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    4004   JP3368000000

SHOWA DENKO K.K.

(4004)
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Showa Denko K K : Announcement regarding Company Split (Absorption-Type Company Split) and Transfer of Energy Storage Devices and Systems Business

07/08/2021 | 01:03pm EDT

[Translation]

July 8, 2021

To whom it may concern

Name of Listed Company:

Showa Denko K.K.

Code Number:

4004 TSE First Section

Name of Representative:

Kohei Morikawa, President & CEO

Contact:

Yunia Kagawa

General Manager

CSR & Corporate Communication Office

TEL (03) 5470-3235

Announcement regarding Company Split (Absorption-Type Company Split) and Transfer of Energy Storage Devices and Systems Business through Share Transfer by a Consolidated Subsidiary (Change of Second-Generation Subsidiary)

Showa Denko K.K. (hereinafter referred to as the "Company") hereby announces that Showa Denko Materials Co., Ltd. (hereinafter referred to as "SDMC"), the Company's consolidated subsidiary, has determined by its board of directors today that (i) SDMC shall have a newly established, wholly owned subsidiary of it named Energy Storage Devices Spin-Off Preparation Co., Ltd. (hereinafter referred to as "NewCo"; its company name shall be hereafter changed upon discussion) succeed the energy storage devices and systems business in which SDMC is engaged at its Saitama Works and Nabari Works (hereinafter referred to as the "Business") through an absorption-type company split (hereinafter referred to as the "Company Split"), thereafter, (ii) SDMC shall transfer all shares of NewCo and the directly or indirectly owned shares of Energy System Service Japan Co., Ltd., CSB Energy Technology Co., Ltd., Siam Magi Co., Ltd., Thai Energy Storage Technology Public Company Limited, Thai Nonferrous Metal Co., Ltd., 3K Products Company Limited, and Power Plas Company Limited to Sustainable Battery Solutions, Inc. (hereinafter referred to as "SBS"), operated by Sustainable Battery Holdings, Inc. whose largest shareholders are the funds (hereinafter collectively referred to as the "AP Funds") served by Advantage Partners Inc. (hereinafter referred to as "AP") (such transfer hereinafter referred to as the "Share Transfer" and, collectively with the Company Split, the "Transaction").

The Transaction will be concluded on the condition that SBS obtains the clearances and licenses necessary under the domestic and international competition laws and other laws and regulations.

Because the Company Split spins off a wholly owned subsidiary of SDMC (the Company's consolidated subsidiary), some disclosure items and details have been omitted from this press release.

1

1. Purpose of the Transaction

The Business of the Company Group (collectively meaning the Company, its subsidiaries, and affiliates; the same shall apply hereinafter) originates in the manufacture and sale of storage batteries initiated in 1916 by Nippon Storage Battery MFG. Co., Ltd., the predecessor of Shin-Kobe Electric Machinery Co., Ltd. In 1972, following SDMC's acquisition of a majority of the shares of Shin-Kobe Electric Machinery Co., Ltd., the Company Group made a full-scale entry into the Business. Since this entry, the Company Group has continued in research and development for the Business, focusing on trends in the battery market. As a result, we have gained a particular advantage in product performance driven by our unique technology and established a track record of delivering high-quality batteries for vehicles and industrial use based on such technology to excellent clients, including major automobile companies and major telecommunications carriers both in Japan and abroad. Further, backed up by such advanced technological capabilities and the product appeal of high-quality batteries, we have recently expanded our business overseas such as Thailand and Taiwan and have gradually developed a global system for the Business.

On the other hand, as announced in the "Long-Term Vision for Newly Integrated Company (2021-2030)" published by the Company on December 10, 2020, the Company Group aims to realize a Group-wide breakthrough by integrating the midstream materials technology of the Company, the downstream application technology of SDMC, and the evaluation and analysis technology of both companies to provide customers with one-stop solutions and new functions as a globally top-level, functional chemical manufacturer and to contribute a sustainable society. In addition, with an aim to realize this vision, the Company Group has developed a highly complementary business portfolio consisting of "Core Growth," "Next-Generation," "Stable Earnings," and "Fundamental Technologies/Materials" businesses. With each of these four business categories demonstrating a high level of competitiveness commensurate with their respective roles, we will continue to provide new functions to the market and realize sustainable growth. In particular, we are ready to aggressively invest in the "Core Growth" and "Next- Generation" businesses, focusing on electronics, mobility, and life science that can lead to the future growth of the Company Group.

In examining the optimal allocation of resource and business portfolio management to realize sustainable growth based on this long-term vision, the Company Group carefully considered all available options for operation of the Business of SDMC, our consolidated subsidiary. As a result, we reached the conclusion that the best option for stakeholders, including clients of the Business, daily end-users of the Company Group's Business products, and employees engaged in the Business, is to promote the expansion of the Business through business partners that possess or have access to specialized knowledge and management resources for renewable energy and automobile industry etc. that are relevant to the Business. We decided that the best business partner for this endeavor would be SBS, one of the leading investment companies in Japan, with experience in a considerable number of projects

2

similar to the Transaction, and with a variety of expertise. We therefore determined to promote the Business with SBS.

The Company is confident that the realization of the Transaction will enable the NewCo etc. which shall operate the Business subject to the Transaction to (i) gain the support of SBS and its shareholders for the Business operations and utilize their abundant management resources in an aggressive and strategic manner, (ii) execute its flexible and bold business strategies as an independent company, and (iii) thereby achieve further growth and enhanced competitiveness.

2. Outline of the Company Split

(1) Outline of the Company Split

(i) Schedule for the Transaction, including the Company Split

SPA (share purchase agreement for the Transaction)

July 8, 2021

Execution Date

Date of Incorporation of NewCo

July, 2021 (Expected)

Absorption-Split Agreement Execution Date

September, 2021 (Expected)

Date of the General Meeting of Shareholders to Approve the

October, 2021 (Expected)

Absorption Split Agreement (SDMC and NewCo)

Company Split Effective Date

December 1, 2021 (Expected)

Date of Share Transfer

December 1, 2021 (Expected)

(Note) The Transaction will be concluded on the condition that SBS obtains the clearances and licenses necessary under the domestic and international competition laws and other laws and regulations.

  1. Company Split Method
    Method shall be company split, where SDMC shall be the splitting company and NewCo shall be the successor company.
  2. Details of Allocations in relation to the Company Split
    In relation with the Company Split, NewCo will issue ordinary shares and allocate all such shares to SDMC. Currently, the details including the number of shares to be issued are yet to be determined.
  3. Handling of Stock Acquisition Rights and Corporate Bonds with Stock Acquisition Rights in conjunction with the Company Split
    Not applicable.
  4. Capital Increase or Decrease due to the Company Split Currently not determined.

3

    1. Rights and Obligations of the Successor Companies
      NewCo shall succeed to the assets, liabilities, contractual positions, and other rights and obligations relating to the Business of SDMC on the effective date of the Company Split.
    2. Prospect of Fulfillment of Debts
      No issues in the payment of debts borne by NewCo after the effective date of the Company Split have been assessed.
  1. Overview of the Parties to the Company Split (as of July 8, 2021)

Splitting Company

Successor Company (Note 1)

(1)

Name

Showa Denko Materials Co., Ltd.

Energy Storage Devices Spin-Off

Preparation Co., Ltd. (Note 2)

(2)

Address

1-9-2

Marunouchi,

Chiyoda-ku,

1-9-2 Marunouchi, Chiyoda-ku, Tokyo

Tokyo

(3)

Position and

Hisashi Maruyama, President and

Masato Yoshida, President and Chief

Name of

Chief Executive Officer

Executive Officer

Representative

Manufacturing,

processing,

and

Manufacture and sale of

energy

(4)

Business

sale

of functional materials

and

storage devices and related systems

Descriptions

advanced

components

and

and services

systems

(5)

Capital

JPY 15,454 million

JPY 1

(6)

Date of

October 10, 1962

July, 2021 (Expected)

Establishment

(7)

Number of

8 shares

1 share

Issued Shares

(8)

Fiscal Year-End

December 31

March 31

(9)

Number of

Employees

6,729 employees

0 employees

(Note 3)

Major

(10)

Shareholders

HC Holdings K.K.

Showa Denko

and

100%

100%

Materials Co., Ltd.

Shareholding

Ratio

(11)

Relationships

with the

Company

Capital

HC Holdings K.K., a wholly owned

SDMC, a consolidated

subsidiary

of

subsidiary of the Company, holds

the Company,

holds

100%

of

the

Relationships

100% of the shares.

shares.

Two directors of the Company

Personal

serve as directors of SDMC. One

Not applicable.

Relationships

director of SDMC serve as director

of the Company.

The

Company

sells

functional

chemicals, ceramics products and

No business

relationship with

the

Business

electronic chemicals to SDMC. The

Company since the business is yet to

Relationships

Company

purchases

equipment

commence.

from SDMC and is provided

analysis services from SDMC.

4

Status of

The Splitting

Company is our

The Successor Company is a wholly

owned subsidiary of our consolidated

consolidated

subsidiary

and

Related Parties

subsidiary

and constitutes a related

constitutes a related party.

party.

(12)

Financial Status and Operating Results of the Splitting Company over the Last Three Years (Note

4)

Fiscal Year Ended

Fiscal Year Ended

Fiscal Year Ended

March 31, 2019

March 31, 2020

December 31, 2020

(Consolidated)

(Consolidated)

(Consolidated) (Note 5)

Shareholder Equity in

JPY 420,095 million

JPY 423,432 million

JPY 408,047 million

Parent Company

Total Assets

JPY 708,659 million

JPY 704,425 million

JPY 670,204 million

Shareholder Equity per

Share of Parent

JPY 2,017.54

JPY 52,929,000,000

JPY 51,005,875,000

Company (Note 6)

Sales

JPY 681,025 million

JPY 631,433 million

JPY 429,238 million

Operating Income

JPY 36,353 million

JPY 23,126 million

JPY 12,510 million

Income before Tax

JPY 40,500 million

JPY 23,960 million

JPY 14,821 million

Net Income this Period

Attributable to Parent

JPY 29,451 million

JPY 16,553 million

JPY 7,455 million

Company

Comprehensive Income

this Period Attributable

JPY 28,397 million

JPY 4,845 million

JPY 14,945 million

to Parent Company

Basic per Share

JPY 137.94

JPY 2,050,125,000

JPY 915,125,000

Net Income (Note 5)

Cash Dividends per

JPY 60.00

JPY 30.00

JPY 3,750,000,000

Share (Note 5)

(Note 1) Expected to be established on July, 2021. All of the above items are current projections.

(Note 2) The company name is planned to be changed hereafter.

(Note 3) The number of employees of SDMC as of December 31, 2020 is indicated.

(Note 4) Expected to be established in 2021, so no fiscal year has ended.

(Note 5) The fiscal year ended in December 2020 of SDMC is a nine-month accounting period due to a change in the fiscal year-end.

(Note 6) SDMC has consolidated its 26,027,000 ordinary shares into 1 share effective June 23, 2020. In order to ease the comparison between past figures, for the fiscal years ended March 2020 and December 2020, the Shareholder Equity per Share of Parent Company and Basic per Share Net Income have been calculated assuming that such share consolidation was executed at the beginning of the fiscal year ended March 2020.

  1. Overview of the Business Division Subject to Split
    1. Business Operated by the Splitting Division
      Manufacture and sale of energy storage devices and related systems and services
    2. Operating Results of the Splitting Division

Results of the Fiscal Year Ending March 31, 2020

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Showa Denko KK published this content on 08 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 July 2021 16:24:07 UTC.


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