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FEFTA tag doesn't affect national security review,

official says

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Prior notification needed for all foreign buyouts

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Companies' own designations do not need government

approval

By Makiko Yamazaki and Ritsuko Shimizu

TOKYO, Sept 3 (Reuters) - Japanese companies cannot use

a national security designation as a tool to thwart foreign

takeovers, a senior finance ministry official said, pushing back

at speculation Tokyo's foreign exchange act could be manipulated

for protectionism.

The comments follow media reports retail giant Seven & i

Holdings ( SVNDF ) is seeking to be classified as "core" to

national security under the Foreign Exchange and Foreign Trade

Act (FEFTA) to fend off a buyout bid from Canada's Alimentation

Couche-Tard ( ANCTF ).

The senior official, who declined to comment on individual

deals, told Reuters the issue of "core" classification doesn't

change the process of the government's security review in cases

of foreign bids for companies designated as significant to

Japan's economy or security.

Seven & i ( SVNDF ), with a market value of $38 billion, is currently

categorised in the finance ministry's classification list as a

company that conducts "designated", not "core", businesses.

Businesses considered "core" are those deemed crucial for

national security, including nuclear power, space and

semiconductors.

Foreign entities face stricter requirements to notify the

government in advance when attempting to acquire a stake in a

company with a business classified as "core" than they do when

targeting companies in "non-core" sectors.

But in the case of acquiring control in any so-called

"designated business", a would-be buyer must file prior

notification regardless of whether the target is "core" or

"non-core", the official said.

The official added that the classification doesn't affect

the degree of scrutiny during its review on national security,

saying that the government "will examine whether the transaction

would pose risks to national security."

The ministry's classification list regarding prior

notification requirements is based on surveys of all listed

companies. The classifications there "are not something that

would need government approval," the official said.

The official declined to be named due to the sensitivity of

the issue.

When asked about the reported pursuit of the "core" tag,

Seven & i ( SVNDF ) said it replied to the ministry's latest survey by the

Aug. 23 deadline detailing the company's current structure and

businesses.

The survey is not related to Couche-Tard's buyout proposal,

which the Japanese company revealed on Aug. 19, Seven & i ( SVNDF ) said.

Convenience stores, Seven & i's ( SVNDF ) mainstay business, are not a

designated sector that requires FEFTA review, but the group has

wide-ranging businesses including financials and security.

Japan in 2008 blocked the London-based Children's Investment

Fund from buying shares in Electric Power Development Co ( EPWDF )

, known as J-Power. That's the only deal that has been

rejected under the FEFTA, but there are cases where plans have

been modified or withdrawn during reviews, according to the

finance ministry.