Denso : Notice Regarding Acquisition of Own Shares and Tender Offer for Repurchase of Own Shares

The Company will continue to raise dividends payment sustainably with taking into accounts its consolidated results, consolidated dividend payout ratio, and dividend amount. Therefore, the Company makes efforts to develop management bases for adapting to environmental changes flexibly and improve consolidated results. The Company's Articles of Incorporation prescribe that the Company can pay dividend by resolving not only at a shareholders meeting but also at a meeting of the Board of Directors, under the provision of Article 459 of the Companies Act, and the Company appropriates its internal reserve for capital investment, research and development expenses, and repurchase of own shares for shareholders returns.

The Company's Articles of Incorporation also prescribe that the Company can repurchase its own shares by resolving at a meeting of the Board of Directors, under the provision of Article 165, Paragraph 2 of the Companies Act, so that the Company can promote shareholders returns, enhance capital efficiency, and execute capital policies for adapting to environmental changes more flexibly.

The Company considered various options regarding the specific method for returns to shareholders based on its capital policies described above. At the beggining of September 2018, from the view point of being able to acquire considerable number of its own shares in relatively short terms without losing capital efficiency if the Company repurchase its own shares from a large shareholder, the Company started to examine repurchasing its own shares from Mitsui Sumitomo Insurance Company, Limited ('Mitsui Sumitomo Insurance'), who is the 10th shareholder of the Company, which holds 9,543,600 of the Company's common shares as of September 30, 2018, and its shareholding represents 1.20% (rounded to two decimal places; the same applies hereafter in calculating the percentage of the total number of issued shares.) of all the Company's issued shares, 794,068,713, and Tokio Marine & Nichido Fire Insurance Company, Ltd. ('Tokio Marine & Nichido Fire Insurance'; collectively, together with Mitsui Sumitomo Insurance, the 'Tendering Shareholders'), who is the 36th shareholder of the Company, which holds 2,832,949, and its shareholding represents 0.36%.

At the middle of September 2018, the Company concluded that the method of a tender offer would ensure an opportunity for shareholders to tender their shares while watching the trend in the market price during the prescribed offer period (hereinafter referred to as the 'tender offer period'), was the most suitable from the viewpoint of both the equitable treatment of shareholders and the transparency of the transactions. When deciding on the purchase price for the tender offer (referred to as the 'tender offer price' hereafter), the Company also concluded that it would be desirable to conduct a tender offer at a price representing a certain discount to the market price. The tender offer price is based on the market price, with a focus on ensuring the precision and objectivity of the criteria used to determine the tender offer price and with a view towards setting a tender offer price that is below the market price in order to stem the outflow of assets from the Company, to the extent possible, from the perspective of respecting the interests of shareholders who will continue to hold the Company's common shares. Thus, at the middle of September 2018, the Company communicated with Tendering Shareholders regarding the implementation of the tender offer, in which the tender offer price represented a discount of around 3% versus the closing price on October 30, 2018 or average of closing prices on past one month (from September 30, 2018 to October 30, 2018) of the Company's common shares on the First Section of the Tokyo Stock Exchange.

At the middle of September 2018, the Company asked Tendering Shareholders if they would apply for tender offer based on the conditions above. As a result, at the end of September 2018, the Company received answers from Mitsui Sumitomo Insurance that they would apply 2,120,000 of the Company's common shares (0.27% of total number of issued shares), which was a part of 9,543,600 shares (1.20% of total number of issued shares) which Mitsui Sumitomo Insurance holds, and from Tokio Marine & Nichido Fire Insurance that they would apply 1,130,000 of the Company's common shares (0.14% of total number of issued shares), which was a part of 2,832,949 shares (0.36% of total number of issued shares) which Tokio Marine & Nichido Fire Insurance holds.

After examining and determining the above issues, the Company resolved to conduct the tender offer for repurchasing its own shares, using the acquisition method specified under Article 156, Paragraph 1 of the Companies Act, as applied pursuant to the provisions of Article 165, Paragraph 3 of the same Act, and the provisions of the Company's Articles of Incorporation, and set a tender offer price of 4,748 yen (rounded to the nearest yen; the same applies hereafter in calculating the tender offer price.) by applying a discount of 3.00% to the 4,895 yen, which is the closing price for the Company's common shares on the First Section of the Tokyo Stock Exchange on October 30, 2018, the business day before the meeting of the Board of Directors held on October 31, 2018. Also, in order to provide an opportunity for other shareholders exclude Tendering Shareholders to tender their shares, the Company set a maximum limit of 3,600,000 (0.45% of the total number of issued shares) on the number of shares the Company intends to purchase.

Regarding a source of funds, the Company plans to appropriate initial resources for repurchasing own shares. The Company holds 687,882 million yen as a short-term liquidity (cash and cash equivalents) on a consolidated basis as of September 30, 2018, which is enough to keep high liquidity, and a specific sum of cash-flow by business enterprise is expected to be accumulated additionally. Therefore, the Company considers it is able to keep financial soundness and safety even after tender offer.

Furthermore, the Company received explanations from Mitsui Sumitomo Insurance that it is Mitsui Sumitomo Insurance's policy at present, to hold 7,423,600 of the Company's common shares (0.93% of the total shares issued), and from Tokio Marine & Nichido Fire Insurance that it is Tokio Marine & Nichido Fire Insurance's policy at present, to hold 1,702,949 of the Company's common shares (0.21% of the total shares issued).

The Company has no plans for the disposition regards to the portion of Company shares acquired as a result of the tender offer at present.