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| April
27, 2004 Seiko Epson Corporation |
| Split-Off of Liquid Crystal Display Business and Its Transfer to a Consolidated Subsidiary Company |
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On March 24,
2004, Seiko Epson Corporation ("Epson") announced that Epson and
SANYO Electric Co., Ltd. ("SANYO") have reached a basic agreement
on plans to establish a joint venture liquid crystal business. According to
the agreement, Epson will split off and transfer a portion of its liquid
crystal businesses to a predecessor company established by a separate
agreement, while SANYO, Tottori SANYO Electric Co., Ltd. ("Tottori
Sanyo") and SANYO LCD Engineering Co., Ltd. ("SANYO LCD
Engineering") will transfer their respective liquid crystal businesses
to the predecessor company.
The Seiko Epson board of directors today approved the joint-venture
agreement with SANYO. The agreement, outlined below, makes SANYO EPSON
IMAGING DEVICES CORPORATION ("SANYO EPSON IMAGING DEVICES"), a
consolidated subsidiary company of Epson, the aforesaid predecessor company,
effective October 1, 2004. The board also approved a corporate split
agreement that calls for Epson to split off and transfer its liquid crystal
business to the consolidated subsidiary company. It also approved a transfer
agreement between the consolidated subsidiary company and the above SANYO
group companies.
Details of the above are as follows:
1. Objective of the joint venture
The color liquid crystal display market has rapidly expanded in recent years
from PC monitors to new applications in such products as liquid crystal TVs,
mobile phones, digital cameras, and in-vehicle devices. The ensuing entry of
a large number of manufacturers has crowded the market and resulted in
intense price competition. In addition to pricing pressure, manufacturers
are being pressed to develop new products on shorter cycles, and the R&D
and capital investment needed to develop and manufacture increasingly
advanced panels are a mounting burden.
Against this backdrop, SANYO EPSON IMAGING DEVICES will aim to combine and
create synergies among Epson and SANYO's areas of technical strength,
notably in miniaturization, imaging, high pixel density and volume
production. Supplying high-performance liquid crystal displays that offer
more competitive cost performance, SANYO EPSON IMAGING DEVICES will seek to
become a major player in the market for small- and medium-sized LCDs.
2. Summary of the corporate split and business transfer to a subsidiary
company
a. Schedule
|
Board meeting for approval of the joint venture agreement and corporate split agreement |
April 27, 2004 |
|
Board meeting for approval of the agreement to transfer the SANYO group's business to the subsidiary company |
April 27, 2004 |
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Shareholders meeting for approval of the corporate split |
June 25, 2004 (planned) |
|
Execution of the split: |
October 1, 2004 (planned) |
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Registration of the corporate split: |
October 1, 2004 (planned) |
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Business transfer to subsidiary company: |
October 1, 2004 (planned) |
|
Establishment of joint venture company: |
October 6, 2004 (planned) |
b. Structure of the corporate split
Epson will split off a portion of its LCD businesses and transfer them to a
succeeding company, SANYO EPSON IMAGING DEVICES, a consolidated subsidiary
company of Epson, in return for an allotment of shares in the succeeding
company. (See Attachment 1 for an outline of the parties to the corporate
split.)
c. Allotment of shares
Epson will receive an allotment of 164,820 common shares issued by SANYO
EPSON IMAGING DEVICES at the time of the corporate split.
d. Monies to be paid on the corporate split
Monies will not be paid upon the corporate split.
e. Rights and obligations to be transferred to the succeeding company
SANYO EPSON IMAGING DEVICES, the succeeding company, will assume all assets,
liabilities and other rights and obligations associated with the business to
be transferred that are considered to be mandatory for running the
transferred business.
f. Outlook for fulfillment of liabilities
It has been determined that all obligations to be incurred by Epson and
SANYO EPSON IMAGING DEVICES as a result of this split can be met in full.
g. Officers of the succeeding company (planned)
President: Teruo Tabata (currently director of SANYO Electric Co., Ltd.)
Vice president: Shuji Aruga (currently a Seiko Epson director)
Other officers have yet to be decided.
3. Description of business to be split off
a. Businesses to be split off
Epson's D-TFD panel business and STN panel business, both of which are based
primarily at Epson's Toyoshina Plant. (Epson's high-temperature polysilicon
TFT and OLED operations are excluded from this agreement.)
b. Net sales during the fiscal year ended March 31, 2004 of the business to
be split off
230.2 billion yen
c. Book value of assets and liabilities to be transferred (as of March 31,
2004)
| Item |
Book Value |
Item |
Book value
(In billions of yen) |
| Current assets |
\65.1 billion |
Current liabilities |
\42.9 billion |
| Fixed assets |
\45.2 billion |
Fixed liabilities |
\36.5 million |
| Total |
\110.4 billion |
Total |
\79.4 billion |
4. Content of businesses to be transferred to the subsidiary company
a. Businesses to be transferred by each party (See Attachment 2 for an
overview of the transferring companies)
- SANYO will transfer its liquid
crystal display panel business.
- Tottori SANYO will transfer its liquid crystal display business using
amorphous-silicon TFT substrates.
- SANYO LCD Engineering will transfer its liquid crystal display business
using low-temperature polysilicon TFT substrates.
b. Transfer price
The transfer price will be negotiated based on the fair market price on the
date of the transfer.
c. Overview of the Epson subsidiary company after the business transfer
See Attachment 1
5. Method of determining shareholding percentages in the succeeding
company post-merger
a. Shareholding percentages
Epson: 55.0% SANYO: 45.0%
b. Method of determining shareholding percentages
Prior to the finalization of the shareholding percentages in the basic
agreement between Epson and SANYO, Epson hired Nikko City Group Security Co.
Ltd. (Nikko City Group) to evaluate the appropriateness of the shareholding
ratio so as to ensure that the percentages were fair and reasonable.
Epson and SANYO provided Nikko City Group with information on their
respective liquid crystal business operations, past financial performance,
future profit plans and the assumptions on which these were based. Nikko
City Group analyzed this and other publicly available information using the
discounted cash flow method and by making comparisons with similar publicly
held companies.
Nikko City Group issued the opinion that Epson's 55% shareholding percentage
in the joint venture company is reasonable from a financial standpoint.
Nikko City Group arrived at this conclusion by calculating the business
valuations of the companies' respective liquid crystal operations based on
the total picture provided by these analyses, by calculating the stock
valuations based on assumptions regarding net interest-bearing debt to be
taken over from both companies, and by then making a relative comparison
between the stock valuations of the companies' liquid crystal businesses.
Epson negotiated and discussed the shareholding percentage with SANYO based
on Nikko City Group's assessment and on the particulars of the deal
involving the transfer of SANYO's liquid crystal display businesses.
After confirming that there were no material changes in matters used to
determine the shareholding percentages in SANYO EPSON IMAGING DEVICES, the
parties reached an agreement that gives SANYO a 45% shareholding percentage
to Epson's 55%. This agreement was approved by Epson's board of directors on
April 27, 2004.
6. Post-split Epson
a. The split will not cause changes to any of the company name or its
business activities, main place of business, representatives, capital or
fiscal year-end.
b. Impact of the split on earnings
Any impact on financial forecasts brought about by the joint venture between
SANYO and Epson's liquid crystal businesses will be promptly disclosed.
Overview of parties to the corporate split
| |
Split
Company
(As of March 31, 2004) |
Succeeding
Company
(Outlook for October 6, 2004) |
| Company name |
Seiko Epson Corporation |
SANYO EPSON IMAGING DEVICES CORP. |
| Business activities |
Information-related equipment (printers and printer consumable supplies, color image scanners, liquid crystal projectors, PCs, etc.), electronic devices (medium- and small-sized liquid crystal displays, CMOS LSIs, quartz crystal resonators and oscillators, etc.), precision instruments (watches, plastic eyeglass lenses, factory automation equipment, etc.), and miscellaneous R&D, manufacturing, sales and marketing, and service operations |
Develop, manufacture and sell liquid crystal displays |
| Date established |
May 18, 1942 |
July 17, 1996 |
| Main place of business |
2-4-1 Nishishinjuku, Shinjuku-ku, Tokyo |
Tokyo |
| Representative |
Saburo Kusama, President |
Teruo Tabata, President (presently director of SANYO Electric Co., Ltd., ) |
| Capital |
53.2 billion yen |
15 billion yen |
| Total number of shares outstanding |
196,364,592 |
300,000 |
| Shareholders' equity |
414,367 million yen (consolidated) |
- |
| Total assets |
1,207,053 million yen (consolidated)
|
- |
| Fiscal year-end |
March 31 |
March 31 |
| Number of employees |
84,899 (consolidated) |
- |
| Principle shareholders and shareholding % |
| Aoyama Kigyou Kabushiki Kaisha: |
10.34% |
| Sanko Kigyou Kabushiki Kaisha: |
7.27% |
| The Dai-Ichi Mutual Life Insurance Company: |
3.97% |
|
| Seiko Epson: |
55.00% |
| SANYO: |
45.00% |
|
| Relationship with SANYO EPSON IMAGING DEVICES CORP. (as of April 27, 2004) |
| Capital |
: |
The succeeding company is a consolidated subsidiary of Epson (as of April 26, 2004) |
| Personnel |
: |
The succeeding company will have seven directors, four of whom are expected to be appointed from Epson; and three statutory auditors, one of whom will be a standing statutory auditor and one of whom will be a part-time statutory auditor, both appointed from Epson |
| Transactions |
: |
No business transactions prior to becoming a consolidated subsidiary of Epson |
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