Hitachi Chemical : Announcement of Hitachi Chemical's Company Split (Simplified Absorption-type Split) and Transfer of its Subsidiary (Split Company)

July 25, 2019
Hitachi Chemical Co., Ltd.

Hitachi Chemical Co., Ltd. (hereinafter 'Hitachi Chemical') announces the decision reached at the board of directors' meeting on July 25, 2019 to absorb and split the material procurement business of its consolidated subsidiary Hitachi Kasei Shoji Co., Ltd. (hereinafter 'Hitachi Kasei Shoji') for the Hitachi Chemical Group, and to transfer all Hitachi Kasei Shoji shares owned by Hitachi Chemical to Shinko Denki Co., Ltd. (hereinafter 'Shinko Denki').

As a company split involving the succession of Hitachi Chemical's wholly owned subsidiary's business division, some items and details of disclosure have been omitted.

1. Background and Purpose

Hitachi Kasei Shoji is doing businesses of procuring materials for the Hitachi Chemical Group and selling materials and manufacturing equipment of other companies other than Hitachi Chemical Group.
Hitachi Chemical strived to acquire new business opportunities by approaching Hitachi Kasei Shoji's customers for manufacturing equipment of wiring boards and liquid crystal display, with the expectation that Hitachi Chemical could supply needed materials such as laminate materials for wiring boards and circuit connection films for displays. However the synergies that Hitachi Chemical expected with Hitachi Kasei Shoji increasingly became limited. Hitachi Chemical therefore decided to take over Hitachi Kasei Shoji's business of material procuring for the Hitachi Chemical Group, and to transfer the business of selling other companies' materials and manufacturing equipment to Shinko Denki.

Shinko Denki is a trading company specializing in competitive products mainly for the information and communications, and car electronics industries, including functional materials and electronic and vehicle-mounted components; it is also Hitachi Chemical's longtime partner handling Hitachi Chemical Group's products. Hitachi Kasei Shoji is expected to further expand its sales through its business bases for materials and manufacturing equipment supplied by companies other than the Hitachi Chemical Group, while utilizing Shinko Denki's sales bases in Japan and overseas, including China and Thailand.

2. Schedule of the Company Split and Transfer of the Subsidiary

Resolution at the board of directors' meeting	July 25, 2019
Conclusion of company split agreement	July 25, 2019
Scheduled execution of company split (effective date)	October 1, 2019
Conclusion of equity purchase/sale agreement	July 25, 2019
Completion of equity transfer (planned)	October 1, 2019

*This schedule is as of July 25, 2019, and may be subject to change due to procedures and certain circumstances in the future.

3. Overview of the Company Split

(1) Outline of the company split

1. (ⅰ)Method of the company split
   An absorption-type split will be executed with Hitachi Kasei Shoji as the split company and Hitachi Chemical as the succeeding company.
2. (ⅱ)Allocation of shares upon the company split
   With the company split executed between Hitachi Chemical and its wholly owned subsidiary, no shares will be allocated upon the company split.
3. (ⅲ)Share acquisition rights and bonds with share acquisition rights associated with the company split
   Not applicable.
4. (ⅳ)Changes in capital resulting from the company split
   Hitachi Chemical's capital will not change with the company split.
5. (ⅴ)Rights and obligations to be assumed by the succeeding company
   Rights and obligations pertaining to the company split, including assets, liabilities, and contractual status, will be assumed as provided by the company split agreement.
6. (ⅵ)Prospects of fulfilling the obligations
   Hitachi Chemical has determined that it will have no problems in fulfilling the obligations to be assumed upon the company split.

(2) Overview of the companies subject to the company split

Succeeding company	Split company
(1) Name	Hitachi Chemical Co., Ltd.	Hitachi Kasei Shoji Co., Ltd.
(2) Address	1-9-2, Marunouchi, Chiyoda-ku, Tokyo	1-9-2, Marunouchi, Chiyoda-ku, Tokyo
(3) Name and title of representative	Hisashi Maruyama, President and Chief Executive Officer	Hideki Handa, President
(4) Principal lines of business	Manufacture, process, and sale of functional materials and advanced components and systems	Purchase/sale and import/export of functional material and equipment related products
(5) Capital	15,454 million yen	301 million yen
(6) Established	October 10, 1962	June 1, 1968
(7) Number of shares issued	208,364,913	1,040,000
(8) Fiscal year end	March 31	March 31
(9) Major shareholder and shareholding ratio	Hitachi, Ltd., 51.24%	Hitachi Chemical Co., Ltd., 100%
(10) Operating results and financial condition for the previous fiscal year
Fiscal year end	March 2019	March 2019
Equity attributable to owners of the parent	420,095 million yen	4,301 million yen
Total assets	708,659 million yen	9,242 million yen
Equity attributable to owners of the parent per share	2,017.54 yen	4,135.23 yen
Revenue	681,025 million yen	22,055 million yen
Operating income	36,353 million yen	260 million yen
Income before income taxes	40,500 million yen	318 million yen
Net income attributable to owners of the parent	28,723 million yen	210 million yen
Basic earnings per share	137.94 yen	201.96 yen

(11) Relationship between the succeeding company and the split company	Capital	Hitachi Chemical owns 100 percent of shares issued by Hitachi Kasei Shoji.
	Personnel	Three employees from Hitachi Chemical are assigned to Hitachi Kasei Shoji, and 108 employees from Hitachi Kasei Shoji are assigned to Hitachi Chemical.
	Business	Hitachi Chemical and Hitachi Kasei Shoji have a business relationship for their products and services.

*The number of shares issued by Hitachi Chemical is as of March 31, 2019.*The number of shares issued by Hitachi Kasei Shoji is as of March 31, 2019.

(3) Overview of the business division to be succeeded with the company split

1. (ⅰ)Outline of the succeeded business division
   Material procurement business for the Hitachi Chemical Group
2. (ⅱ)Operating results of the succeeded business division (ending in March 2019)
3. (ⅲ)Items and values of assets and liabilities to be succeeded (as of March 31, 2019)

   Assets		Liabilities
   Item	Book value	Item	Book value
   Current assets	4,726 million yen	Current liabilities	2,124 million yen
   Fixed assets	421 million yen	Fixed liabilities	542 million yen
   Total assets	5,146 million yen	Total liabilities	2,666 million yen

(4) Changes after the company split

The name, principal lines of business, address, representative, capital, and fiscal year end of Hitachi Chemical will not change after the company split. Hitachi Chemical's net and gross assets are not finalized at present.

4. Overview of the Subsidiary Transfer

(1) Overview of the company transferring its equities

The overview of the company transferring its equities (Hitachi Kasei Shoji) is as described in paragraph

(2) 'Overview of the companies subject to the company split' of Chapter 3 'Overview of the Company Split.'

(ⅰ) Financial condition and operating results for the past three years of the company transferring its equities

Fiscal year end	March 2017	March 2018	March 2019
Equity attributable to owners of the parent	4,374 million yen	4,094 million yen	4,301 million yen
Total assets	9,632 million yen	10,558 million yen	9,242 million yen
Equity attributable to owners of the parent per share	4,205.71 yen	3,936.92 yen	4,135.23 yen
Revenue	18,437 million yen	20,112 million yen	22,055 million yen
Operating income	238 million yen	99 million yen	260 million yen
Income before income taxes	308 million yen	48 million yen	318 million yen
Net income attributable to owners of the parent	206 million yen	26 million yen	210 million yen
Basic earnings per share	198.21 yen	24.94 yen	201.96 yen
Dividend per share	0 yen	293.27 yen	0 yen

(2) Overview of the target company for the equity transfer

(1) Name	Shinko Denki Co., Ltd.
(2) Address	Kabutocho Building, 4-3 Nihonbashi-kabutocho, Chuo-ku, Tokyo
(3) Name and title of representative	Jun Takahashi, President and Chief Executive Officer
(4) Principal lines of business	Sale of electronic components and materials, energy-related parts and materials, and production facilities
(5) Capital	350 million yen
(6) Established	June 4, 1949
(7) Fiscal year end	March 31
(8) Relationship between Hitachi Chemical Group and Shinko Denki	Capital	Shinko Denki owns a small percentage of Hitachi Chemical shares.
	Personnel	Two employees from Shinko Denki are assigned to Hitachi Chemical.
	Business	Hitachi Chemical has a business relationship with Shinko Denki for the sale of its products.

5. Changes in Voting Right Ratio before and after the Transfer

(1) Voting right ratio before the transfer	100%
(2) Voting right ratio after the transfer	0%
(3) Number of shares transferred	1,040,000 shares
(4) Transfer value	Share transfer value	1,260million yen
	Other costs (estimate)	42million yen

*The final share transfer value may be subject to change, with the value adjusted and determined after the share transfer.

6. Future Outlook

The expected impact of this share transfer on Hitachi Chemical's consolidated performance forecast for the fiscal year ending March 2020 is minor.