Steel Partners Submits to Brother Industries Suggestions to Improve Corporate Value; Urges Focus on Core Business, Share Repurchases amid Market Weakness

TOKYO--(BUSINESS WIRE)--Steel Partners Japan Strategic Fund (Offshore), L.P. (“Steel Partners”) today announced that it submitted to Brother Industries Ltd. (TOKYO:6448) (the “Company” or “Brother”) an updated version of a presentation entitled “Suggestions to Improve Corporate Value” (the “Presentation”).

The Presentation includes suggestions for improving the Company’s financial and operational competitiveness as well as a comparative analysis of its current performance versus its competitors.

“As long-term investors in Brother, we are concerned that a lack of focus and inefficient capital structure at the Company continues to cause under-appreciation of its enterprise value vis-à-vis peers,” stated Warren Lichtenstein of Steel Partners. “We believe the Company should focus on its core Printing & Solutions business and sell, discontinue or spin-off non-core businesses.”

Steel Partners noted that cross shareholdings in non-related companies have also hurt Brother’s profitability and reduced book value. In particular, the Company should take steps to maximize the value of its holdings in industrial products company Nissei Corporation (TOKYO:6271) which also trades below its intrinsic value, Steel Partners said. Otherwise, Steel Partners believes the Company should consider liquidating this position and all other non-core equity and bond investments and return such capital to shareholders.

To unlock value, Steel Partners in the Presentation recommended the Company use non-core assets, valued at approximately ¥68 billion to repurchase and cancel 29% of the Company’s outstanding shares. Steel Partners estimated that such a repurchase program would increase fiscal year 2008 return on equity by 44% and improve earnings per share by 41% on a pro forma basis.* Steel said it has met with the Company on several occasions and urged management to initiate a large-scale share repurchase program, but this suggestion was only partially put into action.

“We are especially disappointed that the company did not initiate a currently proposed large-scale share repurchase program as the company’s shares currently trade well below their intrinsic value,” said Warren Lichtenstein. “Other Japanese companies have taken advantage of current market weakness to buy back shares at favorable prices, and we believe Brother should do likewise.”

Steel Partners also noted in the Presentation that Brother’s margins for its core office equipment business are substantially lower than many of its peers, presenting an opportunity for operational improvement. To initiate such improvements, Steel Partners suggested the Company draw on Steel Partners’ operational know-how and access to experienced operating partners.

Steel Partners is Brother Industries’ largest shareholder, holding 28,217,500 shares, or approximately 10.167% of the Company’s outstanding shares as of November 19, 2008, and has been a shareholder since November 2005.

The Presentation is available for review and download at www.spjsf.jp.

*CAUTIONARY NOTE REGARDING PRO FORMA FIGURES.

Pro forma figures noted in this press release may not have been prepared under Japan’s generally accepted accounting principles (“GAAP”) and in some cases pro forma figures may differ greatly from the those derived from GAAP. The accuracy of pro forma figures cannot be assured and there is no certainty that pro forma results reflected herein will actually be achieved due to changes in economic conditions, increases in raw material prices, shrinkage of market in the future or other reasons. Steel Partners does not provide any warranty with respect to the figures used in achieving or calculating the estimated return on equity or earnings per share. Please read carefully the “IMPORTANT CAUTIONARY CONSIDERATIONS REGARDING PRESENTATION” and, in particular, “CAUTIONARY NOTE REGARDING PRO FORMA FIGURES,” set out on pages 1 through 4 of the Presentation.

About SPJSF

Steel Partners Japan Strategic Fund (Offshore), L.P. is a long-term relationship/active value investor that seeks to work with the management of its portfolio companies to increase corporate value for all stakeholders and shareholders.