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Notice of Tohcello Co., Ltd. Becoming a Wholly Owned Subsidiary of Mitsui Chemicals, INC. through a Share Exchange

Published on 2009-01-07. Author : SpecialChem

Mitsui Chemicals, Inc. and Tohcello Co., Ltd. announce that each of their Boards of Directors at meetings held December 19, 2008 has resolved to conduct a share exchange to be effective on April 1, 2009, through which TOHCELLO becomes a wholly owned subsidiary of the MCI. The two companies have entered into a Share Exchange Agreement.

As a result of the Share Exchange, TOHCELLO will be delisted from the Tokyo Stock Exchange on March 26, 2009. Pursuant to the delisting rule, the last trading day will be March 25, 2009.

Purpose of the Share Exchange

MCI is currently in its 4-year Mid-term Business Plan which commenced in fiscal year 2008. The Performance Materials Business Sector is aiming to enforce and expand its functional film?sheet business through consistent integration of the process of converting resins to films.

TOHCELLO (53.39% MCI owned) has its main business in packaging films used for foods, in which assurance of profit for continued investment is aimed, and high-performance industrial films such as silicone-coated films and heat resistant release films, in which expansion of profit is aimed by introducing new products mainly in the new fields.

Through the Share Exchange, TOHCELLO will become a wholly owned subsidiary of MCI and both companies will strengthen their alliance and further increase their corporate value as follows: a. Reinforcing product development capability and cost-competitiveness through consistent system encompassing resins to films. b. Implementing flexible and effective management through timely decision making and the sharing of management strategies c. Maximizing group synergy with TOHCELLO at the core of MCI group's film sheet operations

Delisting of TOHCELLO on Tokyo Stock Exchange

Through this Share Exchange, TOHCELLO will become a wholly owned subsidiary of MCI on April 1,2009. Pursuant to Tokyo Stock Exchange delisting regulations, TOHCELLO will be delisted on March 26, 2009 (scheduled last trading day is March 25, 2009). TOHCELLO shareholders, with exception of MCI, will be required to exchange such stock with that of MCI in accordance to exchange procedures outlined in the section II-2 below pursuant to the Share Exchange Agreement.

Reasons for Delisting and Alternative Measures

The reason for the Share Exchange is as described in above section I.1, and the delisting itself is not the main reason.

Although the delisting of TOHCELLO is not the main purpose of the Share Exchange, TOHCELLO shares are scheduled to be delisted on March 26, 2009 pursuant the delisting rule.

MCI's common stock to be allotted and delivered in exchange for TOHCELLO shares in the Share Exchange are listed on the Tokyo Stock Exchange, therefore shareholders who have TOHCELLO shares of 767 or more can trade these in the market. On the other hand, shareholders who have TOHCELLO shares of less than 767 will be allocated less than one trading unit (1,000 shares) of MCI shares which cannot be traded on the market, however, such shareholders may use the Special Dealing Service (hereinafter defined). (For details, see note (iii) of Section II-2. For information about shares of less than one share unit, please refer to note (iv) of Section II-2)

TOHCELLO shares can be traded according to standard procedures on the Tokyo Stock Exchange until the (tentative) last trading date, March 25, 2009 as indicated in above Section I-2.

Measures to Ensure Fairness

Since MCI is TOHCELLO's major shareholder with 53.43% of its shares, to ensure fairness, both companies have respectively assigned an independent and disinterested third party, to evaluate the Share Exchange ratio. Based on such evaluations, MCI and TOHCELLO negotiated and agreed on the Share Exchange ratio at which the Share Exchange is to be conducted.

Measures to Prevent Conflicts of Interest

No TOHCELLO directors holds position of directors or employees with MCI. Accordingly, it has been determined that there is no conflict of interest and therefore particular measures to prevent conflicts of interest are not taken.

Basis for the Share Exchange Ratio

To ensure the fairness and reasonableness of the Share Exchange, both companies separately retained independent and disinterested third parties to calculate the Share Exchange ratio. MCI appointed Mizuho Securities Co., Ltd. (hereinafter called "Mizuho") and TOHCELLO appointed Daiwa Securities SMBC Co., Ltd. (hereinafter called "Daiwa SMBC") to evaluate a Share Exchange ratio for MCI and TOHCELLO shares.

Mizuho used Market Stock Price Method and Discount Cash Flow Method ("DCF") to calculate MCI and TOHCELLO Share Exchange ratio. In the Market Stock Price Method, the range of Share Exchange ratios was calculated based on: 1) the average of closing prices of Tokyo stock exchange market (the "Closing Price(s)") for the period from November 4, 2008 (the day after the announcement of results during the second quarter of FY2008) to December 17, 2008 (the "Base Date"), 2) the average of the Closing Prices for the period from November 18, 2008 to the Base Date, and 3) the average of the Closing Prices for the period from September 18, 2008 to the Base Date.

Mizuho's evaluations are based on the assumption that information disclosed by the two companies and information in the public domain are accurate and complete, and that there is no information that the two companies have not provided and that may have an effect on such evaluations etc. Mizuho did not conduct its own evaluation or assessment on each asset and liability of both companies. Also, Mizuho referred to financial forecast of both companies for such calculations under assumption that both companies have rationally prepared such forecast to the best of their forecast and judgment available for them at the moment and that such calculations reflect economic conditions and information as of December 17, 2008.

Daiwa SMBC used Market Stock Price Method and Discount Cash Flow Method to evaluate MCI and TOHCELLO Share Exchange ratio. In the Market Stock Price Method, the range of Share Exchange ratios was evaluated based on the volume weighted average price for: 1) one month from November 18, through December 17, 2008, three months fromSeptember 18, through December 17, 2008, and 3) six months from June 18, through December 17, 2008.

Source: Mitsui Chemicals, Inc.

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