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THE TENDER OFFER DESCRIBED IN THIS PRESS RELEASE IS NOT BEING MADE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA. NO PERSON MAY APPLY FOR THIS TENDER OFFER FROM THE UNITED STATES OF AMERICA.
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November 16, 2006
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Notification with Respect to Commencement of the Tender Offer
and Business Alliance regarding Mercian Corporation's Alcoholic Beverages Business
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At the meeting of the Board of Directors held on November 16, 2006, the Board resolved to acquire the shares of Mercian Corporation (Stock Code: 2536, the First Section of the Tokyo Stock Exchange and the First Section of the Osaka Stock Exchange) ("Mercian") through a tender offer (the "Tender Offer"), and to enter into an agreement for the formation of a business alliance in the alcoholic beverages business. In connection with such resolutions, we would like to provide notice of the following.
| Commencement of Tender Offer
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| 1. |
Purpose of Tender Offer |
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In May 2006, the Company announced the Company's Group Vision 2015 ("KV 2015"), its long-term operating framework for the Group for the next 10 years. To achieve this, the framework establishes a plan for achieving rapid growth for the Group by strengthening its core domestic alcohol business. The Group has solidified its competitive position in the areas of beer, low malt beer (happoshu), new genre drinks and ready-to-drink (RTD) beverages. In order to comprehensively strengthen our alcoholic beverages business, we believe that from this point it is urgent that we expand in the wine and shochu businesses.
On the other hand, Mercian has developed its mid-term operating plan (2006 ~2008) based on its mid- and long-term management strategy, and is aiming for the improvement of its corporate value with goals of "structural reform of the alcoholic beverages business" and "shift to growth." In this operating plan, Mercian has identified wine and processing liquors, which are already Mercian's strong areas, as top priorities for further expansion and is trying to shift its shochu and low alcoholic business ("RTD businesses") to businesses with a greater emphasis on "quality".
From the spring of 2006, the two companies have been in discussions regarding the possibility of a business alliance, and are convinced that they have many common attitudes towards customers, quality and values in respect of the companies' alcoholic beverages businesses and that it is possible to increase growth and profitability by fully utilizing each company's strengths.
As a result, the companies have agreed to enter into a business alliance in order to together achieve the number one or equivalent position in each field of the alcoholic beverages industry through mutual cooperation. To strengthen the effectiveness of this alliance, the companies have also agreed that the Company will acquire 67,000,000 shares (or 50.12% of the outstanding shares) of Mercian's common stock pursuant to a tender offer.
Through this business alliance, the companies will seek to become the strongest comprehensive alcoholic beverages group in Japan. By utilizing each company's strengths and with the fundamental approach of ensuring the utmost synergies, the companies will strive to grow and to improve efficiency/profitability in each field of the alcoholic beverages business in which the Company or Mercian operates. The companies' operations in each field will be integrated (as part of restructuring measures) to focus such operations in the company that has the current or potential superior position in such field.
At first, the Company will combine its wine business with, and integrate it into, Mercian's wine business, and Mercian will aim to become a leading manufacturer, purchaser and distributor of domestically produced and imported wines. In addition, in connection with the shochu business and RTD business, the Company will integrate Mercian's businesses into its businesses and plans to make full use of Mercian's management resources and to strive to expand its shochu business and strengthen its RTD business.
In addition, both the Company and Mercian plan to achieve the efficient use of the infrastructure of each company, including their manufacturing and distribution bases and merchandising activities in the mass sales/professional use market. While generally seeking to maintain current employment, we will proceed with proactive mutual exchanges of personnel principally through secondment, and to increase opportunities to present new challenges to our employees and to strengthen our personnel resources.
We have the following objectives for the tender offer for Mercian's shares in conjunction with the business alliance agreement:
First, by forming a capital alliance rather than a simple business alliance, both companies will realize the effects of the business alliance and improve profitability more rapidly, thereby solidifying our business alliance.
Second, we will be able to take advantage of the simplified application procedures for alcoholic beverage distribution licenses and permits to smoothly coordinate both companies' production and operation activities, as a result of the Company's acquisition and holding of more than half of the outstanding shares of Mercian's common stock.
The reason that the Company is seeking to acquire 67,000,000 shares (or 50.12% of the outstanding shares) of Mercian's common stock is that we aim to strengthen each company to the utmost extent by preserving the independence of Mercian and the Mercian brands. The Company's Group aims to preserve the business, employees and powerful brands created by Mercian up to this point as well as to establish a structure for mutual support between the two companies. We expect to send directors from the Company to Mercian, as necessary, to propel the group's comprehensive alcoholic product line-up.
Through the prompt implementation of the strategic business alliance and the capital alliance, the Company believes that it will be able to make significant contributions to increasing the corporate value of each company.
We have agreed to purchase 17,134,000 shares of Mercian's stock from Ajinomoto Co., Inc., currently the largest shareholder of Mercian, in connection with the Tender Offer.
Although Mercian's stock is listed on the First Section of the Tokyo Stock Exchange and on the First Section of the Osaka Stock Exchange, the Company will not purchase shares in excess of the 67,000,000 shares intended to be purchased through the tender offer and, in the event that the tender offer succeeds, it is planned that Mercian's listings on these stock exchanges will be maintained.
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| 2. |
Purpose of the Business Alliance regarding the Alcoholic Beverages Business |
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(1) |
Purpose of the business alliance |
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(a) |
Mutual objectives of each company |
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"striving for the birth of the strongest comprehensive alcoholic beverages group in Japan" |
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(i) |
Challenge the position as the number one wine manufacturer and distributor |
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(ii) |
Secure a beachhead for developing the shochu business |
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(iii) |
Strengthening the number one position and expanding the RTD business |
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(iv) |
Becoming the top runner in the market for Chinese liquors and shokoshu (imported) |
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(v) |
Increasing profits and sales through joint use of functions: |
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By taking advantage of merchandising opportunities, increasing sales and coverage of stores handling Mercian products |
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Joint use of infrastructure (distribution, indirect channels, etc.) |
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Developing and mutually exchanging human resources |
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(vi) |
By integrating R&D functions, developing and strengthening a system for the product development |
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(b) |
The Company's objectives |
| Enhance our market position and strengthen our portfolio in the market for shochu and RTD businesses |
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(c) |
Mercian's objectives |
| Strengthen our revenue base and improve our market position through the consolidation and specialization of our wine and processing liquors businesses |
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(2) |
Schedule for the business alliance |
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Beginning today, each company will promptly establish a project team to conduct discussions with respect to specific measures to be implemented as each of such measures becomes feasible. The contents of such discussions will be announced as they become certain. In the event that the tender offer does not succeed, the business alliance agreement will be void. |
| 3. |
Outline of the Tender Offer |
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(1) |
Description of the Target |
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Trade name: Mercian Corporation |
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Main business: |
(1) |
Manufacture and sales of alcoholic beverages, chemicals, pharmaceuticals and non-alcoholic beverages |
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(2) |
the import of alcoholic beverages |
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Date of incorporation: December 4, 1934
Address of head office: 1-5-8, Kyobashi, Chuo-ku, Tokyo 104-8305, Japan
Representative: President and Representative Director, Yuji Okabe
Amount of share capital: ¥20,972 million (as of June 30, 2006)
Outstanding shares: 133,689,303 shares (as of June 30, 2006) |
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(2) |
Description of shares to be purchased: common shares |
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(3) |
Tender offer period: Friday, November 17, 2006 to Monday, December 18, 2006 (32 days) |
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(4) |
Purchase price per share: ¥370 per share |
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(5) |
Basis for calculation of purchase price |
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The purchase price proposed by the Company (¥370 per share) was determined by comprehensively taking into consideration various factors, including future expected revenues, the market prices and the marketability of the stock (traded volume, market making ratio, etc.) of Mercian, in addition to financial and asset conditions. The purchase price of ¥370 per share represents an approximately 28.0% premium to ¥289, the average share closing price of Mercian on the First Section of the Tokyo Stock Exchange during the past three months up to and including November 15, 2006, and an approximately 39.6% premium to ¥265, the share closing price on November 15, 2006. |
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(6) |
Total number of shares planned to be purchased: 67,000,000 shares |
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(Note 1) |
If the total number of tendered shares is less than the number of shares planned to be purchased (67,000,000 shares), none of the tendered shares will be purchased by the Company. |
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(Note 2) |
If the total number of tendered shares is more than the number of shares planned to be purchased (67,000,000 shares), such excess of the tendered shares will not be purchased by the Company. |
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(Note 3) |
There is no plan to acquire treasury stock owned by Mercian Corporation through the Tender Offer. |
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(7) |
Changes in the number of shares owned by the Company due to the Tender Offer: |
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Number of shares owned prior to the Tender Offer: 0 shares (shareholding percentage of 0.00%) |
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Number of shares owned subsequent to the Tender Offer: 67,000,000 shares (shareholding percentage of 50.89%) |
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(Note) |
The number of shares owned subsequent to the Tender Offer represents to the number of shares to be owned by the Company assuming the Company purchases the total number of 67,000,000 shares planned to be purchased. |
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(Note) |
The percentage of shares owned subsequent to the Tender Offer is calculated based on the aggregate number of voting rights (131,645) of Mercian as of June 30, 2006, |
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(8) |
Date of public notification: Friday, November 17, 2006. |
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(9) |
Funds required for the Tender Offer: ¥24,790 million yen (expected) |
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(10) |
Commencement of account settlement: Tuesday, December 26, 2006 |
| 4. |
Agreement with Mercian or its officers in respect of the Tender Offer |
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The Board of Directors of Mercian resolved to support the Tender Offer at a meeting held on November 16, 2006. |
| 5. |
Prospects after the Tender Offer |
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As a result of the Tender Offer, Mercian will become a consolidated subsidiary of the Company. However, it is planned that the listing of Mercian's stock on the First Section of the Tokyo Stock Exchange and the First Section of the Osaka Stock Exchange will be maintained.
The Company will disclose its outlook including the effects of the Tender Offer as soon as we evaluate our outlook subsequent to the business alliance. |
This press release has been prepared only for the purpose of informing the public of the Tender Offer and other issues. This has not been prepared for soliciting sales or purchases. When conducting any sales, shareholders should make appropriate judgments after reviewing the tender offer explanatory statement for the Tender Offer prepared by the Company.
Neither this press release (nor any part hereof) constitutes any document to subscribe for, solicit the sales of, or solicit applications for, the purchase of, securities. Neither this press release (nor any part hereof) nor its distribution shall be interpreted to be the basis of any agreement in relation to the Tender Offer, rely on this press release at the time of concluding any agreement.
The Tender Offer is not being made, directly or indirectly, in or into, or by the use of the mails of, or any other means or instrumentality of interstate or foreign commerce (including, but not limited to, telephones, telexes, facsimile transmissions, e-mails and Internet communications) of, or of any facility of a national securities exchange of, the United States of America. No person may apply for this Tender Offer by the use of such means or instrumentality or of such facility, or from the United States of America. Accordingly, copies of this release and any related offering documents are not being, and must not be, mailed or otherwise transmitted or distributed in or into the United States of America. Any purported acceptance of the Tender Offer resulting directly or indirectly from a violation of these restrictions will not be accepted. No securities or other consideration are being solicited in the United States and, if sent in response by a resident of the United States of America or from within the United States of America, such securities or other consideration will not be accepted. No indications of interest in the Tender Offer are sought by this release.
Certain countries, regions and other jurisdictions may impose certain restrictions on the release, issue or distribution of press releases of this nature under their laws and regulations. In such cases, you are required to comply with such laws and regulations in such countries, regions and other jurisdictions in light of such restrictions. In jurisdictions where the implementation of the Tender Offer is illegal, even if you receive this press release, such receipt shall not constitute any solicitation for the application for the purchase or sale of share certificates in relation to this Tender Offer, and this press release shall be deemed as the distribution of information for reference only. |
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