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October 26, 2009

Mercian Corporation
Kirin Kyowa Foods Company, Limited
Kyowa Hakko Bio Co., Ltd.
Kirin Holdings Company, Limited

Kirin Group to Consolidate Businesses to Enhance Its Group-wide Management Capabilities
Aims to Reinforce Business Foundations and Achieve Further Growth by Consolidating Raw Alcohol Business within Daiichi Alcohol Joint Venture and Processing Liquors and Fermented Seasonings Businesses within Kirin Kyowa Foods

Tokyo, October 26, 2009 - An announcement was made today regarding a basic agreement reached between Mercian Corporation (President and CEO: Hiroshi Ueki), which is a consolidated subsidiary of Kirin Holdings Company, Limited (President and CEO: Kazuyasu Kato), Kirin Kyowa Foods Company Limited (President: Soichiro Katsura), and Kyowa Hakko Bio Co., Ltd. (President: Shuichi Ishino) with regard to the consolidation of businesses within the Kirin Group.

The raw alcohol businesses of Mercian and Kyowa Hakko Bio will be integrated into Daiichi Alcohol Co., Ltd., which is a joint venture to be established next year; while Mercian's processing liquors and fermented seasonings businesses will be consolidated in Kirin Kyowa Foods. These moves are aimed at reinforcing business foundations to create a "Group premium".

Mercian and Kyowa Hakko Bio will establish Daiichi Alcohol as a joint venture in July 2010 to handle the raw alcohol business. The new company will operate as a joint venture of the two founding companies until the end of 2012, with Kyowa Hakko Bio then transferring all of its shares of Daiichi Alcohol to Mercian in January 2013 to transform Daiichi Alcohol into a wholly-owned subsidiary of Mercian. During the joint venture period, the planned investment ratio will be 65% ownership by Mercian and 35% ownership by Kyowa Hakko Bio. This business consolidation will ensure the stable supply of high-quality alcohol products and also enhance sales and cost competitiveness, thereby facilitating the development of stable business foundations and enhancing market presence.

For the processing liquors and fermented seasonings businesses, Mercian's divisions related to the processing liquors business (excluding the Alcohol Marketing Division) and its Nikko Plant will be transferred to Kirin Kyowa Foods in July 2010. The integration plan and other details will be determined through consultations between the two companies. Mercian's fermented seasonings, mirin (sweet cooking sake), alcohol products, alcohol-based sanitary products, and other businesses will be integrated into Kirin Kyowa Foods, which was established in April 2009 through the merger of Kyowa Hakko Food Specialties Co., Ltd. and Kirin Food-Tech Company, Limited. The integration is aimed at strengthening the product lineup of the new company while also providing high-quality products, in pursuit of the goal of becoming the undisputed leader in the processing and commercial food ingredients market.

While entering a variety of capital and business alliances, the Kirin Group has been working to increase group management capabilities and maximize group synergy through alliances and post-alliance integration centered on project teams including cross-company teams*. One part of this process is the current effort to consolidate in a single company the overlapping businesses within the Group as a means of enhancing the competitiveness in each business field and achieving a quantum leap in growth set forth in the long-term management framework ("Kirin Group Vision 2015"), while at the same time aiming for qualitative expansion.

* Cross-divisional and cross-functional teams established within the Kirin Group to enhance synergy.

Integration Scheme for Raw Alcohol Business and Processing Liquors and Fermented Seasonings Businesses

Raw alcohol business

  • Integrate the raw alcohol businesses of Mercian and Kyowa Hakko Bio into Daiichi Alcohol, which is the joint venture to be established by the two companies.
  • Enhance sales and cost competitiveness to develop stable business foundations and enhance market presence.

Processing liquors and fermented seasonings businesses

  • Integrate Mercian's processing liquors and fermented seasonings businesses within Kirin Kyowa Foods.
  • Aim to be the undisputed leader in the processing and commercial food ingredients market.

Overview of Integration of Raw Alcohol Business

1. Overview of the new company (joint venture established by Mercian Corporation and Kyowa Hakko Bio Co., Ltd.)

(1) Name: Daiichi Alcohol Company, Limited
(2) Head office: To be determined
(3) Representative: Takao Kawasaki, President (planned)
(4) Business scale: Approximately 14.0 billion yen (as calculated from the combined sales of the business segments to be transferred)
(5) Capital: To be determined
(6) Investment ratio: Mercian: 65%; Kyowa Hakko Bio: 35% (planned)
(7) Date of establishment: July 1, 2010 (planned)
(8) Employees: To be determined
(9) Business description: Sale of raw alcohol

2. Overview of Mercian Corporation

(1) Name: Mercian Corporation
(2) Head office: 1-5-8, Kyobashi, Chuo-ku, Tokyo
(3) Representative: Hiroshi Ueki, President and CEO
(4) Sales: 92.7 billion yen (fiscal year ended December 2008)
(5) Capital: 20.9 billion yen (as of December 31, 2008)
(6) Main shareholder: Kirin Holdings Company, Limited (50.12% ownership)
(7) Date of establishment: December 4, 1934
(8) Employees: 1,245 (as of December 31, 2008)
(9) Business description: Manufacture and sale of wine and other alcohol beverages, chemical products, pharmaceutical products, and feedstuffs
(10) Main products: Domestic wine ("Château Mercian" series, Bon Rouge, "Tasty, antioxidant additive free" wine, Bistro), imported wine (Sunrise, Frontera, Franzia), processing liquors (wine, sake, goseishu, mirin, confectionery liqueurs, fermented seasonings, alcohol-based sanitary products), alcohol-based ingredients and industrial-use processing liquors, pharmaceuticals and chemicals, livestock and fish feedstuffs

3. Overview of Kyowa Hakko Bio Co., Ltd.

(1) Name: Kyowa Hakko Bio Co., Ltd.
(2) Head office: 1-6-1 Otemachi, Chiyoda-ku, Tokyo
(3) Representative: Shuichi Ishino, President
(4) Sales: 88.4 billion yen (segment information for the fiscal year ended March 2009 of Kyowa Hakko Kirin Co., Ltd.)
(5) Capital: 10.0 billion yen (as of March 31, 2009)
(6) Main shareholder: Kyowa Hakko Kirin Co., Ltd. (100% ownership)
(7) Date of establishment: October 1, 2008
(8) Employees: 1,528 (as of March 31, 2009)
(9) Business description: Manufacture and sale of pharmaceutical ingredients, amino acids, health foods, agricultural, livestock, and fisheries related products, and raw alcohol
(10) Main products: Pharmaceutical and industrial ingredients (glutamine, arginine, citicoline and others), health care products (Remake series and others), agricultural, livestock, and fisheries related products (gibberellin and others), alcohol products

4. Overview of Kirin Group

(1) Sales: 2,303.5 billion yen (fiscal year ended December 2008)
(2) Net income: 80.1 billion yen (fiscal year ended December 2008)
(3) Capital: 102.0 billion yen (as of December 31, 2008)
(4) Employees: 36,554 (as of December 31, 2008)
(5) Business description: Manufacture and sale of alcohol beverages, soft drinks, pharmaceutical products, health and functional foods and others

Overview of Integration of Processing Liquors and Fermented Seasoning Businesses

1. Overview of Kirin Kyowa Foods

(1) Name: Kirin Kyowa Foods Company, Limited.
(2) Head office: Sphere Tower Tennozu, 17th Fl. 2-2-8 Higashi Shinagawa, Shinagawa-ku, Tokyo
(3) Representative: Soichiro Katsura, President
(4) Sales: 42.5 billion yen (fiscal year ended March 2009 of Kyowa Hakko Food Specialties Co., Ltd.)
27.9 billion yen (fiscal year ended December 2008 of Kirin Food-Tech Company, Limited)
Total 70.5 billion yen
(5) Capital: 3.0 billion yen
(6) Main shareholder: Kirin Holdings Company, Limited (65% ownership)
Kyowa Hakko Kirin Co., Ltd. (35% ownership)
(7) Date of establishment: April 1, 2009
(8) Employees: 692 (unconsolidated; as of April 1, 2009)
(9) Business description: Manufacture and sale of seasonings, sweeteners, quality-improving agents, yeast-related ingredients, bakery ingredients and other food ingredients
(10) Main products: Extract natural seasonings, beer yeast extract, amino-acid natural seasonings, Chinese food sauces, fermented seasonings, umami seasonings (Gluace, Ribotide, Inoichiban and others), Sunett, Curdlan, Daiya yeast, Sofutto, egg soup

2. Overview of Mercian Corporation

(1) Name: Mercian Corporation
(2) Head office: 1-5-8, Kyobashi, Chuo-ku, Tokyo
(3) Representative: Hiroshi Ueki, President and CEO
(4) Sales: 92.7 billion yen (fiscal year ended December 2008)
(5) Capital: 20.9 billion yen (as of December 31, 2008)
(6) Main shareholder: Kirin Holdings Company, Limited (50.12% ownership)
(7) Date of establishment: December 4, 1934
(8) Employees: 1,245 (as of December 31, 2008)
(9) Business description: Manufacture and sale of wine and other alcohol beverages, chemical products, pharmaceutical products, and feedstuffs
(10) Main products: Domestic wine ("Château Mercian" series, Bon Rouge, "Tasty, antioxidant additive free" wine, Bistro), imported wine (Sunrise, Frontera, Franzia),processing liquors (wine, sake, goseishu, mirin, confectionery liqueurs, fermented seasonings, alcohol-based sanitary products), alcohol-based ingredients and industrial-use processing liquors, pharmaceuticals and chemicals, livestock and fish feedstuffs

3. Overview of Kirin Group

(1) Sales: 2,303.5 billion yen (fiscal year ended December 2008)
(2) Net income: 80.1 billion yen (fiscal year ended December 2008)
(3) Capital: 102.0 billion yen (as of December 31, 2008)
(4) Employees: 36,554 (as of December 31, 2008)
(5) Business description: Manufacture and sale of alcohol beverages, soft drinks, pharmaceutical products, health and functional foods and others

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