On November 5, Sumitomo Electric announced our offer to take over Nissin Electric Co., Ltd. and Toyokuni Electric Cable Co., Ltd. This is currently the period of acceptance, and we’re asking the shareholders of the two companies to accept our offer. I’d like to give some information on the TOB that was given in the financial results presentation held on that day.
First, about the TOB for Nissin Electric, we have set the upper limit of acquisition at 20 million shares, so as to obtain the majority and transform this company into a consolidated subsidiary from an affiliate accounted for by the equity method.
Nissin Electric, known as “Nissin of capacitors,” has a firmly established status in the area of electric power apparatuses. Sumitomo Electric has been enjoying its cooperation for many years, and we have come to the conclusion that Nissin Electric’s becoming a consolidated Sumitomo Electric subsidiary, thereby further strengthening the two companies’ ties and enabling efficient mutual exploration of technical resources and sales channels, would be beneficial to both parties and highly effective in view of Sumitomo Electric’s management strategies, as defined in our new mid-term business plan “VISION 2012.”
In May 2007, Sumitomo Electric announced “VISION 2012.” To carry this through, we must reinforce our existing five business segments and develop new segments for future growth through concerted Group-wide effort.
In the existing segment of “Electric Wire & Cable, Energy,” we must accelerate our investment in such growth markets as the Middle and Near East, Asia and the United States by developing unique technologies and products suited to electricity network development in those markets. To do so, we must further reinforce our global sales and marketing network.
As for the development of new segments, to achieve our target sales ratio of new products, set at 30% for FY 2012, and to work on our new R&D theme of environment and resource conservation, we must greatly expand our business sphere beyond the boundaries of our existing activities.
In view of the above, we have decided to make an offer to acquire a majority share of Nissin, to make it Sumitomo Electric’s consolidated subsidiary.
Secondly, the purpose of the TOB for Toyokuni Electric Cable is to transform that consolidated company into a fully owned subsidiary. We therefore did not fix an upper limit to our acquisition. Instead, we intend to use a scheme involving the type of share that can be acquired in its entirety through a special resolution adopted at the shareholders’ general assembly.
Toyokuni Electric Cable, already a member of the Sumitomo Electric Group, mainly supplies optical communication cables and unit cables that contribute to work reduction in housing and building construction. The company is expected to face an increasingly challenging business environment, given the steadily lowering product prices, higher levels of technological requirements, shorter product life and higher raw material prices. At the same time, the information-communication market, characterized by a short innovation cycle, is advancing at an accelerated rate due to various changes in the market, including the commencement of FTTx service in the US and China, and next-generation network (NGN) construction in Japan.
We have decided that the best way to move forward under such circumstances is to further capitalize on the Sumitomo Electric Group’s managerial resources in this segment, and solidify the two companies’ collaboration, mainly in development, manufacturing and sales.
As a fully owned Sumitomo Electric subsidiary, Toyokuni will be placed under Sumitomo Electric’s unified governance and management, to build up its mobility and competitiveness. This is why we have announced the TOB.