Tokyo, Japan, March 28, 2002 -- Hitachi, Ltd. (TSE:6501, NYSE:HIT, Hitachi)
and Hitachi Electronics Engineering Co., Ltd. (TSE:6873, Hitachi Electronics
Engineering) today announced that, in accordance with decisions taken
by their respective boards of directors, Hitachi Electronics Engineering,
a subsidiary of Hitachi that is listed on the Tokyo Stock Exchange,
will become a wholly-owned subsidiary of Hitachi through share exchange.
It was also decided that Hitachi Electronics Engineering will issue
new shares to Hitachi.
Officially, the share-exchange agreement will be concluded in late
May 2002, and, upon being approved at the Hitachi Electronics Engineering's
ordinary general meeting of shareholders, which is scheduled to take
place in late June, the share exchange is expected to take place on
October 1, 2002. The issuance of new shares assumes validity in compliance
with the stipulations of the Securities Exchange Law of Japan.
Hitachi Electronics Engineering as a wholly-owned subsidiary
1. Gist of agreement
The Hitachi Group aims to be a global supplier able to provide comprehensive
solutions through information system services and social infrastructure
systems equipped with IT and knowledge, and the key hardware,
software, and high-functional materials that underpin such services
and systems. In accordance with this policy, Hitachi is speeding up
the business realignment of the Hitachi Group and building an optimized
operations system by fusing together and utilizing the Group's knowledge,
experience, technology and other resources.
These consolidated management measures spurred the move to make Hitachi
Electronics Engineering a wholly-owned subsidiary. The move will make
it possible for Hitachi Electronics Engineering to further promote
the restructuring it is currently engaged in, and will also make it
possible to realize further synergies within the Hitachi Group by
organically fusing Hitachi Electronics Engineering's advanced technologies,
which include optical measurement technology and LCD manufacturing
inspection technology, promoting the development of the nanotechnology
business that is a major focus of the Hitachi Group.
Hitachi Electronics Engineering is engaged in the development and
marketing of manufacturing and inspection equipment for magnetic disks,
LCDs and semiconductors. In March 1998, it was listed on the Second
Section of the Tokyo Stock Exchange. Recently, however, the company's
business has been affected by the global IT recession. On March 1,
2002, this led the company to issue a downward revision of its result
forecast for the year ending March 31, 2002. This was accompanied
by the announcement of emergency management measures that are being
implemented to return Hitachi Electronics Engineering to profitability
by rebuilding the company's business by concentrating resources on
core operations, carrying out an extensive reappraisal of its business
division system, and decreasing fixed costs by reducing the number
of employees.
The manufacturing and inspection equipment for LCDs and semiconductors
is a market sector in which technology is becoming increasingly advanced
and cost competition is likely to intensify on a global scale. Making
Hitachi Electronics Engineering a wholly-owned subsidiary will enable
businesses in which Hitachi Electronics Engineering is competitive,
such as optical measurement equipment and flat-panel display equipment,
including LCDs, to be expanded as the key hardware business of the
Hitachi Group. This will allow the management resources to be more
flexibly re-allocated for future needs.
2. Share Exchange Terms and Conditions
(1) Schedule (provisional)
|
March 28, 2002 |
Board of directors approves
memorandum of understanding for share-exchange
|
|
March 28, 2002 |
Signing of memorandum of
understanding for share-exchange
|
|
Late May, 2002 |
Board of directors to approve
share-exchange agreement
|
|
Late May, 2002 |
Signing of share-exchange
agreement
|
|
Late June, 2002 |
Shareholder approval of
share-exchange agreement
(ordinary general meeting of shareholders of Hitachi Electronics
Engineering)
|
|
September 25, 2002 |
Delisting of Hitachi Electronics
Engineering Co., Ltd. from Tokyo Stock Exchange
|
|
September 30, 2002 |
Deadline for the submission
of Hitachi Electronics Engineering share certificates by shareholders
|
|
October 1, 2002 |
Exchange of shares
|
|
In accordance with the
provisions of Paragraph 1 of Article 358 of the Commercial Code
of Japan, Hitachi does not plan to submit the share-exchange agreement
for approval at Hitachi's ordinary general meeting of shareholders. |
(2) Ratio of Share Exchange
Hitachi and Hitachi Electronics Engineering requested Nomura Corporate
Advisors Co., Ltd. (Nomura Corporate Advisors) to calculate the ratio
for the exchange of shares. The results of these calculations were referred
to in discussions between the two companies, which agreed to the ratio
shown below.
The following ratio may be subject to change following discussions between
the parties in the event that there should arise any significant change
in the terms and conditions used to arrive at the ratio.
Company |
Hitachi |
Hitachi Electronics
Engineering |
Share exchange ratio |
1 |
0.5 |
|
|
Notes: |
|
a) |
Share allocation ratio:
There will be an allocation of 0.5 shares of Hitachi stock per
share of Hitachi Electronics Engineering stock. However, there
will be no allocation of shares with respect to Hitachi Electronics
Engineering stock held by Hitachi.
|
|
b) |
Result, method and basis
of calculation by third-party institution:
Nomura Corporate Advisors used the market price analysis and the
discounted cash flow (DCF) method to evaluate Hitachi and Hitachi
Electronics Engineering. The results were used as a basis for
calculating the share-exchange ratio.
|
|
c) |
Number of Hitachi shares
to be issued for the exchange:
4,500,000 ordinary shares
|
|
d) |
Date from which the dividend
on the new shares will be calculated:
October 1, 2002
|
|
e) |
Hitachi may substitute
its treasury stock for a portion of Hitachi's shares to be issued
for the exchanges.
|
3. Outline of Each Company
Note: As of February 28, 2002, Hitachi's capital
amounted to 281,763 million yen, and common stock issued amounted
to 3,337,949,635 shares.
4. Change of the president of Hitachi Electronics
Engineering
Mr. Katsuhiko Kato, currently president of Hitachi Electronics Engineering,
will step down and Mr. Kunio Hasegawa, currently senior vice president
and director of Hitachi, will become president.
(Mr. Hasegawa will assume the presidency following the approval of
the board of directors at a meeting convened following the ordinary
general meeting of the shareholders of Hitachi Electronics Engineering
in late June.)
5. Financial Results (for the most recent three years)
6. Changes after share exchanges
(1) Trade name, business, head-office location :
No changes are planned following the exchange of shares.
(2) Capital and Capital Reserve:
It has not been decided whether there will be increase in Hitachi's
capital and capital reserve.
(3) Effect on Hitachi's Consolidated Results:
Because Hitachi Electronics Engineering is already a consolidated
Hitachi subsidiary, the share-exchange transaction is not expected
to have a material impact on Hitachi's consolidated results.
|
Issuance of new shares of Hitachi Electronics
Engineering to Hitachi
1. Objective
Hitachi Electronics Engineering's area of business, which is focused
on equipment used for performing optical measurements and LCD manufacturing
and inspection, is one that is a priority for the Hitachi Group. Hitachi
Electronics Engineering is an important subsidiary that possesses
leading-edge technology. Hitachi Electronics Engineering will use
the capital generated by issuance of new shares to Hitachi, amounting
to about 3,500 million yen, to complete its current restructuring
program.
2. Outline of share issue
|
(1) Issuance of new shares |
|
1. |
Number of new shares being issued: 7,415,000
ordinary shares |
|
2. |
Issue price: |
472 yen per share |
|
3. |
Total: |
3,499,880,000 yen |
|
4. |
Closing date: |
Tuesday April 16, 2002 |
|
(2) Method of determining
issue price
The issue price has been set at 472 yen based on the average closing
price (490.86 yen) of Hitachi Electronics Engineering shares on
the Second Section of the Tokyo Stock Exchange over the 14-day
trading period from March 4, 2002 to March 22, 2002. |
|
(3) Application of funds
To be used to fund Hitachi Electronics Engineering's restructuring
program. |
3. Increase in Hitachi Electronics Engineering's capital
|
(1) Issued shares of stock |
|
|
1. Prior to capital increase: |
23,000,000 shares |
|
|
2. Following capital increase: |
30,415,000 shares |
|
(2) Shares held by Hitachi,
and percentage of holdings |
|
|
1. Prior to underwriting issue: |
14,000,000 shares (60.87%) |
|
|
2. After underwriting issue: |
21,415,000 shares (70.41%) |
|
(3) Capital and Capital
Reserve |
|
|
1. |
Capital prior to increase: |
2,275 million yen |
|
|
|
Capital reserve prior to increase: |
2,325 million yen |
|
|
2. |
Capital following increase: |
4,024 million yen |
|
|
|
Capital reserve following increase: |
4,074 million yen |
|