ITOHAM FOODS INC. (Translation)
November 6, 2015 Itoham Foods Inc.
President and Representative Director: Mamoru Horio (Tokyo Stock Exchange Securities Code: 2284)
Inquiries: Tadashi Hosomi Manager, Public Relations・Investor Relations Department
Tel: +81-798-66-1231
Yonekyu Corporation President and Representative Director: Isao Miyashita (Tokyo Stock Exchange Securities Code: 2290)
Inquiries: Toshifumi Aoyagi
Operating Officer, General Manager, Accounting & Finance Dept. and
Investor Relations Office Tel: +81-55-929-2797
Based on the 'Basic Agreement on Management Integration' concluded on September 15, 2015, Itoham Foods Inc. (hereafter Itoham) and Yonekyu Corporation (hereafter Yonekyu) have, with resolution by respective Board of Directors Meeting, jointly prepared a Share Transfer Plan on establishing of 'Itoham Yonekyu Holdings Inc.' as the wholly owning parent company through share transfer (hereafter Share Transfer) to be incorporated on April 1, 2016 (hereafter Incorporation Date).
Background and Objective of the Integration
With the economic stimulus of Abenomics, personal spending as a whole has shown steady growth and there is brightness within big-ticket items. On the other hand, there is still strong demand for low prices for food and daily living articles. Along with the restructuring of the retail sector and the general agreement of the TPP negotiations, there will continue to be fierce competitions among companies as well as changes in the market situations, which leaves less room for optimism. Our industry faces tough situation where increased global demand for meat and a weaker yen are causing high meat prices, increasing raw material costs. The domestic market is showing an expansion in the ready-made sector with more women in the work force and increases in single person household. The overseas market is showing increased demand in meat related products, especially in Asia, as the number of middle-income class expands. It is necessary to explore markets that show growth potentials.
Under these circumstances, Itoham Group, now in its final year of 'CNV 2015' mid-term management plan, has endeavored to adopt to changes in the market, strengthen its corporate and product brand images, increase its cost competitiveness and increase its standing as a national brand manufacturer to accelerate its growth strategy. In March this year, Itoham affiliated ANZCO Foods by increasing its share holding. With the affiliation, sales into the global market, especially in Asia, have increase dramatically. Along with increased sales and profits, it has become a huge step in Itoham's management vision of 'to become the most trusted manufacturer of processed meat in Asia.' Itoham will build on this base and continue to increase its overseas sales. In the domestic front, Itoham will supply products with value as a national brand manufacturer and strive to realize a continuous growth as a group. Itoham had recognized that the challenge lies in the need for high mobility in making proposals to the dine-out/ready-made sectors, increased cost competitiveness and stronger value chain in the meat division to ensure steady growth in the future.
On the other hand, Yonekyu, now in its 5th mid-term management plan, is taking on, as a group, the task of sorting out its business operations and restructuring / strengthening. Yonekyu has expanded its business by increasing manufacturing lines, expanding meat production business and strengthening sales structures. It has also improved its profitability by reorganizing its operations, improving productivity, improving logistics efficiency and tight profit and loss management. These efforts have cumulated in record profits last fiscal year.
This year, being the 50th year of operation, Yonekyu is actively executing its operations based on its management philosophy of 'creating enjoyable dining experience for every consumer and furthermore enriching their lives through such experiences' to realize
continuous growth. Yonekyu had recognized that the challenge lies in the necessity to increase production capacity and sales foothold without jeopardizing cost competitiveness in order to realize the above themes.
Through the recognition of the respective challenges, Itoham and Yonekyu have been discussing under the common recognition for the need to establish a 'Further Aggressive Management Strategy.' Itoham and Yonekyu have concluded that it was necessary to increase business size, and at the same time, bring together the strength of both companies to create a synergy effect, and have agreed upon the Integration.
The following synergy effect is foreseen.
Firstly, Itoham's strength is in its consumer products for the processed food division and beef and pork in the meat division. Itoham has production, logistics and sales bases throughout Japan. Yonekyu's strength is in its products for establishment use for the processed food division and pork and poultry for the meat division. Yonekyu's production bases are located in Kanto, Tokai area. By strengthening and complementing the distinguished characteristics, production and sales volume would increase. And by improving capacity utilization of the supply chain beginning from production to sales and securing cost competitiveness, a further aggressive business development would be possible.
Secondly, by utilizing the scale merit created by the Integration, it may be possible to secure outside materials including raw materials for production efficiently and at a lower cost thus improving profitability.
Thirdly, cost reductions by means of reorganizing and maximizing the efficiency of the logistics and back-office operations as well as product development and creation of new values that may have had limits when done individually would be possible allowing for further cost reductions and stronger product presentations.
Under these principles, Itoham and Yonekyu will take on various measures to with challenging spirit through these tough environments to ensure continuous growth and increase corporate value by continuing to supply products with value.
Outline of the Integration
Procedure of Share Transfer
Joint share transfer where Itoham and Yonekyu become wholly owned subsidiaries and the Incorporated Joint Holding Company becomes the wholly owning parent company.
Schedule of Share Transfer
Board resolution on conclusion of Basic Agreement on Management Integration (both companies)
September 15, 2015
Conclusion of Basic Agreement on Management Integration (both companies)
September 15, 2015
Board resolution on Share Transfer Plan (both companies)
November 6, 2015
Record Date regarding the extraordinary shareholders meeting (both companies)
November 21, 2015 (Scheduled)
Extraordinary shareholders meeting to approve share transfer plan (both companies)
January 26, 2016 (Scheduled)
Delisting of stocks (both companies)
March 29, 2016 (Scheduled)
Incorporation of Joint Holding Company
April 1, 2016 (Scheduled)
Listing of Joint Holding Company
April 1, 2016 (Scheduled)
Schedule may change as necessary.
Share allocation related to Share Transfer
Itoham
Yonekyu
Share Transfer Ratio
1
3.67
(note 1) Details of share allocation related to Share Transfer
1 share of common stock of the Joint Holding Company for 1 share of Itoham common stock, 3.67 shares of common stock of the Joint Holding Company for 1 share of Yonekyu common stock will be allocated. Should there be a situation where the share of the Joint Holding Company allocated to current Itoham and Yonekyu shareholders has a fraction of a share, The Joint Holding Company will, pursuant to Article 234 of the Companies Act of Japan and other relevant laws and regulations, pay the relevant shareholder a cash amount corresponding to the fractional shares attributed to such fraction.
The Share Transfer Ratio as stated above may change through discussions between the companies should there be major changes in conditions where the calculation is based.
One unit of the shares of the Joint Holding Company shall consist of 100 shares.
(note 2) Number of newly issued Joint Holding Company Shares to be delivered through the Share Transfer (Scheduled)
297,277,894 shares of common stock
The number of newly issued Joint Holding Company shares to be delivered through the Share Transfer has been calculated based on the total number of issued and outstanding shares of Itoham (247,482,533 shares as of March 31,2015) and those of Yonekyu (28,809,701 shares as of February 28, 2015), provided however, that Itoham and Yonekyu plan to cancel all of their treasury shares, to the extent practicable, as of the day immediately preceding the effective date of the Share Transfer. Accordingly, the treasury shares Itoham held as of March 31, 2015 (43,306,802 shares) and Yonekyu held as of February 28, 2015 (3,441,264 shares) have not been included in calculating the above number.
Because Itoham and Yonekyu plans to cancel treasury shares repurchased by them by the day preceding the date of Share Transfer, to the extent practicable, the number of newly issued Joint Holding Company shares to be delivered through the Share Transfer may change.
(note 3) Notes regarding to shares less than one unit
Should the shareholders of Itoham or Yonekyu be allocated less than one unit shares of the Joint Holding Company, the shareholder will not be able to sell the said share at the Tokyo Stock Exchange or other financial instruments exchanges. In such case, the shareholder may request the Joint Holding Company to purchase those shares less than one unit.
Shareholder may elect to purchase from the Joint Holding Company shares necessary to comprise one unit.
(note 4) Calculation of Share Transfer Ratio
The reasoning behind the calculation, relationship with the appraisers, basis of valuation, de-listing of Itoham and Yonekyu shares, measures to ensure fairness and measures to prevent conflict of interests has not changed from 'the Announcement of Basic Agreement on Management Integration through Establishment of Joint Holding Company (Joint Share Transfer) by Itoham Foods Inc. and Yonekyu Corporation' of September 15, 2015 and its amendment announced the same day. Both companies have decided not to change the
share transfer ratio agreed in the Basic Agreement after taking into consideration the factors including financial conditions, asset conditions, business outlook and share price movements since September 15, 2015.
Handling of share warrants and bonds with subscription to shares
In regards to share warrants issued by Itoham, share warrants of the Joint Holding Company will be allocated based on the contents and the share transfer ratio. Yonekyu has not issued share warrants. Both Itoham and Yonekyu have not issued bonds with subscription to shares.
Payout of dividend
Payout of dividend for Itoham for the year ending March, 2017 is expected to be 10 yen per share at the end of the financial year as stated in the second quarter financial results. Payout of dividend for Yonekyu for the year ending March, 2017 is expected to be 18 yen per year at the end of the financial year as stated in the second quarter financial results.
Profile of Relevant Parties to Share Transfer
(1) Company Name | Itoham Foods Inc. | Yonekyu Corporation |
(2) Location of Registered Head Office | 3-2-1, Bingo-cho, Nada-ku, Kobe, Hyogo | 1259 Okanomiya Terabayashi, Numazu, Shizuoka |
(3) Name and Title of Representative | Mamoru Horio, President | Isao Miyashita, President and Representative Director |
(4) Principal Business | -Manufacture and sale of processed meat products -Processing and sale of meat -Manufacture and sale of processed/precooked food products | - Production and sale of meat (beef, pork, poultry) and meat processed foods (ham, sausages and delicatessen food, etc.) |
(5) Paid-in Capital | 28,427million yen (as of September 30, 2015) | 8,634million yen (as of August 31, 2015) |
(6) Date of Incorporation | June 29, 1948 | February 26, 1969 |
(7) Total Number of Issued and Outstanding Shares | 247,482,533 shares (as of September 30, 2015) | 28,809,701 shares (as of August 31, 2015) |
(8) Fiscal Year End | March 31 | March 31 |
(9) Number of Employees | (non-consolidated) 1,768 (consolidated) 5,663 (as of September 30, 2015) | (non-consolidated) 838 (consolidated) 1,653 (as of August 31, 2015) |
(10) Major Customers | Major retailers and food wholesalers, etc. | Major retailers and food wholesalers, etc. |
(11) Major Banks | Mizuho Bank, Ltd. Sumitomo Mitsui Banking Corporation The Bank of Tokyo-Mitsubishi UFJ, Ltd. | Sumitomo Mitsui Trust Bank, Limited The Bank of Tokyo-Mitsubishi UFJ, Ltd. Mizuho Bank, Ltd. SURUGA bank, Ltd. |
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