1. Purpose of the Tender Offer
(1) Overview of the Tender Offer
The Company entered into the capital and business alliance agreement as of December 19, 2008 (hereinafter referred to as the "Capital and Business Alliance Agreement") with the Target, which is listed on the first section of the Tokyo Stock Exchange, Inc. (hereinafter referred to as the "Tokyo Stock Exchange") and on the first section of the Osaka Securities Exchange Co., Ltd. (hereinafter referred to as the "Osaka Securities Exchange"), for the purpose of making the Target its subsidiary and, with the prospect of an eventual restructuring of the organization, forming a close alliance between the companies. With respect to the contents of the Capital and Business Alliance Agreement, please see "(1) Agreements between the Tender Offeror and the Target or its Directors and a Summary Thereof" of "4. Other Matters" below.
The Company planned to implement a tender offer in the Capital and Business Alliance Agreement for all of the shares of the Target (all of the common shares, Class A preferred shares and Class B preferred shares) subject to, among other conditions, the completion of the procedures and measures that are required under domestic and overseas competition laws and regulations, for the purpose of making the Target its subsidiary. Now, upon near completion of the procedures and measures that are required under domestic and overseas competition laws and regulations, and after confirmation of satisfaction of the conditions for the Company’s commencement of the Tender Offer, which are provided in the Capital and Business Alliance Agreement, commencement of the Tender Offer has been resolved at the meeting of the Board of Directors of the Company held on November 4, 2009. The Company will implement the Tender Offer for all of the shares of the Target (all of the common shares, Class A preferred shares and Class B preferred shares), with 3,070,985,000 of issued shares of the Target being the minimum number of shares scheduled to be purchased, as part of the capital and business alliance between the Company and the Target based on the Capital and Business Alliance Agreement. Upon a determination that the minimum number of shares scheduled to be purchased has been tendered, the total number of share certificates, etc. tendered shall be calculated, with each Class A preferred share and each Class B preferred share tendered in this Tender Offer being deemed as 10 common shares, since the right is conferred on the Class A preferred shares and Class B preferred shares, to request the Target to issue common shares of the Target, in exchange for its acquisition of the relevant preferred shares, at the ratio of 1 preferred share to 10 common shares (hereinafter referred to as the "Conversion").
The number of issued shares less the number of treasury shares, in the case of Conversion of all of the above Class A preferred shares and Class B preferred shares, shall be such number (hereinafter referred to as the "Aggregate Number of Issued Shares of the Target on a Fully Diluted Basis") (6,141,969,078 shares) as is obtained by deducting the number of the treasury shares held by the Target as of March 31, 2009 (16,084,021 shares), which is described in the Target’s annual securities report for the 85th term submitted on June 29, 2009, from the sum of (i) the total number of issued common shares as of June 30, 2009 (1,872,338,099 shares), which is described in the Target’s first quarterly report for the 86th term submitted on August 5, 2009, and (ii) the total number of such common shares (4,285,715,000 shares) as is obtained in the case of Conversion of all issued Class A preferred shares (182,542,200 shares) and issued Class B preferred shares (246,029,300 shares) as of June 30, 2009, both numbers are described in the first quarterly report for the 86th term submitted on August 5, 2009. The minimum number of shares scheduled to be purchased (3,070,985,000 shares), is equal to the majority of the Aggregate Number of Issued Shares of the Target on a Fully Diluted Basis.
Further, the Company plans to convert the Class A preferred shares and Class B preferred shares of the Target into common shares after the acquisition thereof through the Tender Offer. Since no voting rights are granted to Class B preferred shares, the total number of Target’s voting rights will increase by the Conversion of Class B preferred shares into the common shares.
With respect to the Tender Offer, at the meeting of the Board of Directors of the Target held on November 4, 2009, the Target resolved to announce its opinion to endorse the Tender Offer.
(2) Background and Reasons for the Implementation of the Tender Offer and Management Policy after Completion of the Tender Offer
The Company, as a general electronics maker, through intense cooperation with each of its domestic and foreign group companies, is globally developing its manufacturing, sales and service activity in five (5) segments: Digital AVC Networks (audio and visual equipment, such as plasma and LCD TVs, BD/DVD recorders, camcorders, digital cameras, and information and telecommunication equipment, such as PCs, optical disc drives, multi-function printers, telephones and mobile phones); Home Appliances (household appliances, etc., such as refrigerators, room air conditioners, washing machines, clothes dryers and vacuum cleaners); PEW and PanaHome (electronic materials and electric industry business, and building products and homes business); Components and Devices (semiconductors, general components, electric motors and batteries); and Other (electronic-components-mounting machines, industrial robots and other FA equipment, industrial instruments, etc.). Since its establishment in 1918, the Company has been guided by its basic management philosophy, which states that the mission of an enterprise is to contribute to the progress and development of society and the well-being of people worldwide through its business activities. On October 1, 2008, the Company changed its name from Matsushita Electric Industrial Co., Ltd. to Panasonic Corporation. The Company is now proceeding to unify the Panasonic brand globally, and using all of its profit, resulting from the efforts of the entire group, to lead to the improvement of the value of the Panasonic brand.
On January 10, 2007, the Company published the GP3 Plan, the mid-term plan that deems the period from fiscal 2008, the year ended March 31, 2008 to fiscal 2010, the year ending March 31, 2010 as the period for serious phase change to obtain the right to try for global excellence. All group companies, as one Panasonic, have been promoting their efforts to realize the major themes: double-digit growth for overseas sales, four strategic businesses, manufacturing innovation and the ‘eco ideas’ strategy. Despite significant deviations from the initial supposed management conditions, such as the occurrence of the economic crisis, the Company has never revised the direction of the plan, including in the fiscal 2010, the year ending March 31, 2010, which is the last year of the plan, and is continuing to promote such efforts and aims for great progress during the time of market recovery.
The Target is developing its activities, such as manufacturing, sales, maintenance and services, in the Consumer Business Segment (imaging apparatus, such as TVs and projectors, audio equipment, information and communications equipment, such as digital cameras and navigation systems, household appliances, etc., such as refrigerators, air conditioners and washing machines), Commercial Business Segment (commercial equipment, such as showcases and commercial air conditioners, and commercial kitchen equipment, etc.), Component Business Segment (semiconductors, electronic components, primary batteries, rechargeable batteries and PV system, etc.) and Other Business Segment (logistics, maintenance and information services), and, under the management philosophy: "We are committed to becoming an indispensable element in the lives of people all over the world", is aiming to change into a "leading company for energy and environment" which will contribute to the global environment and to the lives of people. Especially, the Target has a large global market share and high level of technology on a global scale, and is well-established as a leading global company, with respect to the consumer lithium-ion battery business. In addition, with respect to the lithium-ion battery business for HEV (Hybrid Electric Vehicles) and EV (Electric Vehicles), an area in which rapid market growth is expected in the future, co-development with domestic and foreign car makers is being implemented. As well as addressing development and commercialization of a much more sophisticated system, a new commercial production line was completed and introduced. In the photovoltaic systems business, to meet active demand, the Target is promoting an increase of production capacity for the HIT (crystalline) solar cell, which is the leading product, by constructing a new plant, and is promoting commercialization of the thin-film solar cell to be used for large scale power generation and industry.
Since its founding in 1947, the Target has been diversifying its business into the radio, washing machine and television businesses, and, with the postwar development of the economy, accomplished remarkable growth, to become a global company in the electronics industry under the Sanyo brand. However, being affected by the intensified competition and the price decline of the digital appliance industry, and losses at the NIIGATA SANYO ELECTRONIC CO., LTD. (presently SANYO Semiconductor Manufacturing Co., Ltd.), due to the Niigata Chuetsu Earthquake in October 2004, the Target was in urgent need, in fiscal 2006, the year ended March 31, 2006, of strengthening its financial standing by building up stockholder’s equity and reducing interest-bearing debt, etc. Under such situation, the Target has been continuing to strengthen its financial standing, and continuing capital investment and research and development focusing on its core-business to implement its growth strategy, by issuing, on March 14, 2006, Class A preferred shares and Class B preferred shares by way of issuance of new shares to third parties, the total amount of which was 300,000,000,000 yen and the allottees of which were the Evolution Investments Co., Ltd., which is a 100 % subsidiary of Daiwa Securities SMBC Principal Investments Co., Ltd., Oceans Holdings Co., Ltd., which is an affiliate company of the Goldman Sachs Group, Inc. and Sumitomo Mitsui Banking Corporation. Further, the Target formulated the Master Plan on November 27, 2007, which is the mid-term business strategy for the period from fiscal 2009, the year ended March 31, 2009 to fiscal 2011, the year ending March 31, 2011, and formulated the Mid-term Management Plan, which is based on the Master Plan, on May 22, 2008, to ensure its growth as a global company. Furthermore, in a continuously harsh economic environment, and considering the economic-stimulus packages, represented by the Green New Deal, which various advanced countries have passed and which target the environment and energy-related fields, the Target now preferentially distributes its resources to such fields, especially rechargeable batteries for vehicles and photovoltaic system business, as part of the "Making Strategic Moves for Future Growth".
The Company and the Target recognize that macroeconomic uncertainty is increasing and that the competitive business environment surrounding the two companies is expected to intensify further due to the general decline in demand resulting from the global economic recession stemming from the financial crisis, the pressures on business resulting from a strong yen and rising material costs, as well as the rise of China and other emerging markets. Moreover, it is becoming increasingly difficult to sustain growth alone. The Company and the Target also recognize that not only should existing strategies be accelerated, but aggressive and drastic action should also be taken in order to achieve potential growth. Therefore, the Company and the Target, based upon a common understanding of the business environment, with the objective of overcoming a harsh global competitive environment, aiming to realize, to the full extent, the potential earnings growth rate and, also, to maximize the corporate values of both the Company and the Target, agreed to enter into discussions regarding a capital and business alliance based on the premise of making the Target a subsidiary of the Company, and made an announcement on November 7, 2008, titled "Panasonic and SANYO Agree to Start Discussions for Capital and Business Alliance." Thereafter, the Company and the Target continued to engage in detailed discussions and reviews and arrived at the conclusion that the best solution for realizing aspirations for global excellence would be to further strengthen the foundation for growth through a collaboration between the companies, by combining the accumulated technologies and manufacturing knowledge of both companies, and upon resolutions being passed at meetings of the respective Board of Directors of each company that were held on December 19, 2008, the Company and the Target entered into the Capital and Business Alliance Agreement. Now, upon near completion of the procedures and measures that are required under domestic and overseas competition laws and regulations, commencement of the Tender Offer has been resolved at the meeting of the Board of Directors of the Company held on November 4, 2009.
The Company and the Target believe that, through this alliance, strong collaboration between both companies will be established in a wide range of business fields. The primary synergies currently expected are as follows:
(i) Solar business
By utilizing the business platform of the Company, the Company and the Target aim to respond to demand for solar batteries, an area in which significant future growth is expected, through (i) further expanding business in the area of highly efficient HIT (crystalline silicon) solar photovoltaic cells and modules (batteries) and (ii) the acceleration of development and commercialization of next-generation solar cells. In addition, by utilizing domestic and overseas sales platforms of the Company’s group, a significant increase in sales can be expected.
(ii) Rechargeable battery business (mobile energy)
The Target has established its status as a leading company in the rechargeable battery business, primarily lithium-ion rechargeable batteries. In addition, the Company has utilized its original black box technology and expanded its business globally. By forging this alliance, the companies will further strengthen their competitiveness through (i) the introduction of the Target’s excellent production technology to the Company and (ii) the provision of the Company’s high-capacity technology, etc. to the Target. Active investments will be made in batteries for HEV (Hybrid Electric Vehicle) and EV (Electric Vehicle), an area in which rapid market growth is expected in the future, and as part of the Company’s group, it is believed that the Target’s collaboration with automakers can be strengthened and sales significantly expanded.
(iii) Strengthening financial and business position
By way of the Target becoming a member of the Company’s group after the execution of the Tender Offer, (i) reductions in company-wide procurement costs in areas such as materials purchasing or (ii) reductions in logistics-related costs are expected in the Target. In addition, by introducing the Company’s original cost reduction know-how, such as "Itakona" or "Cost Busters," to the Target, further strengthening of the financial and business position of the Target can be achieved.
Also, in accordance with the Capital and Business Alliance Agreement, the Company and the Target have established a "Collaboration Committee," and the said committee has been considering, to the extent permitted under the applicable laws and regulations, various items in order to achieve the expected outcomes of collaboration between the two companies. After the execution of the Tender Offer, the Company and the Target will implement strong measures to put the various items into practice by way of turning the energy field into a new growth driver and making the concepts of "creating energy," "storing energy," and "saving energy" the main pillars. Under these concepts, the companies will aim to realize integrated energy control for the entire house and for the entire building. Thereby, Company’s group aims to realize a comprehensive energy solution.
(3) Matters concerning Material Agreements Between the Tender Offeror and the Shareholders of the Target Regarding the Tender of the Target’s Shares in the Tender Offer
The Company entered into a tender agreement with Evolution Investments Co., Ltd. (a wholly-owned subsidiary of Daiwa Securities SMBC Principal investments Co., Ltd.) on March 31, 2009, under which Evolution Investments Co., Ltd. will tender in the Tender Offer all of the Class A preferred shares (89,804,900 shares) and a part of the Class B preferred shares (64,134,300 shares) of the Target held by Evolution Investments Co., Ltd.; provided, however, that the performance by the obligation of Evolution Investments Co., Ltd. to tender the Target’s shares in the Tender Offer is subject to the following conditions precedent: (1) all representations and warranties of the Company set forth in the said tender agreement are true and correct in all material respects; (2) the Company is not in any material respects in breach of any of its obligations under the said tender agreement; (3) the Target’s endorsement of the Tender Offer, the Target’s representation to that effect (including the Target’s abstention from publicizing its opinion on the offering price of the Tender Offer, and the publication of its opinion, with respect to common shares, that whether to tender the Target’s shares in the Tender Offer is left to the judgment of each shareholder), and the Target’s maintenance of the foregoing; (4) the nonexistence of any judgment, decision, order, etc. of any court or administrative agency, or any pending case, prohibiting or restricting Evolution Investments Co., Ltd. from tendering the shares to be tendered; and (5) the nonexistence of unpublicized, material facts (as defined in Paragraph 2, Article 166 of the Financial Instruments and Exchange Law (Law No. 25 of 1948, as amended), the "Law") with respect to the Target. (Provided, however, that the tender of the shares to be tendered in the Tender Offer, which falls under Article 166, Paragraph 6, Item 7 of the Law shall be excluded.) Unless the conditions precedent set forth above are satisfied, Evolution Investments Co., Ltd. will not be obligated to tender the shares of the Target in the Tender Offer. (Provided, however, that Evolution Investments Co., Ltd. may waive the performance of all or any part of the above conditions precedent and still tender the shares of the Target in the Tender Offer.) There is a possibility that, instead of tendering said Class B preferred shares, Evolution Investments Co., Ltd. will convert said Class B preferred shares to common shares and tender the common shares in the Tender Offer. The aggregate number of common shares of the Target (1,539,392,000 shares), assuming that the aforementioned Class A preferred shares and Class B preferred shares are converted into common shares, would be equivalent to approximately 25.06% (rounded to the second decimal place) of the Aggregate Number of Issued Shares of the Target on a Fully Diluted Basis. According to the Amendment Report No. 13 to the Substantial Shareholding Report filed by Evolution Investments Co., Ltd.
