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| January 21, 1999 |
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| Announcement on Merger |
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Mitsubishi Chemical Corporation
Tokyo Tanabe Co., Ltd. |
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This is to announce that Mitsubishi Chemical Corporation and Tokyo Tanabe Co.,
Ltd. have reached a basic agreement to merge on October 1, 1999. The merger is
intended to reinforce the base of the two companies' pharmaceutical businesses,
which are to be consolidated and operated by a wholly owned subsidiary of the
merged company (i.e., Mitsubishi Chemical Corporation).
1. Purpose
Ever since the resumption of pharmaceutical operations in 1971, Mitsubishi Chemical
Corporation has demonstrated its commitment and allocation of significant resources
to develop the business with a remarkable rapidity by launching 12 pharmaceutical
products in 14 years, beginning with bronchial asthma treatment THEODUR
in 1984.
Tokyo Tanabe Co., Ltd., since its founding in 1901, has grown and prospered over
its nearly a hundred year history as a middle-tier pharmaceutical company that
has introduced a wide variety of highly evaluated products for the digestive and
respiratory organs, including URSO
and SURFACTEN.
The two companies entered into a collaborative relationship in 1981, and have
since strengthened and expanded their ties to the extent that some 40 percent
of Tokyo Tanabe's sales revenues are currently being generated by pharmaceuticals
developed by Mitsubishi Chemical. They have also shared in an active partnership
in the fields of research and development as well as marketing.
The operating environment of the Japanese pharmaceutical business today has entered
a crucial period. As policies to curtail public medical expenses take hold, the
pharmaceutical price standard mandated by the government has undergone several
downward revisions, while drastic reforms to the national health insurance system
are slated for implementation from the year 2000. Adding to this predicament is
intensifying competition from foreign pharmaceutical companies due to the globalization
of the domestic market. As such, the reinforcement of marketing operations on
the part of Mitsubishi Chemical, as well as the enhancement of capabilities to
develop new drugs for Tokyo Tanabe, have become urgent tasks.
The decision to merge was a multi-faceted one. The merger is not intended merely
to expand the business scale and scope of the two companies involved, but recast
and re-forge their operational foundations by consolidating Mitsubishi Chemical
and Tokyo Tanabe's complementary array of skills and assets. In so doing, it will
enable them to overcome the immediate challenges it faces so it may be poised
for further development and prosperity in the coming century.
The consolidated pharmaceutical businesses of the merging parties will be transferred
to a wholly-owned subsidiary of the merged company in order to exact maximum efficiency
and productive utility of their combined operations. The subsidiary shall specialize
exclusively on the research, development, manufacturing and marketing of pharmaceutical
products.
2. Projected Ramifications of the Integration
The integration of pharmaceutical operations is expected to yield a number of
dividends. Reinforcement and appropriate allocation of resources in research and
development, sales and distribution networks, and manufacturing operation will
materialize the increasing productivity, proper control over operating costs and
enhancement of profitability. It will enable the new subsidiary to focus on core
strengths to capture larger shares in specific product markets in Japan, while
expanding new marketing opportunities abroad.
Management of the subsidiary will be fully autonomous, endowing it with swift
and timely decision-making capabilities in a highly competitive business. This
will greatly facilitate the smooth integration and synergy of the parties' operations
and provide for the early materialization of the dividends wrought by the merger.
In addition, as an independent business entity, the subsidiary will retain a high
degree of flexibility in responding to strategic collaborations and/or alliances
in the future.
As a result, the business effects of the planned integration is projected to yield
approximately  3 billion per annum
in the third year of the new subsidiary.
3. Merger Schedule
In order to effect the merger concurrently with the start of subsidiary operations,
the schedule for incorporation of the new company, transferal of pharmaceutical
business and merger is listed below:
| (1) |
Tokyo Tanabe Co., Ltd. will establish a wholly-owned company (issuance
of capital stock for non-cash assets, such as real estate).
(Planned for April 1, 1999) |
| (2) |
Tokyo Tanabe will execute the in toto transfer of its business
to the new subsidiary.
Mitsubishi Chemical will transfer its pharmaceutical business to such new company
(planned for September 30, 1999). |
| (3) |
Mitsubishi Chemical Corporation and Tokyo Tanabe Co., Ltd., upon
their respective business transfers, will merge
The new company shall start operation of the integrated pharmaceutical business
as a wholly-owned subsidiary of the newly merged company (planned for October
1, 1999). |
4. Key Merger Issues
(1) Pre-Merger Schedule
| January 22, 1999 |
Board Meeting to approve the Memorandum of Merger |
| May (tbd), 1999 |
Board Meeting to approve the Merger Agreement |
| May (tbd), 1999 |
Signing of the Merger Agreement |
| June (tbd), 1999 |
General Shareholders Meeting for the Merger Agreement |
| October 1, 1999 |
Effective Date of Merger |
(2) Merger Method
Merger will be on an equal basis, with Mitsubishi Chemical Corporation remains
as a surviving company.
(3) Merger Ratio
| Company |
Mitsubishi Chemical Corporation |
Tokyo Tanabe Co., Ltd. |
| Merger Ratio |
1 |
1.75 |
For every Tokyo Tanabe share, 1.75 shares of Mitsubishi Chemical
will be allocated.
(4) Amount of Money Delivered due to Merger:
For every Tokyo Tanabe share, 4.5
will be paid in place of share dividend during the period from April 1, 1999 to
September 30, 1999.
5.Outline of the Merging Companies
(as of March 31, 1998)
| (1) Company |
Mitsubishi ChemicalCorporation |
Tokyo Tanabe Co., Ltd. |
| (2) Business Activities |
Manufacture, Sale,Export and Import of :
Basic Petrochemicals, Industrial Chemicals, Polymer Products, Raw Materials forSynthetic
Fibers, Carbon Products, Inorganic Chemicals, Fertilizers, FunctionalMaterials,
Plastic-BasedProducts, Informationand Electronics RelatedProducts, SpecialtyChemicals,
Pharmaceuticals andOthers |
Manufacture, Sale, Exportand Import of thePharmaceuticals,
FoodAdditives |
| (3) Date of Incorporation |
June 1, 1950 |
November 24, 1921 |
| (4) Head Office |
Chiyoda-ku, Tokyo |
Chuo-ku, Tokyo |
| (5) President |
Akira Miura |
Ippei Asai |
| (6) Paid-in Capital |
140,745million |
7,754million |
| (7)Outstanding Shares |
2,090,886,000 |
67,880,000 |
| (8) Shareholders' Equity |
420,745million |
25,367million |
| (9) Total assets |
1,357,388million |
55,932million |
| (10) Settlement Day |
March 31 |
March 31 |
| (11) Employees |
11,973 |
1,423 |
| (12) Major Shareholders |
1.The Meiji mutual LifeInsurance Co
7.17%
2.The Tokyo-Mitsubishi Bank Ltd
5.14%
3.Nippon Life Insurance Co
4.79%
4.The Mitsubishi trust & Banking Co., Ltd
4.10%
5.The Tokyo Marine & Fire Insurance Co
3.30%
|
1.Mitsubishi ChemicalCorporation
24.39%
2.Yaeko Tanabe
6.07%
3.The Dai-Ichi Kangyo Bank Ltd
5.00%
4.The Yasuda trust &Banking Co., Ltd
4.62%
5.The Dai-ichi Mutual Life Insurance Co
4.10%
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(13) Three-Year Summary
| Company |
Mitsubishi Chemical corporation |
Tokyo Tanabe Co., Ltd. |
| Year Ended March 31 |
1996 |
1997 |
1998 |
1996 |
1997 |
1998 |
| Net Sales |
1,086,669 |
1,080,787 |
1,051,637 |
39,629 |
44,076 |
43,413 |
| Ordinary Profit |
21,632 |
13,556 |
22,686 |
3,673 |
4,777 |
3,275 |
| Net Income |
8,597 |
4,894 |
3,026 |
1,605 |
1,781 |
1,462 |
| (million yen) |
| Per Share |
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| Net Income |
3.92 |
2.23 |
1.42 |
23.65 |
26.25 |
21.55 |
| Cash dividends Applicable to the Year |
3 |
3 |
3 |
8.5 |
9.0 |
9.0 |
| Shareholders' Equity |
208.59 |
207.83 |
201.01 |
346.40 |
362.23 |
373.71 |
| (yen) |
6.Outline of the Business to be transferred
| (1) |
Business to be transferred from Tokyo Tanabe Co., Ltd.
Refer to Section 5.("Outline of the Merging Companies.) |
| (2) |
Business to be transferred from Mitsubishi Chemical
Corporation:<1>Department to be transferred:
The entire Pharmaceuticals division (except for Diagnostic Drugs Business)
<2>transfer Assets:
All Assets concerning of Pharmaceuticals Business except for Land and Building
Book Value : About 9.6 billion (as
of March 31, 1998)
(Book Value : About 12.5billion
(as of September,30,1998)
<3>Net Sales and ordinary Profit of transfer division (March 31, 1998):
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Net Sales : 54.7
billion |
Ordinary Profits :
2.6 billion |
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<4>transfer Price:
The current Price as of the transfer Date |
7.Outline of the New Company (Recipient of transferred Business)
Bellow is the outline of the new company after the transfer of business and merger.
(The new company before the merger will be Tokyo Tanabe's wholly-owned subsidiary
established by investment in kind, including real estate. It's commercial name
has yet to be announced.)
| (1) |
Name: |
(to be announced) |
| (2) |
Business: |
Manufacture and Market of Pharmaceuticals |
| (3) |
Date of Incorporation: |
April 1, 1999 (scheduled)
(Business to start on October 1,1999 (Scheduled)) |
| (4) |
Head Office: |
2-2-6, Nihonbashi-honcho, Chuo-ku, Tokyo |
| (5) |
President: |
Ippei Asai |
| (6) |
Paid-in Capital: |
About 15 billion
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| (7) |
Shareholder: |
Mitsubishi Chemical Corporation 100% |
| (8) |
A settling Day: |
March 31 |
| (9) |
Employees: |
About 2,300 |
| (10) |
Total Assets: |
85 billion |
| (11) |
Prospect for Business:
| |
March 31,2000 |
March 31,2001 |
March 31,2002 |
| Net Sales |
45 |
90 |
95 |
| Ordinary Profit |
2.5 |
6 |
9 |
| Net Income |
1.2 |
3 |
4.5 |
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| (billion yen) |
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*March 31, 2000: Second Half Year Only |
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