Mitsubishi Rayon Co., Ltd. (Head office: Minato-ku, Tokyo; President: Masanao Kambara, hereinafter “MRC” ) and Daicel Corporation (Head office: Kita-ku, Osaka-shi; President: Misao Fudaba, hereinafter “Daicel”) have entered into a non-binding letter of intent (hereinafter “LOI”) concerning establishment of a joint venture to manufacture acetate tow for cigarette filters.

Cigarette demand is growing globally, particularly in emerging nations in Asia, Africa and Eastern Europe. To serve this expanding market, MRC and Daicel aim to set up an internationally competitive production system, through the joint-venture company to be established for the manufacture of acetate tow for cigarette filters.

MRC aims, through -its stronger co-operative relationship with Daicel in the manufacture of acetate tow, to develop solid base for its business portfolio and also enhance its acetate fiber business by boosting earnings through expansion of the market for acetate filaments, an environment-friendly textile ideal for fashionable apparel items.

For Daicel, acetate tow for cigarette filters is one of its core businesses. Given the growing demand, Daicel has promoted its acetate tow business in accordance with its “3D-I” medium-term plan. Establishment of this joint venture is a part of that initiative. In addition, Daicel plans to reinforce its existing production facilities for acetate tow in Japan, and also plans to increase capacity at its joint venture of acetate tow in China.

(1) MRC will spin off its acetate tow manufacturing business operated at its Toyama Production Center (Toyama-shi, Toyama) into a separate company (hereinafter the “Newco”) and will transfer part of the shares of Newco to Daicel.

(2) MRC will have a 65% interest in Newco and Daicel will have the remaining 35%.

(3) Newco will supply its output to both MRC and Daicel and both companies will continue their independent sales activities respectively.

(4) Daicel will supply raw material (cellulose acetate flakes) for the operation of Newco.

Both companies will continue discussions for execution of a legally binding definitive contract at the earliest possible date.