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January 14, 2009
Hitachi Kokusai Electric Inc.
Hitachi Kokusai Electric Inc. (the "Company") hereby announces that the board of directors of the Company (the "Board of Directors") resolved to express the following opinion in favor of the tender offer (the "Tender Offer") for the shares of the Company by Hitachi, Ltd. (the "Tender Offeror") at the meeting held as of the date of this notification.
| (1)Company Name | Hitachi, Ltd. | |
|---|---|---|
| (2)Description of Businesses | Manufacturing of Electric and Electronic Equipment and Systems | |
| (3)Date of Established | February 1, 1920 | |
| (4)Head Office | 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo | |
| (5)Name and Title of Representative | Kazuo Furukawa, President and Chief Executive Officer | |
| (6)Paid-in Capital | 282,033 million yen (as of September 30, 2008) | |
| (7)Major Shareholders and Shareholdings(as of September 30, 2008) |
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| (8)Relationships Between the Offeror and the Company | Capital Relationships | The Tender Offeror owns 39,967,712 shares which represent 37.98%, including indirect shareholdings of 0.86%, of the Company's total number of shares issued as of September 30, 2008. |
| Personnel Relationships | One of the Board of Directors holds a post as a director of the Tender Offeror, and another of the Board of Directors holds a post as a senior advisor emeritus of the same concurrently. | |
| Transaction Relationships | The Company deposits funds with the Tender Offeror under the Hitachi Group's Cash Pooling System. | |
| Status as a Related Party | The Tender Offeror accounts for the Company as an equity-method affiliate. | |
(1) Outline of the Opinion concerning the Tender Offer
The Board of Directors of the Company, at its meeting held as of the date of this notification, resolved to express its support opinion for the Tender Offer for the common shares of the Company by the Tender Offeror.
(2) Rationale and Background to the Opinion concerning the Tender Offer
The Company, as one of the Hitachi Group companies, has pursued business development based on a proprietary strategy while maintaining various cooperative relationships with the Tender Offeror since its completion of merger as of October 1, 2000, of the former three companies, Kokusai Electric Co., Ltd., Hitachi Denshi, Ltd., and Yagi Antenna Co., Ltd., actively in the three business fields, i.e. Wireless Communication and Information Systems, Broadcasting and Video Systems and Semiconductor Manufacturing Systems. The Company is currently seeking to create a highly profitable business structure by further strengthening these businesses, while forging greater cooperation within the Hitachi Group in new business fields and implementing business process reforms that take advantage of the latest IT systems.
The Tender Offeror manufactures and sells products and provides services as a manufacturer of a comprehensive range of electric and electronic equipment and systems, mainly in the Information and Telecommunication Systems, Power and Industrial Systems and Digital Media and Consumer Products segments. The Hitachi Group, which consists of the Tender Offeror, its subsidiaries and affiliated companies, is also developing businesses in other fields such as Electronic Devices and High Functional Materials and Components.
The Tender Offeror currently holds 37.12% of the Company's common shares (or 37.98% including indirect shareholdings) as the largest shareholder and thus accounts for the Company as an equity-method affiliate.
The Company and the Tender Offeror have already been promoting the cooperation in the business areas such as the Tender Offeror's information network business, transportation system and urban system businesses, other social infrastructure and the life infrastructure businesses concerning the Company's technology for digital wireless communication systems, video and monitoring systems or base station equipment for telecommunication companies. Looking ahead, the both parties believe it necessary to further strengthen cooperation to capture more synergies in order to raise corporate value.
Under these environments, the Company and the Tender Offeror have worked together and evaluated various initiatives with a goal of increasing their respective corporate values. As a result, both parties decided that strengthening their corporative relationship via the Tender Offeror's purchase of the majority stake of the Company which then becomes a consolidated subsidiary of the Tender Offeror, with the aim of generating greater business synergies, would be effective means for increasing the Company's corporate value.
More specifically, in order to quickly and flexibly create the advanced and complex system to cater to society's needs, which are growing increasingly sophisticated and difficult as society sees the emergence of ubiquitous networking and advanced security features and convergence of broadcasting and communications, the Company's expertise in digital wireless communications technology, image processing technologies and broadcasting equipment technologies has taken more importance than ever before. As a ubiquitous network society takes shape, with a greater cooperation with the Tender Offeror, who possesses wide-ranging core technologies, components and application products related to communications and video as well as the ability to create large-scale systems and to develop software at an advanced level that are essential for transportation systems and urban systems, and with using the business resources of the Hitachi Group as a whole, the Company would be able to capture greater synergies, which is aiming to expand its business by fusing digital wireless and video technologies.
In the field of Semiconductor Manufacturing System, one of the Company's mainstay businesses, the Company commands leading shares in film forming equipment in a global market as appraised by several leading electronic device manufacturers in the world. Thus the enhancement of the cooperative work between the Semiconductor Manufacturing System business of the Company and the Electronic Device business of the Tender Offeror by strengthening of the cooperation with the Tender Offeror would make the greater expansion of the Company's business possible.
Furthermore, the greater cooperation than in the past between the two parties would harness the business resources of both entities as well as those of the Hitachi Group in all manner of fields. Areas where benefits are expected include utilization of the Hitachi Group's quad-polar operating framework in the Americas, Europe, Asia and China; cooperation in R & D; application of broad portfolio of intellectual property rights through cross-licensing agreements and other means; cooperation in terms of finance; utilization of various expertise in areas such as business development, human resources and systems; use of the latest information; and cooperation in nurturing the Hitachi brand globally.
(3) Measures Taken to Ensure the Fairness of the Valuation of the Tender Offer Price
For the reference purpose in determining the opinion, the Company has requested an independent appraiser, Mizuho Securities Co., Ltd. ("Mizuho Securities" hereafter) to appraise the value of the common share as one of the measures to ensure the fairness of the valuation of the Tender Offer price (the "Tender Offer Price" hereafter).
To calculate the value of the common share, Mizuho Securities used the discounted cash flow method, the comparable company analysis method and the share market price method. The Company has received the appraisal report "The Appraisal of the Common Share" from Mizuho Securities as well as their explanation on the results of the appraisal using those calculation methods.
In addition, the Company has received the necessary legal advice from Torikai Law Office to ensure the fairness and appropriateness of the resolution of the Board of Directors at the meeting with regard to the Tender Offer.
Under consideration of above, and after prudently studying the effect of the Company's becoming a consolidated subsidiary of the Tender Offeror, such as the benefits to the Company's corporate prospects, the contribution to the business development, increase of the corporate value, etc., the Board of Directors has concluded that the terms and conditions of the Tender Offer are reasonable.
In the meantime, the Tender Offer Price is 780 yen per common share. This price is equivalent to 77.3 % premium to the closing price of the Company at the First Section of the Tokyo Stock Exchange on January 13, 2009 (440 yen), 66.7 % premium to the 1 month average closing price ending January 13, 2009 (468 yen), 76.9 % premium to the 3 month average closing price ending January 13, 2009 (441 yen), or 32.9 % premium to the 6 month average closing price ending January 13, 2009 (587 yen), respectively (rounded to the first decimal place or to the nearest yen).
(4) Measures Taken to Avoid Conflict of Interest
The Company, in making decision on the Tender Offer, prudently discussed at the Board of Directors' meeting consisting only of the Board of Directors who do not have an interest in the Tender Offeror, in order to further assure the fairness, transparency and objectiveness. Specifically, the Company's Board Director Shungo Dazai holds a director position of the Tender Offeror and has special interest, and Toshiki Yagi, a former board director of the Tender Offeror is a senior advisor emeritus to the same. Neither of these has participated in the discussion or decisions with regard to any of the resolutions including that of supporting opinion of the Tender Offer as shown above, or in the discussion or negotiations with the Tender Offeror from the standpoint of the Company.
(5) Estimated Public Status of the Company
The Company's shares are listed on the First Section of the Tokyo Stock Exchange and the First Section of the Osaka Securities Exchange. Plans call for the Company to remain listing likewise even after completion of the Tender Offer, since the Tender Offeror has explained that the Tender Offer is not planned with the delisting of the shares of the Company and there is upper limits for number of purchasing shares.
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Attachment: “Hitachi to Commence Tender Offer for Hitachi Kokusai Electric Shares” by the Tender Offeror