Business News

Epson: Absorption-Type Merger of Subsidiary Company (Simplified/ Short-Form Merger) and Debt Waiver

Wednesday 30. November 2016 - The board of directors of Seiko Epson Corporation (TSE: 6724, "Epson") today approved the absorption of subsidiary company Epson Imaging Devices Corporation (EID). As part of this resolution, Epson will also waive some debts owed by EID.

Since the merger is an absorption-type merger of a wholly-owned subsidiary, certain disclosure items and details have been omitted.
1. Purpose of Merger

EID became a 100% subsidiary company of Epson in December 2006 after being initially established as a joint venture involving the company’s small- and medium-sized LCD business in October 2004. While it rolled out operations based on original technology, EID was seriously affected as the business environment dramatically worsened in an increasingly competitive environment. As part of the Epson Group’s efforts to refocus its business portfolio, EID undertook a realignment of its small- and medium-sized display business and effectively terminated the business by transferring operations to another company in 2011.
Against this background, Epson has decided to absorb EID as it seeks to consolidate and drive efficiencies in Group operations.
2. Outline of merger

(1) Merger schedule
Board of directors’ meeting regarding debt waiver to consolidated subsidiary
November 30, 2016
Board of directors’ meeting to approve merger
November 30, 2016
Merger contract conclusion
November 30, 2016
Date of merger (effective date)
February 1, 2017 (planned)
Note: Because Epson is implementing a simple absorption-type merger as stipulated under Article 796, Paragraph 2 of the Companies Act of Japan and EID is following the procedure for a short-form merger as stipulated in Article 784, Paragraph 1 of the same act, neither company requires approval of the merger agreement by a general meeting of shareholders.
(2) Merger method
The merger will be conducted through an absorption-type merger method in which Epson will be the surviving company and EID will be dissolved as the absorbed company.
Since EID has liabilities exceeding its assets, Epson plans to waive the debts owed by EID before the merger, thereby eliminating the state of insolvency before the merger takes place.
Debts to be waived
Loans
Total value of debts to be waived
Approx. 25.2 billion yen
Date effective
November 30, 2016
(3) Distribution of assets
Since EID is a wholly owned subsidiary of Epson, there will be no stocks, money, etc., issued in connection with the merger.
(4) Share subscription rights and bonds with share subscription rights
Not applicable
3. Outline of companies involved in this merger (as of March 31, 2016)
Surviving company Absorbed company
(1) Trade name Seiko Epson Corporation Epson Imaging Devices Corporation
(2) Registered head office 4-1-6 Shinjuku, Shinjuku-ku, Tokyo 6925 Toyoshina, Tazawa, Azumino, Nagano
(3) Name and title of representative Minoru Usui, president Kazuo Oike, president
(4) Business lines Development, manufacturing, sales and service of information-related equipment, electronic devices, precision instruments and others Real estate management
(5) Paid-in capital 53,204 million yen 50 million yen
(6) Founded May 18, 1942 October 1, 2004
(7)Total number of shares outstanding 399,634,778 470,000
(8) Fiscal year end March 31 March 31
(9) No. of employees 67,605 (consolidated) 0 (nonconsolidated)
(10) Principal shareholders and shareholding ratios Sanko Kigyo Kabushiki Kaisha: 5.00%
Japan Trustee Services Bank, Ltd. (Trustee Account): 4.16%
The Master Trust Bank of Japan, Ltd. (Trust Account): 4.11% Seiko Epson Corporation: 100.00%
(11) Financial situation and business results in the preceding financial year (ended March 2016)
Accounting standard IFRS (consolidated) Japanese standard (nonconsolidated)
Total equity 470,676 million yen -21,161 million yen
Total assets 941,340 million yen 7,736 million yen
Revenue (IFRS) / revenue 1,092,481 million yen –
Business profit (IFRS) / operating income 84,951 million yen -88 million yen
Ordinary income – -238 million yen
Profit for the period (IFRS) / net income 46,067 million yen 72 million yen
Note: Ordinary income is not applicable to the IFRS standards applied by Epson. Business profit is broadly equivalent to operating income under Japanese accounting standards.

4. Situation following the merger

There will be no changes to Epson’s trading name, head office address, names and titles of representative directors, business lines or paid-in capital or end of fiscal year as a result of this merger.
5. Outlook

The reduction of taxation expenses expected to accompany this absorption has already been reflected in the outlook for the fiscal year ending March 2017, disclosed on October 27, 2016.
The liabilities write-off accompanying this absorption will have no impact on consolidated financial results because it involves a liabilities write-off for a wholly-owned subsidiary company. There will be no impact on nonconsolidated financial results because the allowance for doubtful receivables has been recorded in previous years.