Shares etc. under certain conditions precedent from a financial perspective, based on the assumptions set forth below and certain other conditions.

Merrill Lynch Japan examined the Business Reports prepared by the Company and various methods for evaluating the Company shares and that the two evaluation methods below are appropriate.

Please note that Merrill Lynch Japan is not a Tender Offeror or the Company’s related party, and has no material conflict of interest that should be stated in relation to the Tender Offer, including the Delisting Procedures.

The range of the share value per share of the Company’s Common Shares calculated based on such methods are as follows.

In the market share price analysis adopted by Merrill Lynch Japan, due to the publication of speculative press reports concerning the Business Integration after the closing of the trading session of the Tokyo Stock Exchange on November 13, 2019, calculations were carried out based on the closing price of 4,585 yen for the Company’s Common Shares on the First Section of the Tokyo Stock Exchange as of November 13, 2019, as the valuation record date, and the simple averages of the closing prices for one month, three months and six months prior thereto (respectively JPY 4,085, JPY 3,934, and JPY 3,570) were used to calculate the range of share values of the Company’s Common Shares of JPY 3,570 to JPY 4,585.

In the DCF method, analysis was carried out based on the Company’s business plans and financial projections, the earnings and investment plans in the Company’s business plans, and other factors, such as information that has been disclosed publicly, that the Company submitted to Merrill Lynch Japan (as discussed below, however, v has not independently verified the accuracy and completeness of such materials, and does not bear any responsibility or obligation to conduct independent verification). The corporate value and share value were analyzed by discounting the free cash flows expected to be generated by each business of the Company by a certain discount rate back to the current value, and a share value range of 4,701 to 6,293 per share was valuated. The Company’s business plans which constituted the assumptions of Merrill Lynch Japan’s calculation using the DCF Analysis with the instruction of the Company contemplate an operating loss due to the post of large marketing expenses and investments to strategic businesses in the respective fiscal years ending December 2019 and 2020 and a significant fluctuation in revenue due to the reduction of marketing expenses and the improvement of profit due to the effect of business investments after the fiscal year ending December 2021. These business plans and free cash flows reflected in the DCF Analysis do not include synergies from the Business Integration. Additionally, the discount rate (weighted average capital cost) was analyzed based on CAPM (capital asset pricing model) generally used in share valuation practice, and a discount rate range of 5.75% to 6.75% or 9.50 to 10.50% was applied, depending on the business. Calculation of the going concern value used a perpetual growth rate analysis, and adopted a perpetual growth rate of 1.25% to 1.75% at the direction of the Company.

The Merrill Lynch Japan Valuation Report and Merrill Lynch Japan Fairness Opinion were submitted in connection with the Special Committee of the Company’s Board of Directors examining the tender offer price of the Company Common Shares etc. in the Tender Offer from a financial perspective in such role, and was submitted to the Special Committee of the Company’s Board of Directors for their convenience for the purpose of such examination. The Merrill Lynch Japan Fairness Opinion was limited to fairness from a financial standpoint in relation with the Business Integration and does not express any other opinion or view whatsoever, and does not express any opinion or view whatsoever with respect to consideration received by the holders of any other type of security, creditors, or other interested parties of any of the parties in connection with the Business Integration. Merrill Lynch Japan does not express any opinion or view whatsoever with respect to the terms or other aspects of the Business Integration, including the form or structure, etc. of the Business Integration (excluding the tender offer price of the Company Common Shares etc. in the Tender Offer to the extent expressly stated in the Merrill Lynch Japan Fairness Opinion , and does not express any opinion or view whatsoever with respect to other strategies that could be adopted by the Company or implemented by the Company, the relative merits of the Business Integration, or regarding the business decision-making in relation to carrying out or implementing the Business Integration. Merrill Lynch Japan does not express any opinion or recommendation whatsoever with respect to whether the Company’s shareholders should tender their shares into the Tender Offer or how the Company’s shareholders should exercise their voting rights or act in relation to the Business Integration or matters in connection therewith. Merrill Lynch Japan does not express any opinion or view whatsoever with respect to the fairness (irrespective of whether financial or otherwise) of the amount, nature, or other aspect of remuneration to the officers, directors, or employees of the parties to the Business Integration relative to the Tender Offer Price. Merrill Lynch Japan does not express any opinion whatsoever in relation to whether Company Common Shares should be traded at any time, including after the Delisting Procedures are publicly disclosed or commenced. Merrill Lynch Japan does not express any opinion whatsoever in relation to the effect to the exchange rate in relation to the Business Integration, and as stated above, Merrill Lynch Japan Fairness Opinion is based on the Tender Offer Price in Japanese yen. As stated, Merrill Lynch Japan has not been retained to solicit, and is not soliciting, any third party to express interest or make a proposal with respect to the purchase of all or part of the Company or for any alternative transaction.

Merrill Lynch Japan, in relation to the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion, performed work including the following.

When preparing the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Report and carrying out the valuation analysis on which they are based, Merrill Lynch Japan did not independently verify the financial or other information and data publicly disclosed, submitted to Merrill Lynch Japan, or separately examined or discussed by Merrill Lynch Japan, assumed that such information and data was accurate and complete, and relied on the accuracy and completeness thereof. Furthermore, Merrill Lynch Japan is not aware of any facts or circumstances that would cause such information or data to be inaccurate or could give rise to any misunderstanding in any material respect, and has relied on the representations of the Company’s management. The Projections relating to the Company prepared by the Company’s management reflect the best projections and honest judgment of the Company’s management relating to the Company’s future performance obtainable at this time, Merrill Lynch Japan has received representations from the Company to the effect that they have been reasonably prepared, and Merrill Lynch Japan has used these as assumptions at the direction of the Special Committee of the Company’s Board of Directors. Out of necessity, the Merrill Lynch Japan Valuation Report uses the current financial, economic, foreign exchange, market and other conditions and circumstances as assumptions (except for where otherwise stated in such analysis) as of the date of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion, and is based on the information able to be obtained by Merrill Lynch Japan as of such date. Circumstances arising after the date of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion may affect the content of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion], but Merrill Lynch Japan bears no obligation to update, revise, or reconfirm the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion. The Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion do not infer or imply any opinion whatsoever with respect to any matter not expressly stated in the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion or anything after the submission date of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion.

As explained above, the Merrill Lynch Japan analysis provided above is an outline of the main financial analysis in connection with the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion at the direction of the Special Committee of the Company’s Board of Directors, and does not encompass the entire analysis carried out by Merrill Lynch Japan in connection with the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion. The preparation of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion and the analysis forming the basis thereof, was a complex analysis process involving various judgments regarding the appropriateness and relevance of each financial analysis methodology and the application of each method to the specific circumstances, and therefore it is not necessarily appropriate to state just part of the analysis results or a summary. The analysis by Merrill Lynch Japan needs to be considered as a whole. Furthermore, extracting just one part of the analysis or factor, or only looking at the information in the tables, etc., without taking into consideration all of the analysis and factors considered or all of the explanations regarding analysis, may give rise to an misunderstanding or incomplete understanding of the process forming the basis for Merrill Lynch Japan’ analysis and opinion. The fact that a certain analysis is referred to in the above outline does not mean that such analysis was given more weight than other analyses mentioned in such outline.

When conducting its analysis, Merrill Lynch Japan took into account the performance of the industry, general business and economic circumstances, and other matters, but most of these are beyond the control of the Tender Offerors and the Company. The projections regarding the Company’s future performance on which Merrill Lynch Japan’s analysis was based do not necessarily indicate the actual value or future results, and the actual value and future results may be significantly better or worse than such projections. Merrill Lynch Japan’s analysis was performed as part of the analysis for the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion and was provided to the Special Committee of the Company’s Board of Directors in connection with the submission of the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion. Merrill Lynch Japan’s analysis was not carried out with the intention of constituting an appraisal, and does not indicate the price in the event that the business is actually sold or the price that any security whatsoever is traded at or may be traded at in future. Therefore, the projections used in the above analysis and the valuation range elucidated in such analysis are by their nature materially uncertain, and should not be construed as indicating Merrill Lynch Japan’s opinion regarding the actual value of the Company.

The tender offer price of the Company Common Shares etc. in the Tender Offer was determined through negotiations between Tender Offerors and (based on the Special Committee’s opinion, intent, and requests, etc. with respect to material respects) the Company, not a financial advisor. The decision to disclose the opinion approving the Tender Offer was made solely by the Company’s Board of Directors based on the opinion of the Special Committee to the Company’s Board of Directors. As mentioned above, the Merrill Lynch Japan Valuation Report and the Merrill Lynch Japan Fairness Opinion were merely one of many factors considered by the Special Committee of the Company’s Board of Directors when examining the Business Integration, and must not be construed to be the deciding factor in the opinion of the Special Committee of the Company’s Board of Directors regarding the Business Integration or the tender offer price of the Company Common Shares etc. in the Tender Offer.

Merrill Lynch Japan has not conducted an independent appraisal or valuation of the Company’s assets or liabilities (irrespective of whether they are contingent liabilities or not), and has not provided such an appraisal or valuation. Merrill Lynch Japan has not carried out an on-site inspection of the Company’s assets or property either. Merrill Lynch Japan has not evaluated the Company’s ability to pay its debts or fair value under any applicable law relating to bankruptcy, inability to pay debts, or other matters similar thereto. In accordance with the directions of the Special Committee of the Company’s Board of Directors, Merrill Lynch Japan has assumed that the Tender Offer will be completed with the currently contemplated terms without the waiver, amendment, or revision of material terms or agreed matters, and that there will be no delay, restriction, or condition imposed (including order to cease and desist or to take amendment measure) that may have an adverse effect on Tender Offerors or the Company, or the planned interests of the Business Integration in the process of obtaining government, regulatory authority, or other authorization, permit, approval, exemption, or release necessary for the Business Integration.

Merrill Lynch Japan serves as the financial advisor of the Special Committee of the Company’s Board of Directors in relation to the overall Business Integration, including the Delisting Procedures, and receives a fee for such services. Payment of a partial amount is conditioned on the submission of the fairness opinion and the balance is conditioned on the completion of the Tender Offer and the LINE Squeeze-out (as defined in “①　Method of the Business Integration” of “(7) Important Agreements Concerning the Tender Offer”) (after the completion of the Tender offer, in case the LINE Squeeze-out is not completed by the end of December 2020, such fee will be paid on January 1, 2021). The Company has also agreed to indemnify Merrill Lynch Japan for all costs borne thereby in relation to its involvement and certain liabilities incurred thereby due it its involvement.

Merrill Lynch Japan and its affiliated companies are full-service securities firms and commercial banks, and provide a wide range of investment banking services, corporate and private banking services, asset and investment management, financing, and financial advisory services, and other commercial services and products to companies, government agencies, and individuals, and are engaged in securities, financial product and derivatives trading, foreign exchange, and other brokerage services, as well as investing on their own account. In the course of their ordinary business, Merrill Lynch Japan and its affiliated companies invest in securities, such as shares and bonds, and other financial products (including derivatives and bank loans or other debt) of Tender Offerors, the Company, ZHD and their respective affiliated companies, on their own account or the account of customers, operate funds in which Tender Offerors, the Company, ZHD and their respective affiliated companies invest, acquire or hold long or short positions in Tender Offerors, the Company, and their respective affiliated companies, and provide funds, sell or purchase, or otherwise carry out transactions with respect to such positions.

Merrill Lynch Japan and its affiliated companies have provided and currently provide investment banking services, commercial banking services, and other financial services to the Company and its affiliated companies, and may also do so in the future. Merrill Lynch Japan and its affiliated companies receive fees for the provision of such services, and may receive fees in the future as well. Such services include but are not limited to (i) serving as the dealer manager and consent solicitation agent with respect to SBG Corp. consent solicitation and exchange offer for foreign currency denominated senior notes issued in 2015, conducted in March 2018, (ii) serving a joint global coordinator for the issuance of $3.3 billion of USD denominated senior notes conducted by SBG in April 2018, and (iii) serving as an international active joint bookrunner for the listing and share price setting for the initial public offering for SoftBank Corp., currently provide such services, and may provide such services in future. Merrill Lynch Japan and its affiliated companies receive fees for the provision of such services and may receive fees in the future as well.

Merrill Lynch Japan expresses no opinion or view with respect to any law, regulation, accounting, tax, or similar matter in relation to the Company or the Delisting Procedures, and has relied on the assessment of these matters by the Company, at the direction of the Special Committee of the Company’s Board of Directors. Merrill Lynch Japan is of the understanding that the Company has received advice from qualified professionals with respect to such matters that the Company deems necessary.

⑥  Acquisition of Advice from Independent Law Firms for the Special Committee

As stated in “④ Establishment of a Special Committee in the Company”, the Special Committee has retained Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho), as legal advisers that are independent from the Tender Offerors, ZHD and the Company in order to obtain from them professional advice with respect to the fairness of procedures and has received legal advice including on the procedures of the Delisting Procedures and the deliberation method and processes of the Special Committee in relation to the Delisting Procedures.

Nakamura, Tsunoda & Matsumoto and White & Case Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho) are not related parties to the Tender Offerors, ZHD or the Company, nor do they have any material interests to be described in respect of the Delisting Procedures, including the Tender Offer.

⑦ Approval of All the Directors of the Company without Interests and the Opinion of All the Statutory Auditors of the Company without Interests That They Have No Objection

As stated above in “(2) Grounds and Reasons for the Opinion; ③ Purpose and Background of the Tender Offer,”the Company’s Board of Directors carefully discussed and examined whether the Delisting Procedures, including the Tender Offer, serve to improve the Company’s corporate value and whether the transaction terms relating to the Delisting Procedures, including the Tender Offer, are appropriate, based on legal advice received from Anderson Mori & Tomotsune and Shearman & Sterling Registered Foreign Lawyers’ Office (Gaikokuho-Jimu-Bengoshi-Jimusho), advice from a financial perspective received from J.P. Morgan, the JPM Valuation Report and JPM Fairness Opinion as of the same date received from J.P. Morgan, and the Merrill Lynch Japan Valuation Report and Merrill Lynch Japan Fairness Opinion submitted via the Special Committee, while giving full respect to the judgment of the Special Committee stated in the Report.

Consequently, as stated above in “②Purpose and Background of the Tender Offer; (i) Background, Purpose and Decision-making Process of the Decision to Implement the Tender Offer,” the Company’s Board of Directors determined that the Delisting Procedures serve to improve the corporate value of the Company and the transaction terms of the Delisting Procedures including the Tender Offer were appropriate. At the meeting of the Board of Directors held today, the board members who participated in deliberations and resolutions unanimously passed a resolution as of today, as the Company’s opinion, to announce approval of the Tender Offer if the Tender Offer commences, to recommend that the Company’s shareholders and holders of the American Depositary Shares tender their shares into the Tender Offer, and that holders of the Share Options and the Convertible Bonds determine at their own discretion whether to tender.

The Company’s two statutory auditors (both outside statutory auditors) participated in deliberations at this meeting of the Board of Directors, excluding one outside statutory auditor (Mr. Yoichi Namekata) who was absent due to business matters, and voiced their opinion that they had no objection to the above resolution. Explanation regarding the Tender Offer was provided to Mr. Yoichi Nemekata, who was absent from the above meeting of the board of directors, prior to the meeting; and it was confirmed that he does not object to the above resolution from the standpoint as the outside statutory auditor.

Of the Company’s directors, because Mr. Hae Jin Lee also serves as NAVER’s Global Investment Officer and from the standpoint of eliminating arbitrariness in the decision-making process when examining and making decisions on the Business Integration, he did not participate in the deliberations and resolution of the Company’s Board of Directors regarding the Business Integration and did not participate in discussions or negotiations with NAVER for the Company. Additionally, after the proposal of the Tender Offer, from the standpoint of eliminating arbitrariness in the decision-making process when examining the Tender Offer, he did not participate in deliberation, and resolutions of the Company’s Board of Directors regarding the Business Integration involving the Tender Offer, including the above meeting of the Board of Directors held today, and did not participate in discussions or negotiations with NAVER for the Company.

⑧　Measures to Ensure Purchase Opportunities From Other Tender Offeror

The Company has not entered into any agreements with the Tender Offerors that would restrict the Company’s contact with potential competing bidders, such as agreements that include safeguarding provisions that would prohibit the Company from having contact with a potential competing bidder.

In addition, according to the Tender Offerors, they are scheduled to set a Tender Offer Period of 30 business days or more, which is longer than the Japan’s statutory minimum of 20 business days. By setting a comparatively long tender offer period, the Tender Offerors intend to ensure an adequate opportunity for the Company’s shareholders to decide on whether to tender in the Tender Offer, thereby ensuring the appropriateness of the Tender Offer Price.

（７）Important Agreements Concerning the Tender Offer

To implement the Tender Offer, the Tender Offerors, ZHD and the Company executed the Definitive Integration Agreement as of today, and the Tender Offerors executed a transaction agreement (the “Transaction Agreement”) as of today in connection with the Definitive Integration Agreement. According to the Tender Offerors, the Tender Offerors, ZHD and the Company have agreed on the Definitive Integrated Agreement and the Transaction Agreement as follows:

① Method of the Business Integration

As described in “① Overview of the Tender Offer” in “(2) Grounds and Reasons for the Opinion” above, we have agreed as follows: (i) subject to the satisfaction of the Conditions Precedent (as defined below), the Tender Offerors will jointly implement the Tender Offer in Japan and the U.S.; (ii) in the event that, following the completion of the Tender Offer in Japan and the U.S., a portion of the Company Shares have not been tendered and acquired through such Tender Offer in Japan and the U.S., we will implement squeeze-out procedures (with the intended result that post-squeeze out, the Tender Offerors shall be the only shareholders of the Company) using a share consolidation or other methods to take the Company private (the “LINE Squeeze-out”); (iii) we will carry out a tender offer in which the Company after the LINE Squeeze-out is the tender offeror and 2,125,366,950 ZHD shares held by Shiodome Z Holdings Co., Ltd. (hereinafter “Shiodome ZHD”) will be the target shares (the “ZHD Tender Offer”), and SoftBank will transfer all ZHD shares held through Shiodome ZHD to the Company (the “ZHD Share Transfer Procedures”); (iv) SoftBank will transfer part of its Company Common Shares to NAVER Party and we will make the ratio of voting rights in the Company held by NAVER Party and SoftBank (immediately after the ZHD Share Transfer Procedures) 50:50 (the “Shareholding Adjustment Procedure”); and (v) the Company will transfer all businesses such that they are under the control of ZHD, and ZHD will be a holding company the shares of which will continue to be listed on the Tokyo Stock Exchange, and which will have control over all of the current business of ZHD and the Company (the “Company Business Transfer Procedure”).

Also, we have agreed as follows: in connection with the ZHD Share Transfer Procedures, the Company shall issue bonds of the Company at a cash amount equivalent to the purchase price for the ZHD Tender Offer to SoftBank, and SoftBank shall subscribe to such bonds; the Company shall conduct an absorption-type merger in which the Company is the surviving company and Shiodome ZHD is the absorbed company (the “Merger”), and based on the total number of outstanding shares of the Company and ZHD (excluding treasury shares) as of September 30, 2019, the date on which the MOU was executed, the Company shall issue 180,882,293 Company Common Shares (Note), allocate and deliver such shares to SoftBank, the parent company of Shiodome ZHD, as consideration for the Merger; in connection with the Company Business Transfer Procedure, the Company shall implement an absorption-type corporate demerger in which all of the Company’s business will be assumed by LINE Successor and, subject to the satisfaction of certain conditions precedent, we will implement the Share Exchange with ZHD shares as consideration whereby ZHD becomes the wholly owning parent company and LINE Successor becomes the wholly owned subsidiary company (based on the the assumption that LINE Successor’s total number of issued shares will be the same amount as the total number of issued and outstanding shares of the Company (excluding treasury shares) as of September 30, 2019, 11.75 ZHD shares will be allocated and delivered to the Company for each share of LINE Successor). In addition, the Tender Offerors have agreed under the Transaction Agreement that, as part of the Shareholding Adjustment Procedure, SoftBank will sell the necessary number of Company Common Shares to NAVER Party and NAVER Party will purchase such shares from SoftBank (the “Share Transfer”), in accordance with the provisions of a share transfer agreement to be separately executed, by the date immediately before the commencement of settlement of the Tender Offer, so that the ratio of voting rights in the Company held by NAVER Party and SoftBank is 50:50 as a result of the Merger.

②　Conditions Precedent for Commencement of the Tender Offer

Under the Definitive Integration Agreement, the commencement of the Tender Offer in Japan and the U.S. including the Tender Offer is conditioned upon satisfaction of all of the following conditions: (1) a resolution is adopted at the Company’s Board of Directors’ meeting, by a unanimous resolution of directors without conflicts of interest, expressing their opinion that they endorse the Tender Offer in Japan and the U.S. and recommend that shareholders of the Company and holders of American Depository Shares tendered into the Tender Offer in Japan and the U.S. (provided, however, that they defer to holders of the Share Options and Convertible Bonds with respect to whether to tender their Share Options and Convertible Bonds in the Tender Offer), and such opinion has not been changed or withdrawn; (2) the Special Committee of the Company established in connection with the Tender Offer advises the Company’s Board of Directors that it would be appropriate to express the endorsing opinion described in (1) above, and such advice has not been changed or withdrawn; (3) the Special Committee of ZHD established in connection with the Business Integration advises ZHD’s board of directors that the Business Integration would not be disadvantageous to minority shareholders of ZHD, and such advice has not been changed or withdrawn; (4) the representations and warranties of each party under the Definitive Integration Agreement are true and correct in all material respects; (5) all obligations under the Definitive Integration Agreement which each party to the Definitive Integration Agreement must comply with or perform before the commencement date of the Tender Offer have been complied with or performed in all material respects; (6) ZHD’s shareholders’ meeting approves the execution of the share exchange agreement and other agreements requiring approval at ZHD’s meeting of shareholders regarding the Business Integration (except for the nomination of ZHD directors, which is decided pursuant to the Capital Alliance Agreement (being the capital alliance agreement executed between ZHD and the Company as of today, providing for the governance and operations of ZHD after the Business Integration; please see “Announcement Regarding Definitive Agreement on Business Integration” released today by ZHD and the Company for the details of the Capital and Alliance Agreement) concerning the Share Exchange, and such approval remains in full force and effect; (7) in the event that the ZHD’s general shareholders’ meeting is held before the commencement date of the Tender Offer, such meeting approves the election of directors of ZHD under the provisions of the Capital Alliance Agreement; (8) the implementation of a series of transactions relating to the Business Integration does not, and is not reasonably expected to, constitute a violation of laws and regulations; (9) procedures under the competition laws and the investment control regulations of each jurisdiction which are necessary for the implementation of the Business Integration (including obtaining the permits and licenses and expiration of necessary waiting period and/or review period, hereinafter, the “Clearance Procedures”) (including the Clearance Procedures required to effect the Delisting Procedures) have been completed;