TOKYO--()--SANYO Electric Co., Ltd.:
“10 trillion yen in sales, 5 percent or more in operating profit ratio, 10 percent in ROE, a three-year accumulative total of over 800 billion yen in free cash flow, and 50 million ton reduction in CO2 emissions, (on a FY 2005 basis)”
To whom it may concern:
SANYO Electric Co., Ltd. (the “Company”) announces that it resolved at its Board of Directors meeting held today (i) to express its endorsement of a tender offer by Panasonic Corporation (the “Offeror”) for the shares of common stock of the Company (the “Tender Offer”) and (ii) to recommend that the Company’s shareholders tender their shares in the Tender Offer as set out below.
The Board of Directors meeting passed the resolutions above with the assumption that the Offeror contemplates making the Company its wholly owned subsidiary through the Tender Offer and a subsequent series of procedures and that the Company’s shares of common stock are scheduled to be delisted in case that the Company does become the wholly owned subsidiary of the Offeror.
1. Outline of Offeror
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(as of March 31, 2010) |
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| (1) | Trade Name | Panasonic Corporation | ||||
| (2) | Address | 1006, Oaza Kadoma, Kadoma-shi, Osaka | ||||
| (3) | Name and Title of Representative | Fumio Ohtsubo, President | ||||
| (4) | Business | Manufacture and sale of electrical and electronic equipment, etc. | ||||
| (5) | Stated Capital | 258,740 million yen | ||||
| (6) | Date of Incorporation | December 15, 1935 | ||||
| (7) | Major Shareholders and Shareholding Ratios |
The Master Trust Bank of Japan, Ltd. (Trust Account) 4.60%
Moxley & Co. 4.23% Japan Trustee Services Bank, Ltd. (Trust Account) 3.89% Nippon Life Insurance Company 2.73% Sumitomo Mitsui Banking Corporation 2.32% NB: The shareholding ratios represent the proportion of shares of common stock held by each shareholder to the total number of issued shares of common stock of the Company. |
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| (8) | Relationship Between Company and Offeror | Capital | The Offeror owns 3,082,309,227 shares of the Company’s common stock, which corresponds to 50.05% of the total number of issued shares of the Company’s common stock (6,158,053,099 shares). | |||
| Personnel | Three of the Offeror’s corporate advisers also serve as either a Director or an Auditor of the Company. | |||||
| Business | The Company conducts sales and purchase transactions of manufactured goods, materials, and the like with the Offeror. | |||||
| Status as a “Related party” | The Offeror is the parent company of the Company | |||||
2. Details of Basis and Reasons for the Opinion on the Tender Offer
(1) Details of the Opinion on the Tender Offer
The Company resolved at the Company’s Board of Directors meeting held today to express its endorsement of the Tender Offer and to recommend that the Company’s shareholders tender their shares in the Tender Offer.
The above resolution of the Board of Directors was adopted by the method described in (iv) Approval by the Directors and Auditors who have No Material Interests under section (3) Measures to Ensure the Fairness of the Tender Offer such as Measures to Ensure the Fairness of the Purchase Price, and Measures to Avoid Conflicts of Interest hereof.
(2) Basis and Reasons for the Opinion on the Tender Offer
(i) Overview of the Tender Offer
The Offeror currently owns 50.05% (3,082,309,227 shares) of the aggregate number of issued shares of the Company (as of March 31, 2010: 6,158,053,099 shares). The Company is a consolidated subsidiary of the Offeror. According to the Offeror’s press release announced today entitled Panasonic Announces Commencement of Tender Offer for Shares of Common Stock of SANYO (the “Offeror’s Press Release”), it has decided to acquire all of the issued shares of the Company’s common stock (excluding the treasury shares owned by the Company) through the Tender Offer in order to make the Company the Offeror’s wholly owned subsidiary. With respect to the Tender Offer, no maximum or minimum number of shares scheduled to be purchased has been established. According to the Offeror’s Press Release, the Tender Offer shall commence subject to, among other conditions, the nonoccurrence of any events that would have a material adverse effect on the parties’ ability to achieve the purpose of the Tender Offer such as a material change in the Company’s or its subsidiaries’ business or assets.
(ii) Basis and Reasons for the Opinion on the Tender Offer
(A) Overview of the Offeror
According to the Offeror’s Press Release, since the Offeror’s establishment in 1918, the Offeror has been conducting business broadly in the electronics industry, guided by its basic management philosophy, which states that the mission of an enterprise is to contribute to the progress and development of society and the well-being of people worldwide through its business activities.
(B) Overview of the Company
The Company is developing its activities, such as manufacturing, sales, maintenance and services, in the Energy Business Segment, Electronic Device Business Segment, Digital System Business Segment, Commercial Business Segment, Consumer Electronics Business Segment, and Other Business Segments. Under the management philosophy “We are committed to becoming an indispensable element in the lives of people all over the world”, it is striving to improve customer value. Notably, the Company has a large global market share and high level of technology on a global scale, and is well-established as a leading global company with respect to the consumer lithium-ion battery business. In addition, with respect to the lithium-ion battery business for HEV (Hybrid Electric Vehicles) and EV (Electric Vehicles), an area in which rapid market growth is expected in the future, co-development with domestic and foreign car makers is being implemented. As well as addressing development and commercialization of a much more sophisticated system, the Company completed and introduced a new commercial production line. In the photovoltaic systems business the Company is promoting an increase in production capacity for the HIT (crystalline silicon) solar cell, which is the top-selling photovoltaic product, by constructing a new plant in order to meet growing demand.
(C) Implementing a Capital and Business Alliance between the Offeror and the Company and Making the Company a Consolidated Subsidiary of the Offeror
The Company and the Offeror, with the goal of overcoming a harsh global competitive environment and aiming to maximize both of their corporate values, agreed to enter into discussions regarding a capital and business alliance based on the premise of making the Company a subsidiary of the Offeror on November 7, 2008, and subsequently made an announcement entitled Panasonic and SANYO Agree to Capital and Business Alliance on December 19, 2008.
As set out in the Offeror’s later announcement dated December 10, 2009, entitled Panasonic Announces the Result of Tender Offer for SANYO Shares, the Offeror then implemented a tender offer for the Company’s shares of common stock (the “Previous Tender Offer”) and as a result came to have 50.19% of the voting rights of all shareholders of the Company (as of September 30, 2009), making the Company a consolidated subsidiary of the Offeror.
(D) The Company’s and the Offeror’s Strategy for Management After the Previous Tender Offer
According to the Offeror’s Press Release, as a result of the above, the Panasonic Group has expansive coverage and depth in the field of electronics, focusing on 6 segments: Digital AVC Networks, Home Appliances, PEW and PanaHome, Components Devices, and Others, as well as and SANYO Electric.
On January 8, 2010, the Offeror announced its annual management policy for the new Panasonic Group, declaring that its vision for the 100th anniversary of its founding (in 2018) is “to become the No. 1 Green Innovation Company in the Electronics Industry”. Then, on May 7, 2010, the Offeror announced its 3-year midterm plan—Green Transformation 2012 (“GT12”)—which is the first step toward realizing such vision.
Under GT12, the entire Panasonic Group will make efforts to “shift its paradigm for growth and lay a foundation to be a Green Innovation Company”, “while integrating its contribution to the environment and business growth”, and aiming to be “a company filled with significant growth potential” by the time GT12 is completed. In particular, GT12 aims to make a bold reallocation in the Panasonic Group’s management resources, focusing on six business segments: “energy systems, heating/refrigeration/air conditioning, network AV, healthcare, security and LED”. The energy systems, heating/refrigeration/air conditioning, and network AV segments are anticipated to drive sales and profits throughout the entire Panasonic Group as the Panasonic Group’s core businesses, and the aim is to dramatically grow the other 3 segments: healthcare, security, and LED, as “next-generation key businesses”. Furthermore, with those businesses as the core of the Panasonic Group’s businesses, the policy is to pursue a form of growth unique to the Panasonic Group by providing “comprehensive solutions for the entire Home, the entire Building, and the entire town”.
Sharing the Panasonic Group’s vision and the concept underlying GT12, the Company formulated its own midterm management plan (the “Company’s Midterm Management Plan”) and announced the details on May 11, 2010. The Company’s Midterm Management Plan made it clear that the Company aims “to establish a foundation for ensuring highly profitable businesses by demonstrating synergies”, and that, in addition to further strengthening the management culture aiming to improve profitability, the Company will accelerate concentrated investments of its management resources in the energy business and enhance the competitiveness of profitable businesses in order to establish continuous competitive superiority. In particular, in the solar cell business that is included in the energy systems, one of the 6 key business areas of the Panasonic Group, the Company will proactively invest in increasing the production of battery cells and modules while at the same time accelerating the development of next-generation solar batteries, so that the Company will become No. 1 player in Japan in Fiscal 2013 and one of the Top 3 players in the global market in Fiscal 2016. In the general use rechargeable batteries business as well, the Company has a policy of firmly to maintain its position as global leader by increasing sales of such batteries for existing uses and pioneering new uses for them. Moreover, the Company aims to achieve a 40% market share in the HEV and EV Business (rechargeable batteries for environmentally friendly cars) in Fiscal 2021.
Since the Previous Tender Offer, the Offeror and the Company have also launched a Collaboration Committee, which has been examining ways in which to create specific synergies. As a result, both companies have set a goal of creating synergies that will push the Panasonic Group’s operating profits over 80 billion yen in Fiscal 2013, using various measures such as strengthening the Panasonic Group’s sales network in the solar battery business and optimizing their strengths to the fullest extent in the lithium-ion battery business. According to the Offeror, the contents of these measures are incorporated in GT12.
(E) The Company’s and Offeror’s Current Management Environments
As noted above, since the Company became a consolidated subsidiary of the Offeror, the Company and the Offeror have certain joint management strategies as group companies and implemented various collaborative measures, such as initiating sales of the HIT solar cell through the Offeror’s sales routes since July of this year. However, the business environment surrounding the Panasonic Group, which includes the Company, continues to change dramatically and rapidly. While business expansion opportunities have been offered by the rapidly expanding environment-related and energy-related markets and burgeoning emerging markets, in addition to the competition with Korean, Taiwanese, and Chinese companies, etc., as well as Japanese, American, and European companies, has intensified not only in the Digital AVC Networks segment, but also in the fields of rechargeable batteries, solar batteries, and electric vehicle-related business, etc. It has become difficult for companies to prevail over global competition in the expanding market without speeding up the strategy execution and implementing all measures to demonstrate further group-wide potential. For the Company’s part as well, it believes that it is necessary to achieve results of the collaborative measures earlier and more steadily and strive to further maximize those results in order to further develop the Company’s business under the management environment described above. Therefore, the Company believes that it is essential to execute measures that enable it to clear the hurdles to becoming a listed company.
In such circumstances, taking the Offeror’s the proposal as an opportunity, the Company and the Offeror have, since around the end of June 2010, continuously discussed and considered various measures to further increase the corporate value of both companies. As a result, the Company and the Offeror came to the conclusion that the acceleration of decision-making, the maximization of the group synergies by making the Company a wholly owned subsidiary of the Offeror through the Tender Offer and transactions thereafter and accelerating efforts to become the “No. 1 Green Innovation Company in the Electronics Industry”, would be significantly beneficial not only in order to expand the corporate value of the Company, but also to expand the corporate value of the entire Panasonic Group.
The Offeror has also been simultaneously carrying out continuous consultations and examinations with Panasonic Electric Works Co., Ltd. (“Panasonic Electric Works”), another consolidated subsidiary of the Offeror, and came to the conclusion that making Panasonic Electric Works a wholly owned subsidiary would likewise be significantly beneficial, not only in order to enhance the corporate value of Panasonic Electric Works, but also to enhance the corporate value of the entire Panasonic Group.
(F) Management Policy for After the Tender Offer
As a result, the 3 companies (“Three Companies”)—the Offeror, Panasonic Electric Works, and the Company—have adopted resolutions at meetings of their respective Boards of Directors held on July 29, 2010, to go ahead with making Panasonic Electric Works and the Company (collectively, “Both Subsidiaries”) the wholly owned subsidiaries of the Offeror (the “Acquisition of All Shares of Both Subsidiaries”), aiming for an effective date in or around April 2011, and they have announced this in their press release titled Announcement of the Agreements toward Panasonic’s acquisition of All Shares of Panasonic Electric Works and SANYO. In anticipation of the Acquisition of All Shares of Both Subsidiaries, the Offeror has simultaneously resolved to commence a tender offer for the shares of common stock of Panasonic Electric Works and the Tender Offer (collectively, the “Combined Tender Offers”). In the event that the Acquisition of All Shares of Both Subsidiaries is not achieved by the Combined Tender Offers, then the Offeror will thereafter implement share exchanges to make each of Panasonic Electric Works and the Company a wholly-owned subsidiary of the Offeror (the “Combined Share Exchange”) in order to accomplish Acquisition of All Shares of Both Subsidiaries.
The Offeror, Panasonic Electric Works, and the Company will pursue the establishment of a new Panasonic Group under which the Three Companies will be genuinely integrated, and will make efforts to
(i) maximize value creation by strengthening their contacts with their customers,
(ii) conduct speedy and lean management, and
(iii) accelerate growth businesses by drastically shifting its management resources.
In order to realize these scenarios, the Panasonic Group’s business organization is scheduled to be restructured by around January 2012. From the perspective of “maximization of customer value”, the basic policy of such restructuring is to integrate and reorganize the business and sales divisions of the Three Companies into three business sectors: “Consumer”, “Devices” and “Solutions”, and to design optimal business models that are most suitable for the character of each business. The companies will strive to firmly establish systems that will enable them to compete against global competitors in each business and each industry.
The directions the reorganizations of each business sector will be as follows:
- The Consumer Business Sector
The Panasonic Group will reorganize its marketing function on a global basis. In doing so, the Panasonic Group strengthen frontline business functions and accelerate the creation of customer-oriented products. Also, the Panasonic Group strengthen foreign consumer business by strategically allocate domestic and foreign market resources in Japan and overseas.
- The Device Sector
The Panasonic Group will strengthen collaboration in development, manufacturing, and sales for the each device having a common business model. By combining marketing and technology, the Panasonic Group will strengthen its “proposal”-style business, which foresees the potential needs of customers and aim to expand the business as an independent business that does not rely on internal needs. In particular in this sector, the Panasonic Group will continue to maximize the use of such strengths as the Company’s rechargeable batteries and solar businesses as well as its customer networks.
- The Solutions Sector
The Panasonic Group will unify development, manufacturing, and sales for each solution for business customers. The Panasonic Group aims to offer the most suitable products, services and solutions as quickly as possible, grasping customer needs in as timely as a fashion as possible. In addition, the “comprehensive solutions for the entire home, the entire building and the entire town” that encompass these solutions will be accelerated. Particularly in this business sector, the Panasonic Group will, continue to maximize the use of Panasonic Electric Works’ strengths and customer networks.
In addition to the reorganization, the function of Head Office will also aim for a “lean and speedy” global head office by strengthening its strategic functions, while integrating and streamlining the Three Companies’ organizations.
The details of the reorganization will be announced as soon as they have been decided.
Furthermore, simultaneously with this reorganization, the Panasonic Group will consider integrating its brands, in principle, into “Panasonic” in the future. However, “SANYO” will continue to be partially utilized, depending on the particular business or region.
The Offeror believes that the Acquisition of All Shares of Both Subsidiaries and reorganization of businesses described will promote the integration of the Three Companies’ advantages and the “proposal” capabilities for “comprehensive solutions”, and will enable rapid increase in global competitiveness especially in the “energy systems”, “heating/refrigeration/air conditioning” and “network AV” business, which are indicated in the GT12 as core businesses to lead sales and profits of the entire Panasonic Group. Also, in each business such as “healthcare”, “security”, and “LED”, which is positioned as a key business for “the next generation”, the Offeror will make efforts to accelerate the growth of such business by combining the capacities of the Three Companies for research and development as well as market development.
The Offeror aims to strengthen its corporate culture and cost competitiveness even further through business integration and unification of the business bases of the Three Companies, and through optimizing and streamlining the head office organization.
According to the Offeror’s Press Release, through these measures the Offeror will aim to ensure the achievement of the target of GT12: “10 trillion yen in sales, 5 percent or more in operating profit ratio, 10 percent in ROE, a three-year accumulative total of over 800 billion yen in free cash flow, and 50 million ton reduction in CO2 emissions, (on a FY 2005 basis)” targeted for the fiscal year ending March 2013, and further aims to exceed these targets.
It should be noted that although the Company’s midterm plan may be revised during the process of the Panasonic Group’s future reorganization in the future, the Company believes that implementing these measures will allow it to realize the synergies from the collaborative measures that the Company and the Offeror have been contemplating, earlier and more steadily.
As noted above, for the purpose of Acquisition of All Shares of Both Subsidiaries the Offeror, Panasonic Electric Works, and the Company adopted a plan whereby the Offeror will implement the Combined Tender Offers and then the (planned) Combined Share Exchange.
According to the Offeror’s Press Release, if it is not possible to make the Company a wholly owned subsidiary of the Offeror through the Tender Offer (the “Acquisition of All Shares of the Company”), then in order to promote the Acquisition of All Shares of the Company, the Offeror plans to execute a share exchange after the Tender Offer that will result in the Offeror becoming the wholly owning parent company of the Company and the Company becoming its wholly owned subsidiary (the “Share Exchange”). For the details of the Share Exchange, please see (4) Policies Regarding Organizational Restructuring, etc. after the Tender Offer (Matters Concerning the So-Called “Two-Tier Purchase”) below.
(G) Opinion on Tender Offer
Given the background described above, the Company’s Board of Directors has resolved to announce its opinion to endorse the Tender Offer and to recommend that the Company’s shareholders tender their shares in the Tender Offer.
(3) Measures to Ensure the Fairness of the Tender Offer such as Measures to Ensure the Fairness of the Purchase Price, and Measures to Avoid Conflicts of Interest
Taking into consideration the fact that the Offeror is currently the Company’s parent company and the fact that some of the Company’s directors have interests in the Offeror, the Company and the Offeror have implemented the measures set forth below to ensure the fairness of the Tender Offer including measures to ensure the fairness of the purchase price under the Tender Offer for the shares of the Company’s common stock (the “Tender Offer Purchase Price”) and measures to avoid conflicts of interest.
(i) Procurement of Valuation Report from Independent, Third-Party Valuation Institution
The Company has engaged ABeam M&A Consulting Ltd. (“ABeam”) a financial adviser acting as a third-party valuation institution independent of the Company and the Offeror to calculate the value of the Company’s shares of common stock. ABeam obtained financial information, business plans and other materials from the Company and received an explanation of those materials in order to collect and review the information necessary for analysis of the value of the Company’s shares of common stock. Taking into consideration such information, ABeam analyzed the value of the Company’s shares of common stock based on certain assumptions and conditions, and submitted a share price valuation report (the “Share Price Valuation Report”; valuation record date: July 28, 2010) to the Company on July 29, 2010. The methods used by ABeam for analyzing the value of the Company’s shares of common stock were the market price analysis, the comparable peer company analysis, and the discounted cash flow analysis (the “DCF Analysis”). The per-share value of the Company’s common stock calculated based on each of the foregoing methods is set forth below.
(a) Market Price Analysis: 114 yen to 140 yen
Based on the market price analysis, using July 28, 2010 as the record date, the per-share value of the Company’s common stock has been determined to be 114 yen to 140 yen, based on the average closing prices and the volume weighted average price of the closing price for the most recent 6 months, the most recent 3 months and the most recent 1 month, and on the closing price on the record date, for the Company’s shares of common stock on the first section of the Tokyo Stock Exchange.
(b) Comparable Peer Company Analysis: 78 yen to 100 yen
Based on the comparable peer company analysis, the value of the Company’s shares of common stock has been evaluated by comparing the market stock prices and financial indicators that show profitability, etc., of listed companies that are engaged in businesses that are similar to the Company’s, and the per-share value of the Company’s common stock has been determined to be 78 yen to 100 yen.
(c) DCF Analysis: 100 yen to 163 yen
- The DCF Analysis is a method of analyzing the corporate value of the Company and the value of the Company’s shares of common stock based on its projected earnings and its investment plans as set forth in its business plans, publicly disclosed information, synergies expected to be created as a result of the Offeror making the Company its wholly owned subsidiary and various other factors, etc. and then by discounting the Company’s future free cash flow projections to the present value by using a specific discount rate (e.g., cost of capital applicable to the Company, etc.). Based on this method, the per-share values of the Company’s common stock have been determined to be 100 yen to 163 yen.
Further, on July 29, 2010, the Board of Directors of the Company received a fairness opinion from ABeam concerning the fact that the resolution of the endorsement of the Opinion and recommendation of the tender is not disadvantageous to the minority shareholders, especially from perspective of fairness of the price, stating that the Tender Offer Purchase Price of 138 yen is fair to shareholders of the Company other than the Offeror, etc. (as defined under Article 441-2 of the Tokyo Stock Exchange’s Securities Listing Regulations) from a financial viewpoint.
(ii) Legal Advice
In examining the Tender Offer and making a decision at its Board of Directors meeting, the Company received legal advice relating to the decision-making process, including on the various procedures to be taken for the Tender Offer, from Mori Hamada & Matsumoto, the Company’s legal adviser.
(iii) Procurement by the Offeror of a Valuation Report from an Independent, Third-Party Valuation Institution
According to the Offeror’s Press Release, in order to ensure the fairness of the Tender Offer Purchase Price, when determining the Tender Offer Purchase Price, the Offeror used a Share Valuation Report that was submitted on July 29, 2010 (the “Valuation Report”; valuation record date: July 27, 2010) by Nomura Securities Co., Ltd. (“Nomura Securities”), the financial adviser acting as a third-party valuation institution independent from the Offeror and the Company as reference. The methods used by Nomura Securities were the average market price analysis, the comparable company analysis, and the DCF Analysis; the per-share value of the Company’s common stock calculated based on each of the foregoing methods is set forth below.
(a) Average Market Price Analysis: 112 yen to 138 yen
Based on the average market price analysis, using July 27, 2010 as the record date, the per-share value of the Company’s common stock has been determined to be 112 yen to 138 yen, based on the average closing prices for the most recent 6 months, the most recent 3 months, the most recent 1 month and the most recent 1 week, and on the closing price on the record date, for the Company’s shares of common stock on the first section of the Tokyo Stock Exchange.
(b) Comparable Company Analysis: 46 yen to 85 yen
Based on the comparable company analysis, the value of the Company’s shares of common stock has been evaluated by comparing the market stock prices and financial indicators that show profitability, etc., of listed companies that are engaged in businesses that are relatively similar to the Company’s, and the per-share value of the Company’s common stock has been determined to be 46 yen to 85 yen.
(c) DCF Analysis: 113 yen to 233 yen
The DCF Analysis is a method of analyzing the corporate value of the Company and the value of the Company’s shares of common stock based on its projected earnings and its investment plans as set forth in its business plans, interviews with the Company’s management, publicly disclosed information and various other factors, etc. and then by discounting the Company’s future free cash flow projections to the present value by using a specific discount rate (e.g., cost of capital applicable to the Company, etc.); based on this method, the per-share value of the Company’s common stock has been determined to be 113 yen to 233 yen.
The Offeror has calculated the (proposed) purchase price for the Tender Offer to be 138 yen based on the nature and results of each of the valuation methods set forth in the Valuation Report and the results of discussions and negotiations with the Company, and by comprehensively taking into account various factors such as (i) results of the business, legal, accounting and tax due diligence of the Company, (ii) the possibility of endorsement of the Tender Offer by the Company’s Board of Directors, (iii) market trends in the price of the Company’s shares of common stock; and (iv) the projected number of shares to be tendered in the Tender Offer. Thereafter, the Company ultimately decided at the Board of Directors meeting held on July 29, 2010, that the Tender Offer Purchase Price shall be 138 yen, after receiving a fairness opinion from Nomura Securities on July 29, 2010 stating that the (proposed) tender offer purchase price of 138 yen valued through the above-mentioned process is fair to for the shareholders of the Offeror from a financial viewpoint.
The Tender Offer Purchase Price of 138 yen per-share of common stock represents a premium of (i) 16.9% (rounded to the second decimal place; the same shall apply to indications of percentages hereinafter in this paragraph) over the closing price of the Company’s shares of common stock of 118 yen in ordinary trading on the first section of the Tokyo Stock Exchange on July 28, 2010, which is the day immediately preceding the day on which the Offeror announced the commencement of the Tender Offer, (ii) 21.1% over the simple average closing price of 114 yen (rounded down to a whole number; the same shall apply to indications of prices in yen hereinafter in this paragraph) in ordinary trading in the previous one–month period (from June 29, 2010 to July 28, 2010), (iii) 9.5% over the simple average closing price of 126 yen in ordinary trading in the previous three-month period (from April 30, 2010 to July 28, 2010) or (iv) 0.7% over the simple average closing price of 137 yen in ordinary trading in the previous six-month period (from January 29, 2010 to July 28, 2010).
(iv) Approval by the Directors and Auditors who have No Material Interests in the Offeror
After receiving the Tender Offer proposal from the Offeror around the end of June 2010, the Company carefully reviewed and considered the purchase price of the Tender Offer and its other terms and conditions, by conducting several discussions and negotiations with the Offeror and referring to such information as the Share Price Valuation Report and the fairness opinion obtained from ABeam, and giving consideration to legal advice provided by Mori Hamada & Matsumoto, the Company’s legal counsel.
At the Company’s Board of Directors meeting held today (at which 5 out of 8 directors were present), as a result of the foregoing, it was determined that the Tender Offer would contribute to the further development of the Company’s business, that the conditions relating to the Tender Offer are acceptable, and that the Tender Offer provided all of the Company’s shareholders with an opportunity to sell the Company’s shares for a reasonable price, and therefore a resolution was adopted with the approval of all of the directors in attendance to endorse the Tender Offer, and to recommend that the Company’s shareholders tender their shares in the Tender Offer. Furthermore, all of the Company’s auditors (4 out of 5 auditors (including 3 outside auditors)) who attended the Board of Directors meeting expressed the opinion that they had no objection to the Company’s Board of Directors endorsement of the Tender Offer, and recommend that the Company’s shareholders tender their shares in the Tender Offer.
It should be noted that the Company has been informed that Messrs. Susumu Koike, Junji Esaka and Kenjiro Matsuba, directors of the Company did not participate in any of the discussions or voting on the Tender Offer, for the purpose of maintaining the fairness and the neutrality of the Company’s decisions because they were officers or employees of the Offeror or its affiliate until 2010 (in the case of Mr. Koike) and 2009 (in the case of Messrs. Esaka and Matsuba) and because Messrs. Susumu Koike and Junji Esaka still are corporate advisers of the Offeror, and that they did not participate in any of the discussions and negotiations with the Offeror on behalf of the Company. Further, Mr. Takae Makita, auditor of the Company, did not participate in the above discussions, for the purpose of maintaining the fairness and the neutrality of the Company’s decisions because he was an officer of the Offeror until 2009 and because he is currently a corporate adviser of the Offeror.
(v) Relatively Long Period of the Tender Offer, etc.
Pursuant to the applicable laws and regulations, the tender offer period of the Tender Offer is required to be at least 20 business days. The tender offer period for the Tender Offer has been set to be relatively long in comparison (i.e., 31 business days). By setting a relatively long tender offer period, the Offeror hopes to confirm the appropriateness of the Tender Offer Purchase Price by ensuring that all of the Company’s shareholders will have sufficient opportunity to consider and decide whether or not to tender their shares in the Tender Offer and to secure the opportunity for other offerors to commence a new tender offer for the Company’s shares.
Further, the Company and the Offeror have not made any agreement that would restrict the Company and an offeror other than the Offeror from making contact with one another, etc., in the event another offeror emerges.
(4) Policies Regarding Organizational Restructuring, etc. after the Tender Offer (Matters Concerning the So-Called “Two-Tier Purchase”)
As explained in (2) Basis and Reasons for Opinion on Tender Offer above, according to the Offeror’s Press Release, the Offeror’s intent is to make the Company the Offeror’s wholly owned subsidiary, and the Offeror then plans to acquire, through the Tender Offer and the Share Exchange, all of the issued shares of the Company’s common stock (excluding the Company’s shares owned by the Offeror).
That is to say, if the Offeror does not acquire all of the issued shares of the Company’s common stock (excluding the treasury shares owned by the Company) through the Tender Offer, the Offeror plans to acquire all of the issued shares of the Company’s common stock (excluding the Company’s shares owned by the Offeror) after the Tender Offer by implementing the Share Exchange.
According to the Offeror’s Press Release, in this way, the Offeror will provide the Company’s shareholders (other than the Offeror) with the choice of either selling their shares at the Tender Offer Purchase Price or becoming shareholders of the Offeror through the Share Exchange, enabling them to continuously support the Panasonic Group’s efforts to realize GT12 and become the No.1 Green Innovation Company in the Electronics Industry.
It is planned that, in connection with the Share Exchange, the Offeror’s shares of common stock will be issued as consideration for the Company’s shares of common stock owned by all of the Company’s shareholders (other than the Offeror); upon going through the necessary statutory procedures, all of the Company’s shares of common stock that were not tendered in the Tender Offer (excluding the Company’s shares owned by the Offeror) will be exchanged for the Offeror’s common shares of common stock, and every shareholder of the Company, to whom not less than one share of the Offeror’s common stock is allocated, will become an owner of shares of the Offeror’s common stock. (If a fractional share less than one whole share of the Offeror’s shares is allotted, cash equivalent to the sales price of the fractional share shall be distributed.) The Share Exchange is planned to be implemented on an effective date in or around April 2011 at the latest.
The Share Exchange is planned to be implemented by the Offeror in the form of a summary share exchange (kani kabushiki kokan) as prescribed in the main text of Article 796, Paragraph 3 of the Companies Act, without obtaining a resolution of approval from the Offeror’s shareholders at a general meeting of shareholders. Further, the Share Exchange may be implemented by the Company in the form of the short form share exchange (ryakushiki kabushiki kokan) as prescribed in the provisions of Article 784, Paragraph 1 of the Companies Act, without the Company obtaining a resolution of approval from the Company’s shareholders at a general meeting of shareholders.
The share exchange ratio applicable to the Share Exchange is scheduled to be determined through consultations between the Company and the Offeror after the completion of the Tender Offer, giving full consideration to the interests of the Company’s and the Offeror’s shareholders, with reference to the share exchange ratio calculated by a third-party valuation institution independent from the Company and the Offeror, in order to ensure the fairness and appropriateness of the ratio. However, in deciding on the consideration to be received by the shareholders of the Company through the Share Exchange (i.e., Offeror‘s shares; provided, however, if there is a fractional number of share less than one whole share in the number of shares received, cash equivalent to such fractional share shall be distributed in accordance with the Companies Act), the Company’s shares of common stock is expected to be valued based on a price equivalent to the Tender Offer Purchase Price.
In connection with the Share Exchange, any shareholder of the Company may demand that the Company purchase the shares owned by such shareholder pursuant to the procedures prescribed by the Companies Act and other applicable laws and regulations. In such event, the purchase price shall ultimately be determined by the court.
(5) Prospects and Reasons for Delisting
The Company’s shares of common stock are currently listed on the first section of the Tokyo Stock Exchange and on the first section of the Osaka Securities Exchange. Because the Offeror has not set the maximum number of shares to be purchased through the Tender Offer, depending on the results of the Tender Offer, it is possible that the Company’s shares of common stock will be delisted pursuant to the delisting standards of the Tokyo Stock Exchange and the Osaka Securities Exchange, following the implementation of the specified procedures. Further, even if the applicable criteria for delisting are not met upon the completion of the Tender Offer, the Offeror plans to make the Company its wholly owned subsidiary thereafter through the Share Exchange, as set out in (4) Policies Regarding Organizational Restructuring, etc. after the Tender Offer (Matters Concerning the So-Called “Two-Tier Purchase”) above, and if such procedures are implemented, the Company’s shares of common stock will be delisted pursuant to the delisting standards of the Tokyo Stock Exchange and the Osaka Securities Exchange. After the delisting, it will be impossible to trade the Company’s shares of common stock on the Tokyo Stock Exchange or the Osaka Securities Exchange.
3. Matters concerning Material Agreements Between the Offeror and the Shareholders and directors of the Company regarding the Tender of the Company’s Shares of Common Stock in the Tender Offer
N/A
4. Details of Profit Sharing by the Offeror or its Special Related Parties
N/A
5. Basic Policy regarding Control over the Company
In order to create a new Panasonic Group in which the Three Companies are truly integrated, the Company, the Offeror, and Panasonic Electric Works are considering reorganizing the structures of their businesses, aiming for an effective date in or around January 2012. The details of the reorganization will be announced as soon as they are decided.
6. Questions to the Offeror
N/A
7. Request for Extension of Tender Offer Period
N/A
8. Prospects
(1) Policies, etc. subsequent to the Tender Offer
With respect to the policies, etc. after the Tender Offer, please refer to 2.(2) Basis and Reasons for Opinion on Tender Offer.
(2) Prospect of future performance
The impact of the Tender Offer on the Company’s performance will be reported as soon as it is ascertained.
9. Matters regarding Transactions, Etc. with Controlling Shareholders
This transaction is deemed to be a transactions, etc. with a controlling shareholder. The transaction complies with the Guidelines for Protection of Minority Shareholders Upon Transactions, Etc. with Controlling Shareholders as indicated in the Corporate Governance Report disclosed by the Company on July 20, 2010.
The Offeror and the Company will conduct this Transaction by ensuring the fairness of this transaction as set out in 2.(3) Measures to Ensure the Fairness of the Tender Offer such as Measures to Ensure the Fairness of the Purchase Price, and Measures to Avoid Conflicts of Interest.
The guidelines indicated in the Corporate Governance Report disclosed on July 20, 2010 state that “the Company independently makes management decisions as a listed company, and prevents the transactions and other actions that are advantageous to the parent company arising from disadvantages to the Company as well as minority shareholders” and “the transaction with the parent company is executed on the same conditions as those for the common transactions fully taking into account the market price and other factors”.
Further, on July 29, 2010, the Board of Directors of the Company received a fairness opinion from ABeam, which is a third-party valuation institution independent of, and without any interest in, the Company and the Offeror, concerning the fact that the resolution of the endorsement of the Opinion and recommendation of the tender is not disadvantageous to the minority shareholders, especially from perspective of fairness of the price, and that the Tender Offer Purchase Price of 138 yen is fair to shareholders of the Company other than the Offeror, etc. (as defined under Article 441-2 of the Tokyo Stock Exchange’s Securities Listing Regulations) from a financial viewpoint.
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