Business News
Announcement of Nippon Paper Group, Inc.s Conversion of Shikoku Coca-Cola Bottling Co., Ltd., into a Wholly Owned Subsidiary through Share Acquisition and Exchange
Monday 15. June 2009 - The Boards of directors of Nippon Paper Group, Inc. ("NPG") and Shikoku Coca-Cola Bottling Co., Ltd. ("Shikoku Coca-Cola") today reached decisions for an exchange of shares ("Share Exchange") aimed at making Shikoku Coca-Cola a wholly owned subsidiary of NPG effective from October 1, 2009. NPG and Shikoku Coca-Cola today signed a Share Exchange Agreement, as detailed below.
The NPG Board today also resolved to acquire a stake of 54.93% in Shikoku Coca-Cola from wholly owned subsidiary Nippon Paper Industries Co., Ltd. (“NPI”), on June 18, 2009, prior to the effective date of the Share Exchange. NPG and Nippon Paper today signed a Stock Purchase Agreement for the transfer of this stock. NPG will undertake a simple Share Exchange. As stipulated in Article 796-3 of Japans Companies Act, that transaction will not require approval at a meeting of shareholders.
Additionally, Shikoku Coca-Cola plans to delist from the Tokyo Stock Exchange, Inc. (“TSE”) prior to the effective date of the Share Exchange (The final trading date for shares of Shikoku Coca-Cola is scheduled for September 24, 2009).
1. Purpose of Conversion into Wholly Owned Subsidiary through Share Exchange
(1) Purpose of Share Exchange
Shikoku Coca-Cola Ltd. was established in 1963 as a wholly owned subsidiary of Jujo Paper Co., Ltd. (now within NPI), as part of that Companys business diversification efforts. Subsequently, Shikoku Coca-Cola listed on the Second Section of the Osaka Securities Exchange Co., Ltd. (“OSE”) in 1993 and on the First Section of the TSE in 2000. Starting with Coca-Cola, the company has developed a business that produces and markets a range of soft drinks throughout Shikokus four prefectures, creating value for shareholders and making a broader contribution to a wide range of stakeholders and to the local economy.
However, the soft drinks industry currently faces great challenges amid the rapid deterioration of the economic environment and intense price competition. Moreover, the total population of the four Shikoku prefectures is declining much faster than Japans national average creating an extremely difficult operating environment for Shikoku Coca-Cola.
Nippon Paper Group has developed extremely close business relationships with the beverage industry reflected in a range of business lines at various NPG subsidiaries. (Please see the table below for details).
Nippon Paper Industries Co., Ltd. Makes and sells paper for liquid-packaging containers
Nippon Daishowa Paperboard Co., Ltd. Makes and sells paper for liquid-packaging containers and cardboard
Nippon Paper-Pak Co., Ltd. Makes and sells paper for liquid-packaging containers
Nippon Tokan Package Co., Ltd. Makes and sells cardboard cases
Dixie Japan Ltd. Makes and sells paper cups
NPG and Shikoku Coca-Cola believe that making the latter company a wholly owned Group subsidiary will reinforce its core strengths without compromising its strategic autonomy. To that end, NPG will swiftly draw on its factory management experience to provide Shikoku Coca-Cola with expertise and technologies to improve plant operations. NPG will also harness its resources to share administrative services. Consequently, full ownership will allow NPG to make a greater contribution to the long-term growth of Coca-Colas business.
For NPG, the acquisition and Share Exchange will make Shikoku Coca-Cola a direct, wholly owned subsidiary within the Group. The new ownership structure will enable NPG to directly participate in the management of Shikoku Coca-Cola, facilitating a more efficient decision-making process and strengthening the Groups overall drinks-related business. This investment will positively contribute to NPGs efforts to reinforce its operations in Japan at a time when the outlook for Japans domestic paper industry remains tough. Ultimately, NPG believes that the planned transaction will bolster the Groups business platforms helping to secure stable profit and assisting Group-wide efforts to enhance overall corporate value.
(2) Prospects and Reasons for Delisting
Through the planned Share Exchange, Shikoku Coca-Cola will become a wholly owned subsidiary of NPG as of October 1, 2009. In line with the requirements of the TSE, Shikoku Coca-Cola plans to delist on September 25, 2009 (the final trading date is scheduled for September 24, 2009). After delisting, trading of Shikoku Coca-Cola shares will cease on the Exchange.
(3) Reasons for Delisting and Assessment of Alternatives
As mentioned in 1. (1) above, for NPG the immediate goal of the Share Exchange is not the delisting of Shikoku Coca-Cola. However, since NPG will become Shikoku Coca-Colas sole shareholder, that company will delist in accordance with 2. (2). NPG shares allotted through the Share Exchange are listed on the TSE, OSE, and the Nagoya Stock Exchange, Inc. (“NSE”). After the Share Exchange, shareholders owning more than 257 Shikoku Coca-Cola shares and allocated at least 100 NPG shares, the minimum trading unit, will be able to trade on the TSE, OSE, and NSE. Depending on their stakes, some Shikoku Coca-Cola shareholders may receive odd-lot shares. NPG believes that such an arrangement will maintain share liquidity.
Shikoku Coca-Cola shareholders with fewer than 257 shares and allocated fewer than 100 NPG shares will not be able to trade their odd-lot shares on a stock exchange. Such shareholders will be able to use NPGs programs for selling or purchasing odd-lot shares. See Note 3 of 2. (2) for details on odd-lot transactions resulting from the Share Exchange.
Shikoku Coca-Cola shareholders can continue to trade their shares in Shikoku Coca-Cola on the TSE and exercise their rights under the Companies Act and related legislation and ordinances until the final scheduled trading date of September 24, 2009.
(4) Ensuring Fairness
Since Shikoku Coca-Cola is currently an indirect NPG subsidiary (and will become a direct one after NPI transfers its Shikoku Coca-Cola shares to NPG, as stated at the beginning of this announcement) NPG has taken the following measures to ensure fair valuation. NPG and Shikoku Coca-Cola separately commissioned appraisals from independent third-party advisors to calculate the Share Exchange ratio, as described in 2. (3). These independent appraisals formed the basis for the discussions between NPG and Shikoku Coca-Cola during the negotiation process to agree on a share exchange ratio and execute the Share Exchange. However, please note that the third-party appraisals of the share exchange ratio do not constitute fairness opinions of the ratio adopted for the Share Exchange.
(5) Measures to Avoid Conflicts of Interest
To avoid a conflict of interest, Mr. Tetsuru Nozawa an NPG employee and an auditor of Shikoku Coca-Cola, did not participate in that companys Board deliberations about the Share Exchange.