Mitsubishi Corporation

Press Room

January 18, 2013

Mitsubishi Corporation to Commence Tender Offer for Shares in YONEKYU CORPORATION

Translation of report filed with the Tokyo Stock Exchange on January 18, 2013
 
Mitsubishi Corporation (hereinafter the “Company” or the “Tender Offeror”) has announced that its Board of Directors today passed a resolution to make a tender offer (hereinafter the “Tender Offer”) for the shares in YONEKYU CORPORATION (hereinafter the “Target Company”). Details are as follows.
 
1. Purpose of the Tender Offer
(1) Outline of the Tender Offer
As of January 18, 2013, the Company owns 6,786,000 common shares in the Target Company whose shares are listed on the First Section of the Tokyo Stock Exchange, which is operated by Tokyo Stock Exchange, Inc. (hereinafter the “Tokyo Stock Exchange”). The 6,786,000 common shares represent a shareholding of 23.55% relative to the total number of issued shares (of 28,809,701) of the Target Company as of November 30, 2012, as stated in the Third-Quarter Report for the 44th Period filed by the Target Company on January 15, 2013 (shareholding ratio is rounded to the 2nd decimal place; hereinafter all shareholding ratios calculated on the same basis). The Target Company is an equity-method affiliate of the Company.
 
At a meeting of the Board of Directors held on January 18, 2013, the Company resolved to purchase all issued shares in the Target Company (excluding common shares in the Target Company owned by the Company and treasury shares owned by the Target Company) through the Tender Offer to make the Target Company a consolidated subsidiary of the Company. As the purpose of the Tender Offer is to make the Target Company a consolidated subsidiary of the Company, the Company has set the minimum of the number of shares, etc., to be purchased (hereinafter “the minimum number of shares to be purchased”) at 5,899,200 shares. This minimum threshold constitutes the number of shares needed to increase the number of voting rights represented by the common shares in the Target Company that the Tender Offeror will own after the Tender Offer (including the number of voting rights represented by the common shares in the Target Company owned by the Tender Offeror (6,786,000 shares) as of January 18, 2013) to a majority of voting rights (253,703) represented by the number of shares (25,370,347), which is calculated by subtracting the number of treasury shares (of 3,439,354 shares) owned by the Target Company as of November 30, 2012, as stated in the Consolidated Financial Results for the Third Quarter Ended November 30, 2012 of the fiscal year ending February 28, 2013 (Japanese GAAP) filed by the Target Company on January 7, 2013, from the total number of issued shares (of 28,809,701 shares) of the Target Company as of November 30, 2012, as stated in the Third-Quarter Report for the 44th Period filed by the Target Company on January 15, 2013. If the total number of tendered shares, etc., (hereinafter, “tendered shares”) through the Tender Offer is less than the minimum number of shares to be purchased, the Company will not purchase any of the tendered shares. To provide the greater opportunity for the shareholders of the Target Company who wish to tender their shares in the Tender Offer to sell their shares, the Company has not set the maximum number of shares to be purchased through the Tender Offer. Accordingly, if the total number of tendered shares exceeds the minimum number of shares to be purchased (of 5,899,200 shares), the Company will purchase all the tendered shares. However, the Company does not plan to delist the shares in the Target Company through the Tender Offer. (For details on the likelihood of delisting the Target Company’s shares as a result of the Tender Offer, please see the subsequent section “(5) Outlook for Delisting and Reason”).
 
According to the “Notice of Opinion on Tender Offer for Shares in YONEKYU CORPORATION by Mitsubishi Corporation” issued by the Target Company on January 18, 2013 (hereinafter, “the Target Company’s Press Release”), the Target Company obtained a valuation report regarding valuation analysis of the Target Company’s shares (hereinafter “the Valuation Report”) from Frontier Management Inc. (hereinafter “Frontier Management”) and legal advice from NAGASHIMA OHNO & TSUNEMATSU. Following careful discussions and consideration of various conditions regarding the Tender Offer, all the directors who participated in the voting at the meeting of the Target Company’s Board of Directors held on January 18, 2013 expressed unanimous support for the Tender Offer for the following reasons. The Target Company believes that it can strengthen its earnings power by becoming a consolidated subsidiary of the Company. The Target Company believes that becoming a consolidated subsidiary of the Company will make it possible to strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Furthermore, the Target Company and the Mitsubishi Corporation Group will be able to further strengthen the earnings base and enhance corporate value by maximizing synergies between both companies, including overseas business expansion, while enabling efficient and agile management of business operations through such measures as more effective use of business resources, including those of the Company and its group companies. Furthermore, the Target Company’s Board of Directors has determined that the purchase price per share of the Target Company offerred by way of the Tender Offer (hereinafter “the Tender Offer Price”) is not unreasonable given that a certain premium has been added to the recent share price of the Target Company’s common shares on the Tokyo Stock Exchange and that the Tender Offer Price is within the range of values indicated by the Valuation Report obtained by the Target Company from Frontier Management. However, since the Company does not plan to delist the shares in the Target Company through the Tender Offer, and the Target Company’s policy is that its shares should continue to be listed after the Tender Offer is completed, all the directors who participated in the voting decided to adopt a neutral position on whether or not to tender shares through the Tender Offer, leaving it to shareholders to decide whether or not to tender their shares. Furthermore, all of the corporate auditors (including outside corporate auditors) who participated in discussions on this resolution expressed an opinion to the effect that they had no objection to the resolution adopted at the meeting of the Board of Directors.
 
To avoid doubt of conflicts of interest and ensure fair and impartial decision-making by the Target Company, Mr. Isao Miyashita, a director of the Target Company, and Mr. Tsutomu Takanose, a corporate auditor of the Target Company, both of whom serve concurrently as employees of the Company, did not participate in any of the above discussions or resolutions at meetings of the Target Company’s Board of Directors regarding these matters, and did not participate in discussions and negotiations with the Company regarding the Tender Offer.
 
(2) Events Leading Up to the Decision to Conduct the Tender Offer, the Purpose and Decision-Making Process of the Tender Offer and Management Policy After the Tender Offer
 
1) Events Leading Up to the Decision to Conduct the Tender Offer, and the Purpose and Decision-Making Process of the Tender Offer
The Mitsubishi Corporation Group is a diversified organization engaged in a wide variety of business activities, providing various types of products and services on a global basis leveraging its trading company functions. Through its domestic and overseas network, the Company is engaged in general trading, including the purchasing, supplying and manufacturing, of a wide range of products related to energy, metals, machinery, chemicals and living essentials, in addition to financial businesses and development of natural resources and infrastructure projects. The Company is also engaged in other businesses such as development of new business models in the new energy and environmental fields, and new technology-related businesses.
 
 
Furthermore, in the food sector, the Company is working to strengthen its integrated value chain spanning procurement of raw materials, transport, processing, and product distribution and retailing. These efforts are directed at accurately addressing developments in recent years such as increasingly sophisticated consumer awareness regarding food safety and reliability, and diversified needs, as well as to ensure stable food supplies. One particular area of focus is the worldwide feed and meat business, which consists of trading in feed ingredients, manufacturing of livestock and fish feed ingredients, and livestock and poultry breeding, slaughtering, processing, and sales. Here the Company is working to upgrade functions and expand earnings in each of these business fields by enhancing cost competitiveness and expanding the overall value chain. As part of these efforts, the Company has strengthened ties with meat packers that conduct a broad range of livestock and processed meat product businesses.
 
The Target Company is an equity-method affiliate of the Company, which owns 23.55% (shareholding ratio) of the total number of issued shares in the Target Company. The Target Company conducts procurement and production of meat, and production and sales of food, such as processed meat products. Based on its management credo of “Evoke A Moving Food Experience,” the Target Company is working to further expand business by actively conducting, among others, business investments aimed at strengthening its proprietary value chains. In recent years, the Target Company has adopted the slogan of “ Challenges Toward A  New Stage.” Under this banner, to supply value-added products and services that more closely reflect consumer needs, the Target Company has been promoting the following basic strategies: expansion of the sales channel, [reinforcement of retail products], reinforcement of delicatessen products, and reinforcement of the management administration structure. Specific measures include reinforcing up sales in the foodservice sector (convenience stores, foodservice establishments), accelerating nationwide expansion of sales areas, and enhancing delicatessen food centered on frozen consumer food products.
 
Since its first investment in the Target Company in 1995, the Company has successively increased its shareholding in the Target Company, while working to expand trading in meat and other items. In 1999, the Company and the Target Company established Tokimeki Farm Co., Ltd. as a joint venture to produce poultry domestically. In these and other ways, both companies have established a strong partnership in the domestic meat production business and in trading in meat and processed meat products.
 
In 2007 and 2008, the Company made the Target Company an equity-method affiliate by purchasing shares in the Target Company held by Kirin Brewery Co., Ltd., the Target Company’s largest shareholder at the time, via a negotiated transaction. Ever since, while maintaining the autonomy of their respective businesses, the Company and the Target Company have focused on driving further advancement in each other’s businesses through various measures in the meat and processed meat product sectors. Examples include using the Company’s expansive domestic and worldwide network, exchanging personnel, increasing trading in products and other items, and taking overseas business expansion initiatives.
 
In the past, Japan’s feed and meat industry has developed by expanding the supply of livestock feed for farmers while increasing production of high-quality meat to ensure a steady supply in the Japanese market, in order to satisfy burgeoning demand for meat driven by population growth and higher personal incomes. However, considering Japan’s declining population and aging society in recent years, the Japanese market currently offers no prospects for expansion in meat consumption. Against this backdrop, the operating environment has become increasingly challenging year after year, due to factors including increased competition from relatively inexpensive imported products, along with stronger calls for price cuts from the retail sector, where industry consolidation is progressing. Furthermore, the food sector, including the feed and meat industry, is facing deteriorating profitability due to rising grain prices around the world. Another factor pushing up costs is the need to address increasingly sophisticated and diverse consumer needs, including demand for food safety and reliability. Moreover, Japan’s processed meat sector has seen generally weak market moves for domestically produced meat mainly due to, among others, the impact of the Great East Japan Earthquake, which struck on March 11, 2011. Situations also remain challenging on the sales front, as consumer belt-tightening remains strong, despite a temporary increase in demand after the earthquake.
 
In this environment, the Company believes that two themes are crucial to establish a competitive edge for the Company and the Target Company and to achieve sustained growth of a stable earnings base. First is to expand and upgrade the operating base so that it can flexibly address changes in the external environment, by conducting integrated management of operations from procurement of feed ingredients to production and sales of meat and processed meat products. Second is to strengthen cost competitiveness in each business field through effective use of business expertise and human resources within the Mitsubishi Corporation Group.
 
As the operating environment becomes increasingly challenging as noted above, the Mitsubishi Corporation Group believes that one urgent priority is to strengthen cost competitiveness. This will entail enhancing value chains in the feed and meat sectors, while pressing on with streamlining each business and optimally allocating management resources under a consolidated group framework. To do so, the Company has determined that it must strengthen its capital relationship with the Target Company. A stronger capital relationship with the Target Company will allow the Company to grow the Target Company into a core enterprise in the meat and meat processing business through measures designed to enhance the Target Company’s cost competitiveness and profitability. Other measures will include having the Target Company make further use of business assets within the Mitsubishi Corporation Group and stepping up personnel exchanges among employees. Furthermore, the Company has strengthened capital and personal relationships with the retail and distribution industries over the years. Harnessing the Target Company’s advanced product development capabilities, manufacturing technologies, and customer service capabilities in the food sector, particularly processed meat products, the Company aims to unlock potential business opportunities that lie within the retail and distribution industries.
 
Furthermore, the Company believes that strengthening the capital relationship with the Target Company will make it possible for the Target Company to further improve profitability in the meat production business, where it is developing operations. This will entail making even greater use than before of the Company’s business expertise and experienced personnel, which the Company has cultivated over many years. At the same time, in the sales business, the Company’s sales subsidiaries will be harnessed to the fullest extent to help expand the earnings of the Target Company. At the same time, the Company believes that these measures will enable the Target Company and the Mitsubishi Corporation Group to strengthen the earnings base and enhance corporate value.
 
Considering these factors, the Company commenced discussions with the Target Company on executing the Tender Offer around October 2012. Thereafter, the two companies held discussions on several occasions. As a result, the Company and the Target Company concluded that they could further strengthen the earnings base and enhance corporate value by making the Target Company a consolidated subsidiary of the Company. This will allow both companies to further strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Both companies will also maximize synergies, including overseas business expansion. Accordingly, the Company decided to execute the Tender Offer at a meeting of its Board of Directors held on January 18, 2013.
 
2) Management Policy After the Tender Offer
 
As of January 18, 2013, the Company’s basic policy on the Target Company’s management structure after the Tender Offer is completed is to respect the current management structure. However, the Company plans to hold discussions on this matter with the Target Company.
 
(3) Measures Aimed to Ensure the Fairness of the Tender Offer, Including Measures Aimed to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest
Although the Target Company is not a subsidiary of the Company as of January 18, 2013, the Company owns 6,786,000 common shares in the Target Company (shareholding ratio: 23.55%), making it an equity-method affiliate. Accordingly, the Company and the Target Company have implemented the following measures aimed at ensuring the fairness of the Tender Offer. (Among the following measures, those measures implemented by the Target Company are based on the explanations provided by the Target Company to the Company.)
 
1)    Request for Valuation Analysis From an Independent Third-Party Appraiser by the Tender Offeror
In order to ensure the fairness of the Tender Offer Price, the Company asked Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (hereinafter “Mitsubishi UFJ Morgan Stanley Securities”) to conduct a valuation of the Target Company’s share price, as a third-party appraiser independent of the Company and the Target Company. The Company obtained a valuation report dated January 17, 2013, which it used for reference in determining the Tender Offer Price. (Mitsubishi UFJ Morgan Stanley Securities is not a related party of the Company, and does not have a material interest in the Tender Offer.) The Company did not receive a fairness opinion concerning the Tender Offer Price from Mitsubishi UFJ Morgan Stanley Securities.
 
Mitsubishi UFJ Morgan Stanley Securities used Market Price Analysis, Comparable Companies Analysis, and Discounted Cash Flow (DCF) Analysis to conduct a valuation analysis of the Target Company's share price. The range of valuations per share of the Target Company’s common stock obtained using the abovementioned methods was as follows:
 
[Market Price Analysis]
 
688 yen to 738 yen
 
[Comparable Companies Analysis]
 
792 yen to 1,118 yen
 
[DCF Analysis]
 
839 yen to 1,280 yen
 
(i) Market Price Analysis
With Market Price Analysis, the range of per-share values produced for the Target Company’s common stock was 688 yen to 738 yen, with a reference date of January 17, 2013. This range was based on the 738 yen closing price on the reference date of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, as well as the simple average closing price (rounded) of 726 yen for the past month, the simple average closing price (rounded) of 688 yen for the past three months, the simple average closing price (rounded) of 696 yen for the past six months, and the simple average closing price (rounded) of 733 yen for the past 12 months.
 
(ii) Comparable Companies Analysis
Under Comparable Companies Analysis, the range of per-share values produced for the Target Company’s common stock was 792 yen to 1,118 yen. Under this method, several companies having similar business activities to the Target Company were selected from publicly listed companies in Japan and a comparison was made of market share prices and financial performance indicators showing profitability in analyzing the Target Company’s share price.
 
(iii) DCF Analysis
Under DCF Analysis, the range of per-share values produced for the Target Company’s common stock was 839 yen to 1,280 yen. This method analyzes the future free cash flows expected to be generated by the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, recent operating performance and other publicly disclosed information, and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
While considering the results of the valuation analysis of the Target Company’s shares in the aforementioned valuation report, the Company comprehensively considered such factors as actual examples of premiums paid in similar tender offers conducted in the past, whether or not the Target Company’s Board of Directors would support the Tender Offer, trends in the market price of the Target Company’s common stock, the outlook for subscriptions to the Tender Offer, the results of discussions and negotiations with the Target Company, and other factors. The Board of Directors of the Company ultimately decided on January 18, 2013 to set the Tender Offer Price at 950 yen. In setting the Tender Offer Price, the Company factored in the effect of the developments recently announced by the Target Company, namely, the sale of a consolidated subsidiary and extraordinary losses announced on December 21, 2012, the Target Company’s Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) announced on January 7, 2013, and revisions to the Target Company’s business forecasts announced on January 18, 2013.
 
The Tender Offer Price of 950 yen per share represents a 28.73% premium (rounded to 2 decimal places) on the 738 yen closing price of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange on January 17, 2013, the trading day before the announcement of the Tender Offer. It also represents a 30.80% premium (rounded to 2 decimal places) on the simple average closing price of 726 yen (rounded, same below for calculations of simple average closing price) for the past one month, the period from December 18, 2012 to January 17, 2013. Furthermore, it represents a 38.14% premium (rounded to 2 decimal places) on the simple average closing price of 688 yen for the past three months, the period from October 18, 2012 to January 17, 2013. It also represents a 36.43% premium (rounded to 2 decimal places) on the simple average closing price of 696 yen for the past six months, the period from July 18, 2012 to January 17, 2013. In addition, it represents a 29.69% premium (rounded to 2 decimal places) on the simple average closing price of 733 yen for the past 12 months, the period from January 18, 2012 to January 17, 2013.
 
2)    Measures by the Target Company to Ensure Fairness
According to the Target Company’s Press Release, the Target Company announced that its Board of Directors has expressed supportive opinion for the Tender Offer. Furthermore, in deciding to leave it to the shareholders to decide whether or not to tender their shares for the Tender Offer, the Target Company obtained a Valuation Report from Frontier Management, a third-party appraiser independent from the Company and the Target Company. Furthermore, when deciding to agree to the Tender Offer, the Target Company looked at the matter closely, taking into account the decision to express supportive opinion to the Tender Offer. The Target Company did not receive a fairness opinion concerning the Tender Offer Price from a third-party appraiser.
 
Moreover, the Target Company obtained the necessary legal advice regarding ensuring the fairness of decision-making and other matters from NAGASHIMA OHNO & TSUNEMATSU, a legal adviser.
 
a)               Request for Valuation Analysis From an Independent Third-Party Appraiser
According to the Target Company’s Press Release, the Board of Directors of the Target Company asked Frontier Management, a third-party appraiser independent of the Company and the Target Company, to conduct a valuation analysis of the Target Company’s shares, in order to ensure the fairness of the decision-making process when evaluating the Tender Offer Price submitted by the Company. The Target Company received a Valuation Report regarding the value of the Target Company’s shares from Frontier Management on January 17, 2013. Frontier Management is not a related party of the Company or the Target Company. Frontier Management obtained documents and an explanation from the Target Company’s management team regarding the current state of business, future business plans and other matters and based on this information calculated values for shares in the Target Company. In the Valuation Report prepared by Frontier Management, Frontier Management assumed that the Target Company was a going concern, and believing that it was important to evaluate the Target Company’s share value from various angles, it used the Average Market Price Method, Comparable Companies Method, and DCF Method to conduct a valuation analysis of the Target Company’s shares. The range of valuations per share of the Target Company’s common stock obtained by Frontier Management using the abovementioned methods was as follows:
 
[Average Market Price Method]
 
684 yen to 726 yen
 
[Comparable Companies Method]
 
941 yen to 1,400 yen
 
[DCF Method]
 
895 yen to 1,051 yen
 
With the Average Market Price Method, the range of per-share values produced for the Target Company’s common stock was 684 yen to 726 yen, with a reference date of January 17, 2013. This range was based on the simple average closing price of 726 yen for the past month of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, the simple average closing price of 688 yen for the past three months, and the simple average closing price of 684 yen in the period from the business day following the Target Company’s announcement of business forecast revisions on September 24, 2012, which constituted a recent material fact, and the reference date for the valuation.
 
Under the Comparable Companies Method, the range of per-share values produced for the Target Company’s common stock was 941 yen to 1,400 yen. Under this method, analysis was conducted of the Target Company’s share value by comparing the market share prices and financial performance indicators showing profitability of the publicly listed companies operating similar businesses to the Target Company.
 
Under DCFMethod, the range of per-share values produced for the Target Company’s common stock was 895 yen to 1,051 yen. This method analyzes the estimated future free cash flows of the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, management interviews with the Target Company, recent business performance (including details of revisions to the Target Company’s business forecasts announced on January 18, 2013), and other publicly disclosed information and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
Frontier Management obtained information from after the April 19, 2011 release of the Target Company’s 5th Medium-Term Management Plan through January 17, 2013, and the Target Company’s financial forecasts reflecting economic conditions (including the Target Company’s business plans and details contained in business forecast revisions announced by the Target Company on January 18, 2013). Frontier Management evaluated the share value of the Target Company using the Comparable Companies Method and DCF Methodbased on this information. The aforementioned financial forecasts were rationally prepared by the Target Company’s management team based on the best forecasts available and their judgment at that time. Furthermore, the Target Company did not receive a fairness opinion concerning the fairness of the Tender Offer Price from third-party appraiser Frontier Management.
 
(Note) Frontier Management used information obtained from the Target Company and publicly available information in conducting its share valuation analysis of the Target Company under the assumption that all such materials and information were accurate and complete. Frontier Management did not independently verify the accuracy or completeness of such materials and information. Furthermore, Frontier Management did not independently evaluate, appraise or assess the assets or liabilities (including contingent liabilities) of the Target Company or its affiliated companies, or conduct analysis or evaluation of individual assets or liabilities. Furthermore, Frontier Management did not request an appraisal or assessment in respect of the same to a third-party appraiser.
 
b) Advice From a Law Firm
According to the Target Company’s Press Release, the Target Company carefully discussed the Tender Offer, and appointed legal adviser NAGASHIMA OHNO & TSUNEMATSU to obtain legal advice regarding the decision-making method and process of the Target Company’s Board of Directors for the Tender Offer in order to ensure the fairness and appropriateness of the decision-making of the Target Company’s Board of Directors. NAGASHIMA OHNO & TSUNEMATSU has been the Target Company’s legal adviser from the outset and there have been no changes in legal adviser.
 
c)               Confirmation That All Directors and Corporate Auditors Had No Beneficial Interest
According to the Target Company’s Press Release, the Target Company obtained a Valuation Report regarding valuation analysis of the Target Company’s shares from Frontier Management and legal advice from NAGASHIMA OHNO & TSUNEMATSU. Following careful discussions and consideration of various conditions regarding the Tender Offer, all the directors who participated in the voting at the meeting of the Target Company’s Board of Directors held on January 18, 2013 expressed unanimous support for the Tender Offer for the following reasons. The Target Company believes that it can strengthen its earnings power by becoming a consolidated subsidiary of the Company. The Target Company believes that becoming a consolidated subsidiary of the Company will make it possible to strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Furthermore, the Target Company and the Mitsubishi Corporation Group will be able to further strengthen the earnings base and enhance corporate value by maximizing synergies between both companies, including overseas business expansion, while enabling efficient and agile management of business operations through such measures as more effective use of business resources, including those of the Company and its group companies. Furthermore, the Target Company’s Board of Directors has determined that the Tender Offer Price is not unreasonable given that a certain premium has been added to the recent share price of the Target Company’s common shares on the Tokyo Stock Exchange and that the Tender Offer Price is within the range of values indicated by the Valuation Report obtained by the Target Company from Frontier Management. However, since the Company does not plan to delist the shares in the Target Company through the Tender Offer, and the Target Company’s policy is that its shares should continue to be listed after the Tender Offer is completed, all the directors who participated in the voting decided to adopt a neutral position on whether or not to tender shares through the Tender Offer, leaving it to shareholders to decide whether or not to tender their shares. Furthermore, all of the corporate auditors (including outside corporate auditors) who participated in discussions on this resolution expressed an opinion to the effect that they had no objection to the resolution adopted at the meeting of the Board of Directors.
 
To avoid doubt of conflicts of interest and ensure fair and impartial decision-making by the Target Company, Mr. Isao Miyashita, a director of the Target Company, and Mr. Tsutomu Takanose, a corporate auditor of the Target Company, both of whom serve concurrently as employees of the Company, did not participate in any of the above discussions or resolutions at meetings of the Target Company’s Board of Directors regarding these matters, and did not participate in discussions and negotiations with the Company regarding the Tender Offer.
 
3)               Ensuring Objectivity for Ensuring the Fairness of the Tender Offer Price
The Company and the Target Company have not reached any agreement that would prevent a potential rival bidderfrom contacting the Target Company, such as an agreement, including deal protection provisions, that would prohibit the Target Company from having contact with a counter offeror. In this way, by ensuring the opportunity for a counter tender, the Company and the Target Company have given consideration to ensuring the fairness of the Tender Offer Price.
 
(4) Plans to Purchase Additional Shares After the Tender Offer
The Company plans to make the Target Company a consolidated subsidiary. If the Target Company does indeed become a consolidated subsidiary of the Company through successful conclusion of the Tender Offer, the Company does not plan at this stage to purchase additional shares in the Target Company.
 
(5) Outlook for Delisting and Reason
The Company does not plan to delist the shares in the Target Company through the Tender Offer. However, to provide the greater opportunity for the shareholders of the Target Company who wish to tender their shares in the Tender Offer to sell their shares, the Company has not set the maximum number of shares to be purchased through the Tender Offer. Accordingly, depending on the outcome of the Tender Offer, Target Company shares may meet the Delisting Standards prescribed by the Tokyo Stock Exchange. In that event, Target Company shares may be delisted after completing the prescribed procedures. Three of the said conditions for delisting in the Delisting Standards are as follows: (1) when the number of shareholders is under 400 on the last day of the fiscal year, with a grace period of 1 year; (2) the number of floating shares (the number of publicly listed shares less shares held by corporate officers (directors, corporate auditors and executive officers), shares held by shareholders holding 10% or more of issued shares (excluding shares that will clearly not be held on a long-term basis), and treasury shares) is less than 2,000 units on the last day of the fiscal year, with a grace period of 1 year; and (3) the market capitalization of floating shares (defined as the amount obtained by multiplying the number of floating shares on the last day of the fiscal year by the closing price at the end of the fiscal year) is less than 500 million yen at the end of the fiscal year, with a grace period of 1 year.
 
However, if Target Company shares are in danger of meeting the Delisting Standards as a result of this Tender Offer, the Company plans to take the optimal means to maintain the public listing of Target Company shares through faithful discussions with the Target Company regarding measures to avoid delisting, such as off-auction distribution and secondary sales. At present, nothing specific has been decided about the concrete form of the aforementioned policy or details or conditions of its execution.
 
(6) Matters Relating to Material Agreement Between the Tender Offeror and Shareholders of the Target Company Concerning the Tender Offer
Nothing.
 
2. Outline of the Tender Offer
(1) Outline of the Target Company
       ①
Company Name
YONEKYU CORPORATION
Head Office
1259 Okanomiya Terabayashi, Numazu-shi, Shizuoka, Japan
Name and Title of Representative
Akira Fujii, President and Representative Director
Main Business
Production and sale of processed foods (ham, sausages and delicatessen food), production and sale of meat, operation of restaurants, production and sale of beverages, etc.
Capital
8,634 million yen (as of August 31, 2012)
Established
February 26, 1969
Major Shareholders and Ownership Ratio (as of August 31, 2012)
Mitsubishi Corporation                                               23.55%
Specified Securities Trustee Company Societe Generale Private Banking Japan                                                                      3.93%
Japan Trustee Services Bank, Ltd. (Trust Account)             2.97%
YONEKYU Employee Shareholding Association                  2.36%
ITOCHU Corporation                                                            2.09%
The Master Trust Bank of Japan, Ltd. (Trust Account)       1.67%
Sumitomo Mitsui Trust Bank, Limited                                  1.39%
Japan Trustee Services Bank, Ltd. (Trust Account 4)          1.03%
Zensho Holdings Co., Ltd.                                                     1.00%
STATE STREET BANK AND TRUST COMPANY 505211 (Standing Agent: Mizuho Corporate Bank, Ltd., Settlement & Clearing Services Division)                                                  0.97%
Relationship of Listed Company and Target Company
 
 
 
Capital Relationship
The Company owns Target Company shares representing the equivalent of 23.55% of the total number of issued shares in the Target Company.
 
 
 
Personnel Relationship
One Company employee concurrently serves as a director and one Company employee concurrently serves as a corporate auditor of the Target Company.
 
 
 
Business Relationship
The Company has a comprehensive business alliance agreement with the Target Company and sells meat and processed meat products to the Target Company.
 
 
 
Related Party Status
The Target Company is an equity-method affiliate of the Company and is therefore deemed to be a related party.
 
(2) Schedule, etc.
1) Schedule
Board of Directors’ resolution
January 18, 2013 (Friday)
Date of public notice of start of Tender Offer
January 21, 2013 (Monday)
Public notice will be made through electronic disclosure, and notice to such effect will be published in the Nihon Keizai Shimbun.
(EDINET (Electronic Disclosure for Investors’ NETwork) address
Tender Offer Statement submission date
January 21, 2013 (Monday)
 
2) Term of Tender Offer Period as of the Filing of the Tender Offer Statement
From Monday, January 21, 2013 to Wednesday, February 20, 2013 (22 business days)
 
3) Possibility of Extension of Tender Offer Period Upon Request of the Target Company
If the Target Company submits a Position Statement requesting an extension of the Tender Offer Period, pursuant to the provisions of Article 27-10, Paragraph 3 of the Financial Instruments and Exchange Act (including Act No. 25 of 1948 and subsequent amendments, hereinafter “the Financial Instruments and Exchange Act”), the Tender Offer Period shall extend to March 4, 2013 (Monday), a total of 30 business days.
 
(3) Tender Offer Price
950 yen per common stock
 
(4) Basis of the Tender Offer Price
1)    Calculation Basis
In order to ensure the fairness of the Tender Offer Price, the Company asked Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. to conduct a valuation of the Target Company’s share price, as a third-party appraiser independent of the Company and the Target Company. The Company obtained a valuation report dated January 17, 2013, which it used for reference in determining the Tender Offer Price. (Mitsubishi UFJ Morgan Stanley Securities is not a related party of the Company, and does not have a material interest in the Tender Offer.) The Company did not receive a fairness opinion concerning the Tender Offer Price from Mitsubishi UFJ Morgan Stanley Securities.
 
Mitsubishi UFJ Morgan Stanley Securities used Market Price Analysis, Comparable Companies Analysis, and Discounted Cash Flow (DCF) Analysis to conduct a valuation analysis of the Target Company's share price. The range of valuations per share of the Target Company’s common stock obtained using the abovementioned methods was as follows:
 
(i) Market Price Analysis
With Market Price Analysis, the range of per-share values produced for the Target Company’s common stock was 688 yen to 738 yen, with a reference date of January 17, 2013. This range was based on the 738 yen closing price on the reference date of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, as well as the simple average closing price (rounded) of 726 yen for the past month, the simple average closing price (rounded) of 688 yen for the past three months, the simple average closing price (rounded) of 696 yen for the past six months, and the simple average closing price (rounded) of 733 yen for the past 12 months.
 
(ii) Comparable Companies Analysis
Under Comparable Companies Analysis, the range of per-share values produced for the Target Company’s common stock was 792 yen to 1,118 yen. Under this method, several companies having similar business activities to the Target Company were selected from publicly listed companies in Japan and a comparison was made of market share prices and financial performance indicators showing profitability in analyzing the Target Company’s share price.
 
(iii) DCF Analysis
Under DCF Analysis, the range of per-share values produced for the Target Company’s common stock was 839 yen to 1,280 yen. This method analyzes the future free cash flows expected to be generated by the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, recent operating performance and other publicly disclosed information, and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
While considering the results of the valuation analysis of the Target Company’s shares in the aforementioned valuation report, the Company comprehensively considered such factors as actual examples of premiums paid in similar tender offers conducted in the past, whether or not the Target Company’s Board of Directors would support the Tender Offer, trends in the market price of the Target Company’s common stock, the outlook for subscriptions to the Tender Offer, the results of discussions and negotiations with the Target Company, and other factors. The Board of Directors of the Company ultimately decided on January 18, 2013 to set the Tender Offer Price at 950 yen. In setting the Tender Offer Price, the Company factored in the effect of the developments recently announced by the Target Company, namely, the sale of a consolidated subsidiary and extraordinary losses announced on December 21, 2012, the Target Company’s Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) announced on January 7, 2013, and revisions to the Target Company’s business forecasts announced on January 18, 2013.
 
The Tender Offer Price of 950 yen per share represents a 28.73% premium (rounded to 2 decimal places) on the 738 yen closing price of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange on January 17, 2013, the trading day before the announcement of the Tender Offer. It also represents a 30.80% premium (rounded to 2 decimal places) on the simple average closing price of 726 yen (rounded, same below for calculations of simple average closing price) for the past one month, the period from December 18, 2012 to January 17, 2013. Furthermore, it represents a 38.14% premium (rounded to 2 decimal places) on the simple average closing price of 688 yen for the past three months, the period from October 18, 2012 to January 17, 2013. It also represents a 36.43% premium (rounded to 2 decimal places) on the simple average closing price of 696 yen for the past six months, the period from July 18, 2012 to January 17, 2013. In addition, it represents a 29.69% premium (rounded to 2 decimal places) on the simple average closing price of 733 yen for the past 12 months, the period from January 18, 2012 to January 17, 2013.
 
2)    Calculation Background
(Background to Tender Offer Price Decision)
The Mitsubishi Corporation Group is a diversified organization engaged in a wide variety of business activities, providing various types of products and services on a global basis leveraging its trading company functions. Through its domestic and overseas network, the Company is engaged in general trading, including the purchasing, supplying and manufacturing, of a wide range of products related to energy, metals, machinery, chemicals and living essentials, in addition to financial businesses and development of natural resources and infrastructure projects. The Company is also engaged in other businesses such as development of new business models in the new energy and environmental fields, and new technology-related businesses.
 
Furthermore, in the food sector, the Company is working to strengthen its integrated value chain spanning procurement of raw materials, transport, processing, and product distribution and retailing. These efforts are directed at accurately addressing developments in recent years such as increasingly sophisticated consumer awareness regarding food safety and reliability, and diversified needs, as well as to ensure stable food supplies. One particular area of focus is the worldwide feed and meat business, which consists of trading in feed ingredients, manufacturing of livestock and fish feed ingredients, and livestock and poultry breeding, slaughtering, processing, and sales. Here the Company is working to upgrade functions and expand earnings in each of these business fields by enhancing cost competitiveness and expanding the overall value chain. As part of these efforts, the Company has strengthened ties with meat packers that conduct a broad range of livestock and processed meat product businesses.
 
The Target Company is an equity-method affiliate of the Company, which owns 23.55% (shareholding ratio) of the total number of issued shares in the Target Company. The Target Company conducts procurement and production of meat, and production and sales of food, such as processed meat products. Based on its management credo of “Evoke A Moving Food Experience,” the Target Company is working to further expand business by actively conducting, among others, business investments aimed at strengthening its proprietary value chains. In recent years, the Target Company has adopted the slogan of “Advance to a New Stage.” Under this banner, to supply value-added products and services that more closely reflect consumer needs, the Target Company has been promoting the following basic strategies: expansion of the sales channel, [reinforcement of retail products], reinforcement of delicatessen products, and reinforcement of the management administration structure. Specific measures include reinforcing sales in the foodservice sector (convenience stores, foodservice establishments), accelerating nationwide expansion of sales areas, and enhancing delicatessen food centered on frozen consumer food products.
 
Since its first investment in the Target Company in 1995, the Company has successively increased its shareholding in the Target Company, while working to expand trading in meat and other items. In 1999, the Company and the Target Company established Tokimeki Farm Co., Ltd. as a joint venture to produce poultry domestically. In these and other ways, both companies have established a strong partnership in the domestic meat production business and in trading in meat and processed meat products.
 
In 2007 and 2008, the Company made the Target Company an equity-method affiliate by purchasing shares in the Target Company held by Kirin Brewery Co., Ltd., the Target Company’s largest shareholder at the time, via a negotiated transaction. Ever since, while maintaining the autonomy of their respective businesses, the Company and the Target Company have focused on driving further advancement in each other’s businesses through various measures in the meat and processed meat product sectors. Examples include using the Company’s expansive domestic and worldwide network, exchanging personnel, increasing trading in products and other items, and taking overseas business expansion initiatives.
 
In the past, Japan’s feed and meat industry has developed by expanding the supply of livestock feed for farmers while increasing production of high-quality meat to ensure a steady supply in the Japanese market, in order to satisfy burgeoning demand for meat driven by population growth and higher personal incomes. However, considering Japan’s declining population and aging society in recent years, the Japanese market currently offers no prospects for expansion in meat consumption. Against this backdrop, the operating environment has become increasingly challenging year after year, due to factors including increased competition from relatively inexpensive imported products, along with stronger calls for price cuts from the retail sector, where industry consolidation is progressing. Furthermore, the food sector, including the feed and meat industry, is facing deteriorating profitability due to rising grain prices around the world. Another factor pushing up costs is the need to address increasingly sophisticated and diverse consumer needs, including demand for food safety and reliability. Moreover, Japan’s processed meat sector has seen generally weak market moves for domestically produced meat mainly due to, among others, the impact of the Great East Japan Earthquake, which struck on March 11, 2011. Situations also remain challenging on the sales front, as consumer belt-tightening remains strong, despite a temporary increase in demand after the earthquake.
 
In this environment, the Company believes that two themes are crucial to establish a competitive edge for the Company and the Target Company and to achieve sustained growth of a stable earnings base. First is to expand and upgrade the operating base so that it can flexibly address changes in the external environment, by conducting integrated management of operations from procurement of feed ingredients to production and sales of meat and processed meat products. Second is to strengthen cost competitiveness in each business field through effective use of business expertise and human resources within the Mitsubishi Corporation Group.
 
As the operating environment becomes increasingly challenging as noted above, the Mitsubishi Corporation Group believes that one urgent priority is to strengthen cost competitiveness. This will entail enhancing value chains in the feed and meat sectors, while pressing on with streamlining each business and optimally allocating management resources under a consolidated group framework. To do so, the Company has determined that it must strengthen its capital relationship with the Target Company. A stronger capital relationship with the Target Company will allow the Company to grow the Target Company into a core enterprise in the meat and meat processing business through measures designed to enhance the Target Company’s cost competitiveness and profitability. Other measures will include having the Target Company make further use of business assets within the Mitsubishi Corporation Group and stepping up personnel exchanges among employees. Furthermore, the Company has strengthened capital and personal relationships with the retail and distribution industries over the years. Harnessing the Target Company’s advanced product development capabilities, manufacturing technologies, and customer service capabilities in the food sector, particularly processed meat products, the Company aims to unlock potential business opportunities that lie within the retail and distribution industries.
 
Furthermore, the Company believes that strengthening the capital relationship with the Target Company will make it possible for the Target Company to further improve profitability in the meat production business, where it is developing operations. This will entail making even greater use than before of the Company’s business expertise and experienced personnel, which the Company has cultivated over many years. At the same time, in the sales business, the Company’s sales subsidiaries will be harnessed to the fullest extent to help expand the earnings of the Target Company. At the same time, the Company believes that these measures will enable the Target Company and the Mitsubishi Corporation Group to strengthen the earnings base and enhance corporate value.
 
Considering these factors, the Company commenced discussions with the Target Company on executing the Tender Offer around October 2012. Thereafter, the two companies held discussions on several occasions. As a result, the Company and the Target Company concluded that they could further strengthen the earnings base and enhance corporate value by making the Target Company a consolidated subsidiary of the Company. This will allow both companies to further strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Both companies will also maximize synergies, including overseas business expansion. Accordingly, the Company decided to execute the Tender Offer at a meeting of its Board of Directors held on January 18, 2013.
 
(i) Name of Third Party Who Performed the Valuation
In order to ensure the fairness of the Tender Offer Price, the Company asked Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. to conduct a valuation of the Target Company’s share price, as a third-party appraiser independent of the Company and the Target Company. The Company obtained a valuation report dated January 17, 2013, which it used for reference in determining the Tender Offer Price. (Mitsubishi UFJ Morgan Stanley Securities is not a related party of the Company, and does not have a material interest in the Tender Offer.) The Company did not receive a fairness opinion concerning the Tender Offer Price from Mitsubishi UFJ Morgan Stanley Securities.
 
(ii) Overview of Opinion
Mitsubishi UFJ Morgan Stanley Securities used Market Price Analysis, Comparable Companies Analysis, and Discounted Cash Flow (DCF) Analysis to conduct a valuation analysis of the Target Company's share price. The range of valuations per share of the Target Company’s common stock obtained using the abovementioned methods was as follows:
 
A. Market Price Analysis
With Market Price Analysis, the range of per-share values produced for the Target Company’s common stock was 688 yen to 738 yen, with a reference date of January 17, 2013. This range was based on the 738 yen closing price on the reference date of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, as well as the simple average closing price (rounded) of 726 yen for the past month, the simple average closing price (rounded) of 688 yen for the past three months, the simple average closing price (rounded) of 696 yen for the past six months, and the simple average closing price (rounded) of 733 yen for the past 12 months.
 
B. Comparable Companies Analysis
Under Comparable Companies Analysis, the range of per-share values produced for the Target Company’s common stock was 792 yen to 1,118 yen. Under this method, several companies having similar business activities to the Target Company were selected from publicly listed companies in Japan and a comparison was made of market share prices and financial performance indicators showing profitability in analyzing the Target Company’s share price.
 
C. DCF Analysis
Under DCF Analysis, the range of per-share values produced for the Target Company’s common stock was 839 yen to 1,280 yen. This method analyzes the future free cash flows expected to be generated by the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, recent operating performance and other publicly disclosed information, and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
(iii) Course of Events Leading to Decision on Tender Offer Price Based on Third-Party Opinion
While considering the results of the valuation analysis of the Target Company’s shares in the aforementioned valuation report, the Company comprehensively considered such factors as actual examples of premiums paid in similar tender offers conducted in the past, whether or not the Target Company’s Board of Directors would support the Tender Offer, trends in the market price of the Target Company’s common stock, the outlook for subscriptions to the Tender Offer, the results of discussions and negotiations with the Target Company, and other factors. The Board of Directors of the Company ultimately decided on January 18, 2013 to set the Tender Offer Price at 950 yen. In setting the Tender Offer Price, the Company factored in the effect of the developments recently announced by the Target Company, namely, the sale of a consolidated subsidiary and extraordinary losses announced on December 21, 2012, the Target Company’s Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) announced on January 7, 2013, and revisions to the Target Company’s business forecasts announced on January 18, 2013.
 
The Tender Offer Price of 950 yen per share represents a 28.73% premium (rounded to 2 decimal places) on the 738 yen closing price of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange on January 17, 2013, the trading day before the announcement of the Tender Offer. It also represents a 30.80% premium (rounded to 2 decimal places) on the simple average closing price of 726 yen (rounded, same below for calculations of simple average closing price) for the past one month, the period from December 18, 2012 to January 17, 2013. Furthermore, it represents a 38.14% premium (rounded to 2 decimal places) on the simple average closing price of 688 yen for the past three months, the period from October 18, 2012 to January 17, 2013. It also represents a 36.43% premium (rounded to 2 decimal places) on the simple average closing price of 696 yen for the past six months, the period from July 18, 2012 to January 17, 2013. In addition, it represents a 29.69% premium (rounded to 2 decimal places) on the simple average closing price of 733 yen for the past 12 months, the period from January 18, 2012 to January 17, 2013.
 
(Measures Aimed to Ensure the Fairness of the Tender Offer Price and Measures to Avoid Conflicts of Interest)
Although the Target Company is not a subsidiary of the Company as of January 18, 2013, the submission date of the Tender Offer, the Company owns 6,786,000 common shares in the Target Company (shareholding ratio: 23.55%), making it an equity-method affiliate. Accordingly, the Company and the Target Company have implemented the following measures aimed at ensuring the fairness of the Tender Offer. (Among the following measures, those measures implemented by the Target Company are based on the explanations provided by the Target Company to the Company.)
 
(i) Request for Valuation Analysis From an Independent Third-Party Appraiser by the Tender Offeror
In order to ensure the fairness of the Tender Offer Price, the Company asked Mitsubishi UFJ Morgan Stanley Securities to conduct a valuation of the Target Company’s share price, as a third-party appraiser independent of the Company and the Target Company. The Company obtained a valuation report dated January 17, 2013, which it used for reference in determining the Tender Offer Price. (Mitsubishi UFJ Morgan Stanley Securities is not a related party of the Company, and does not have a material interest in the Tender Offer.) The Company did not receive a fairness opinion concerning the Tender Offer Price from Mitsubishi UFJ Morgan Stanley Securities.
 
Mitsubishi UFJ Morgan Stanley Securities used Market Price Analysis, Comparable Companies Analysis, and Discounted Cash Flow (DCF) Analysis to conduct a valuation analysis of the Target Company's share price. The range of valuations per share of the Target Company’s common stock obtained using the abovementioned methods was as follows:
 
[Market Price Analysis]
 
688 yen to 738 yen
 
[Comparable Companies Analysis]
 
792 yen to 1,118 yen
 
[DCF Analysis]
 
839 yen to 1,280 yen
 
A. Market Price Analysis
With Market Price Analysis, the range of per-share values produced for the Target Company’s common stock was 688 yen to 738 yen, with a reference date of January 17, 2013. This range was based on the 738 yen closing price on the reference date of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, as well as the simple average closing price (rounded) of 726 yen for the past month, the simple average closing price (rounded) of 688 yen for the past three months, the simple average closing price (rounded) of 696 yen for the past six months, and the simple average closing price (rounded) of 733 yen for the past 12 months.
 
B. Comparable Companies Analysis
Under Comparable Companies Analysis, the range of per-share values produced for the Target Company’s common stock was 792 yen to 1,118 yen. Under this method, several companies having similar business activities to the Target Company were selected from publicly listed companies in Japan and a comparison was made of market share prices and financial performance indicators showing profitability in analyzing the Target Company’s share price.
 
C. DCF Analysis
Under DCF Analysis, the range of per-share values produced for the Target Company’s common stock was 839 yen to 1,280 yen. This method analyzes the future free cash flows expected to be generated by the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, recent operating performance and other publicly disclosed information, and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
While considering the results of the valuation analysis of the Target Company’s shares in the aforementioned valuation report, the Company comprehensively considered such factors as actual examples of premiums paid in similar tender offers conducted in the past, whether or not the Target Company’s Board of Directors would support the Tender Offer, trends in the market price of the Target Company’s common stock, the outlook for subscriptions to the Tender Offer, the results of discussions and negotiations with the Target Company, and other factors. The Board of Directors of the Company ultimately decided on January 18, 2013 to set the Tender Offer Price at 950 yen. In setting the Tender Offer Price, the Company factored in the effect of the developments recently announced by the Target Company, namely, the sale of a consolidated subsidiary and extraordinary losses announced on December 21, 2012, the Target Company’s Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) announced on January 7, 2013, and revisions to the Target Company’s business forecasts announced on January 18, 2013.
 
The Tender Offer Price of 950 yen per share represents a 28.73% premium (rounded to 2 decimal places) on the 738 yen closing price of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange on January 17, 2013, the trading day before the announcement of the Tender Offer. It also represents a 30.80% premium (rounded to 2 decimal places) on the simple average closing price of 726 yen (rounded, same below for calculations of simple average closing price) for the past one month, the period from December 18, 2012 to January 17, 2013. Furthermore, it represents a 38.14% premium (rounded to 2 decimal places) on the simple average closing price of 688 yen for the past three months, the period from October 18, 2012 to January 17, 2013. It also represents a 36.43% premium (rounded to 2 decimal places) on the simple average closing price of 696 yen for the past six months, the period from July 18, 2012 to January 17, 2013. In addition, it represents a 29.69% premium (rounded to 2 decimal places) on the simple average closing price of 733 yen for the past 12 months, the period from January 18, 2012 to January 17, 2013.
 
(ii) Measures by the Target Company to Ensure Fairness
According to the Target Company’s Press Release, the Target Company announced that its Board of Directors has expressed its supportive opinion for the Tender Offer. Furthermore, in deciding to leave it to the shareholders to decide whether or not to tender their shares for the Tender Offer, the Target Company obtained a Valuation Report from Frontier Management, a third-party appraiser independent from the Company and the Target Company. Furthermore, when deciding to agree to the Tender Offer, the Target Company looked at the matter closely, taking into account the decision to express supportive opinion to the Tender Offer. The Target Company did not receive a fairness opinion concerning the Tender Offer Price from a third-party appraiser.
 
Moreover, the Target Company obtained the necessary legal advice regarding ensuring the fairness of decision-making and other matters from NAGASHIMA OHNO & TSUNEMATSU, a legal adviser.
 
a) Request for Valuation Analysis From an Independent Third-Party Appraiser
According to the Target Company’s Press Release, the Board of Directors of the Target Company asked Frontier Management, a third-party appraiser independent of the Company and the Target Company to conduct a valuation analysis of the Target Company’s shares, in order to ensure the fairness of the decision-making process when evaluating the Tender Offer Price submitted by the Company. The Target Company received a Valuation Report regarding the value of the Target Company’s shares from Frontier Management on January 17, 2013. Frontier Management is not a related party of the Company or the Target Company. Frontier Management obtained documents and an explanation from the Target Company’s management team regarding the current state of business, future business plans and other matters and based on this information calculated values for shares in the Target Company. In the Valuation Report prepared by Frontier Management, Frontier Management assumed that the Target Company was a going concern, and believing that it was important to evaluate the Target Company’s share value from various angles, it used the Average Market Price Method, Comparable Companies Method, and DCF Method to conduct a valuation analysis of the Target Company’s shares. The range of valuations per share of the Target Company’s common stock obtained by Frontier Management using the abovementioned methods was as follows:
 
[Average Market Price Method]
 
684 yen to 726 yen
 
[Comparable Companies Method]
 
941 yen to 1,400 yen
 
[DCF Method]
 
895 yen to 1,051 yen
 
With the Average Market Price Method, the range of per-share values produced for the Target Company’s common stock was 684 yen to 726 yen, with a reference date of January 17, 2013. This range was based on the simple average closing price of 726 yen for the past month of the Target Company’s common stock on the First Section of the Tokyo Stock Exchange, the simple average closing price of 688 yen for the past three months, and the simple average closing price of 684 yen in the period from the business day following the Target Company’s announcement of business forecast revisions on September 24, 2012, which constituted a recent material fact, and the reference date for the valuation.
 
Under the Comparable Companies Method, the range of per-share values produced for the Target Company’s common stock was 941 yen to 1,400 yen. Under this method, analysis was conducted of the Target Company’s share value by comparing the market share prices and financial performance indicators showing profitability of the publicly listed companies operating similar businesses to the Target Company.
 
Under DCF Method, the range of per-share values produced for the Target Company’s common stock was 895 yen to 1,051 yen. This method analyzes the estimated future free cash flows of the Target Company based on future earnings forecasts of the Target Company from the year ending on February 28, 2013, taking into consideration factors such as the Target Company’s business plans, management interviews with the Target Company, recent business performance (including details of revisions to the Target Company’s business forecasts announced on January 18, 2013), and other publicly disclosed information and discounts it back at a certain discounted rate to present value to analyze the Target Company’s share price.
 
Frontier Management obtained information from after the April 19, 2011 release of the Target Company’s Target Company’s 5th Medium-Term Management Plan through January 17, 2013, and the Target Company’s financial forecasts reflecting economic conditions (including the Target Company’s business plans and details contained in business forecast revisions announced by the Target Company on January 18, 2013). Frontier Management evaluated the share value of the Target Company using the Comparable Companies Method and DCF Method based on this information. The aforementioned financial forecasts were rationally prepared by the Target Company’s management team based on the best forecasts available and their judgment at that time. Furthermore, the Target Company did not receive a fairness opinion concerning the fairness of the Tender Offer Price from third-party appraiser Frontier Management.
 
(Note) Frontier Management used information obtained from the Target Company and publicly available information in conducting its share valuation analysis of the Target Company under the assumption that all such materials and information were accurate and complete. Frontier Management did not independently verify the accuracy or completeness of such materials and information. Furthermore, Frontier Management did not independently evaluate, appraise or assess the assets or liabilities (including contingent liabilities) of the Target Company or its affiliated companies, or conduct analysis or evaluation of individual assets or liabilities. Furthermore, Frontier Management did not request an appraisal or assessment in respect of the same to a third-party appraiser.
 
b) Advice From a Law Firm
According to the Target Company’s Press Release, the Target Company carefully discussed the Tender Offer, and appointed legal adviser NAGASHIMA OHNO & TSUNEMATSU to obtain legal advice regarding the decision-making method and process of the Target Company’s Board of Directors for the Tender Offer in order to ensure the fairness and appropriateness of the decision-making of the Target Company’s Board of Directors. NAGASHIMA OHNO & TSUNEMATSU has been the Target Company’s legal adviser from the outset and there have been no changes in legal adviser.
 
c) Confirmation That All Directors and Corporate Auditors Had No Beneficial Interest
According to the Target Company’s Press Release, the Target Company obtained a Valuation Report from Frontier Management and legal advice from NAGASHIMA OHNO & TSUNEMATSU. Following careful discussions and consideration of various conditions regarding the Tender Offer, all the directors who participated in the voting at the meeting of the Target Company’s Board of Directors held on January 18, 2013 expressed unanimous support for the Tender Offer for the following reasons. The Target Company believes that it can strengthen its earnings power by becoming a consolidated subsidiary of the Company. The Target Company believes that becoming a consolidated subsidiary of the Company will make it possible to strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Furthermore, the Target Company and the Mitsubishi Corporation Group will be able to further strengthen the earnings base and enhance corporate value by maximizing synergies between both companies, including overseas business expansion, while enabling efficient and agile management of business operations through such measures as more effective use of business resources, including those of the Company and its group companies. Furthermore, the Target Company’s Board of Directors has determined that the Tender Offer Price is not unreasonable given that a certain premium has been added to the recent share price of the Target Company’s common shares on the Tokyo Stock Exchange and that the Tender Offer Price is within the range of values indicated by the Valuation Report obtained by the Target Company from Frontier Management. However, since the Company does not plan to delist the shares in the Target Company through the Tender Offer, and the Target Company’s policy is that its shares should continue to be listed after the Tender Offer is completed, all the directors who participated in the voting decided to adopt a neutral position on whether or not to tender shares through the Tender Offer, leaving it to shareholders to decide whether or not to tender their shares. Furthermore, all of the corporate auditors (including outside corporate auditors) who participated in discussions on this resolution expressed an opinion to the effect that they had no objection to the resolution adopted at the meeting of the Board of Directors.
 
To avoid doubt of conflicts of interest and ensure fair and impartial decision-making by the Target Company, Mr. Isao Miyashita, a director of the Target Company, and Mr. Tsutomu Takanose, a corporate auditor of the Target Company, both of whom serve concurrently as employees of the Company, did not participate in any of the above discussions or resolutions at meetings of the Target Company’s Board of Directors regarding these matters, and did not participate in discussions and negotiations with the Company regarding the Tender Offer.
 
iii) Ensuring Objectivity for Ensuring the Fairness of the Tender Offer Price
The Company and the Target Company have not reached any agreement that would prevent a potential rival bidder from contacting the Target Company, such as an agreement, including deal protection provisions, that would prohibit the Target Company from having contact with a counter offeror. In this way, by ensuring the opportunity for a counter tender, the Company and the Target Company have given consideration to ensuring the fairness of the Tender Offer Price.
 
3)    Relationship With the Appraiser
Mitsubishi UFJ Morgan Stanley Securities, the Company's financial advisor (appraiser), does not fall under the category of “related party” of the Company, and does not have a material beneficial interest in the Tender Offer.
 
(5) Number of Shares to Be Purchased in the Tender Offer
Number of Shares to Be Purchased
Minimum Number of Shares to Be Purchased
Maximum Number of Shares to Be Purchased
18,584,347 shares
5,899,200 shares
(Note 1) If the total number of tendered shares is less than the minimum number of shares to be purchased (of 5,899,200 shares), the Company will not purchase any of the tendered shares. However, if the total number of tendered shares exceeds the minimum number of shares to be purchased (of 5,899,200 shares), the Company will purchase all the tendered shares.
(Note 2) The Company will not purchase any treasury stock held by the Target Company through the Tender Offer.
(Note 3) The Company has not set the maximum number of shares to be purchased in the Tender Offer. Therefore, the number of shares to be purchased has been listed as the maximum number of stock certificates, etc. of the Target Company (of 18,584,347 shares) that the Company will purchase through the Tender Offer. This number was obtained by subtracting the number of treasury shares (of 3,439,354 shares) owned by the Target Company as of November 30, 2012, as stated in the Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) submitted on January 7, 2013, and the common stock of the Target Company owned by the Company (of 6,786,000 shares) as of today, from the total number of issued shares (of 28,809,701 shares) as of November 30, 2012 stated in the Target Company’s Third-Quarter Report for the 44th Period filed by the Target Company on January 15, 2013.
(Note 4) Shares constituting less than one unit are also subject to the Tender Offer. If shareholders exercise their right to request purchase of shares constituting less than one unit in accordance with the Companies Act of Japan (Act No. 86 of 2005, including subsequent amendments, here and below), the Target Company may purchase its own shares during the Tender Offer Period in accordance with the procedures prescribed by law.
 
(6) Proportion of Ownership of Shares, etc. After the Tender Offer
Number of Voting Rights Represented by Shares, etc. Owned by the Tender Offeror before the Tender Offer
67,860
(Share Ownership of Shares, etc. before the Tender Offer: 26.75%)
Number of Voting Rights Represented by Shares, etc., Owned by Parties having Special Relationship with the Tender Offeror before the Tender Offer
4,158
(Share Ownership of Shares, etc. before the Tender Offer: 1.64%)
Number of Voting Rights Represented by Shares, etc. to be Purchased
185,843
(Share Ownership of Shares, etc. after the Tender Offer: 100.00%)
Total Number of Voting Rights of All Shareholders of the Target Company
253,214
 
(Note 1) “Number of Voting Rights Represented by Shares, etc. to be Purchased” is the number of voting rights attached to the 18,584,347 shares expected to be purchased in the Tender Offer.
(Note 2) “Number of Voting Rights Represented by Shares, etc., Owned by Parties having Special Relationship with the Tender Offeror Before the Tender Offer” is the number of voting rights represented by the share certificates, etc. held by Parties having Special Relationship with the Company. (However, this excludes treasury stock held by the Target Company and holders who are excluded from Parties having Special Relationship with the Company in accordance with Article 3, Paragraph 2-1 of the Cabinet Office Ordinance on Disclosure Required for Tender Offer for Share Certificates, etc. by Person Other than Issuer (Ministry of Finance Ordinance No. 38 of 1990, as amended) (the “Cabinet Office Ordinance”) in the calculation of Share Ownership of Shares, etc. in Article 27, Paragraph 2-1 of the Financial Instruments and Exchange Act; hereinafter referred to as “Small Holders.”) Furthermore, since the shares, etc. owned by Parties having Special Relationship with the Tender Offeror (excluding treasury stock owned by the Target Company) are subject to the Tender Offer, in the calculation of “Share Ownership of Shares, etc. after the Tender Offer,” “Number of Voting Rights Represented by Shares, etc., Owned by Parties having Special Relationship with the Tender Offeror before the Tender Offer” are not added to the numerator.
(Note 3) “Total Number of Voting Rights of All Shareholders of the Target Company” is based on the total number of voting rights of all shareholders as of November 30, 2012, as stated in the Target Company’s Third-Quarter Report for the 44th Period filed by the Target Company on January 15, 2013. However, since shares constituting less than one unit are subject to the Tender Offer, the calculations of “Share Ownership of Shares, etc. before the Tender Offer” and “Share Ownership of Shares, etc. after the Tender Offer” use as the denominator 253,703, which is the number of voting rights concerning the number of shares (25,370,347 shares), calculated as the total number of issued shares (of 28,809,701 shares) as of November 30, 2012 stated in the abovementioned Target Company’s Third-Quarter Report for the 44th Period, less treasury shares (of 3,439,354 shares) owned by the Target Company as of November 30, 2012, as stated in the Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Japanese GAAP) submitted on January 7, 2013.
(Note 4) The “Share Ownership of Shares, etc. before the Tender Offer” and the “Share Ownership of Shares, etc. after the Tender Offer” are rounded to two decimal points.
 
(7) Funds, Etc. Required for the Tender Offer
17,655 million yen
 
(Note) The above amount is the Tender Offer Price per share (of 950 yen) multiplied by the 18,584,347 shares to be purchased in the Tender Offer.
 
(8) Method of Settlement
1)    Name and Location of Head Office of Securities Company, Bank, etc. to Settle the Tender Offer
 
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
 
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo
 
2)    Commencement Date of Settlement
February 27, 2013 (Wednesday)
 
(Note) The commencement date of settlement shall be March 11, 2013 (Monday) if the Target Company submits a Position Statement requesting an extension of the Tender Offer Period, pursuant to the provisions of Article 27-10, Paragraph 3 of the Financial Instruments and Exchange Act.
 
3)    Settlement Procedure
Promptly after the end of the Tender Offer Period, a notice of purchase will be mailed to the address or location of shareholders wishing to tender their shares in the Tender Offer (the “Tendering Shareholders”) (or to the address or location of the standing proxy in the case of non-resident shareholders).
 
Payment of the purchase price will be made in cash. The Tender Offer Agent will, in accordance with the Tendering Shareholder’s instructions, remit to the account designated by the Tendering Shareholder (or the standing proxy in the case of non-resident shareholders) the purchase price for shares promptly after the commencement date of settlement.
 
4)    Method of Returning Share Certificates
If all the tendered shares are not purchased, in accordance with “1) Existence and Details of Conditions Listed under Paragraph 4 of Article 27-13 of the Financial Instruments and Exchange Act” and “2) Existence of Conditions for Withdrawal, etc. of the Tender Offer, Details Thereof, and Manner of Disclosing Withdrawal, etc.” of “(9) Other Conditions and Procedures Relating to the Tender Offer” below, shares to be returned will be returned by restoring the original record as at the same time immediately before application to the Tender Offer soon after the commencement date of settlement (or the day of withdrawal, if the Tender Offer is withdrawn). 
 
(9) Other Conditions and Procedures Relating to the Tender Offer
1) Existence and Details of Conditions Listed under Paragraph 4 of Article 27-13 of the Financial Instruments and Exchange Act
If the total number of tendered shares is less than the minimum number of shares to be purchased (of 5,899,200 shares), the Company will not purchase any of the tendered shares. However, if the total number of tendered shares exceeds the minimum number of shares to be purchased (of 5,899,200 shares), the Company will purchase all the tendered shares.
 
2) Existence of Conditions for Withdrawal, etc. of the Tender Offer, Details Thereof, and Manner of Disclosing Withdrawal, etc.
Upon the occurrence of any event listed in Article 14, Paragraph 1, Items 1i through ri and wo through so, Items 3 i through chi and nu, as well as Article 14, Paragraph 2, Items 3 through 6 of the Order for Enforcement of the Financial Instruments and Exchange Act (Cabinet Order No. 321 of 1965, as amended) (the “Enforcement Order”), the Company may withdraw the Tender Offer during the Tender Offer Period. In the Tender Offer, matters conforming to reasons listed from i through ri, as specified in the Article 14, Paragraph 1, Item 3 nu of the Enforcement Order, shall refer to cases where the false description regarding material matters or incomplete disclosure of material matters is discovered in mandatory disclosure documents filed by the Target Company in the past.
 
Should the Company intend to withdraw the Tender Offer, the Company will give public notice thereof through electronic disclosure and publish such fact in the Nihon Keizai Shimbun; provided, however, that if it is impracticable to give such notice within the Tender Offer Period, the Company will make a public announcement pursuant to Article 20 of the Cabinet Office Ordinance and give public notice forthwith.
 
3) Existence of Conditions for Reducing the Tender Offer Price, Details Thereof, and Manner of Disclosing Reduction
Pursuant to Article 27-6, Paragraph 1, Item 1 of the Financial Instruments and Exchange Act, if the Target Company takes any action enumerated in Article 13, Paragraph 1 of the Enforcement Order during the Tender Offer Period, the Company may reduce the purchase price of the Tender Offer in accordance with the standards prescribed by Article 19, Paragraph 1 of the Cabinet Office Ordinance.
 
Should the Company intend to reduce the purchase price of the Tender Offer, the Company will give public notice thereof through electronic disclosure and publish such fact in the Nihon Keizai Shimbun; provided, however, that, if it is impracticable to give such notice within the Tender Offer Period, the Company will make a public announcement pursuant to Article 20 of the Cabinet Office Ordinance and give public notice forthwith. If the purchase price is reduced, the Company will purchase any and all shares or other securities tendered on and prior to such public notice at the reduced purchase price.
 
4) Matters Regarding Right of Tendering Shareholders, etc. to Cancel Agreement
Tendering Shareholders may, at any time during the Tender Offer Period, cancel an application for the Tender Offer. In the event of cancellation, the Tendering Shareholders must hand-deliver or send by postal mail a written request for the cancellation of the application for the Tender Offer (the “Written Request for Cancellation”), enclosing the Receipt of Application for the Tender Offer, by 16:00 on the last day of the Tender Offer Period to the head office or a nationwide branch of the entity specified below. The cancellation of the application shall be effective when the Written Request for Cancellation is handed to or is delivered to the entity designated below. However, if the request is sent by postal mail, the Written Request for Cancellation will not be effective unless it is delivered to the entity specified below by 16:00 on the last day of the Tender Offer Period.
 
Entity authorized to receive Written Request for Cancellation:
 
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
 
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo
 
(and nationwide branches of Mitsubishi UFJ Morgan Stanley Securities)
 
No compensation for damages or penalty payments will be claimed against any Tendering Shareholder by the Tender Offeror in the event that the application by the Tendering Shareholder is canceled. The cost of returning the share certificates held by the Tender Offeror will be borne by the Tender Offeror. Upon request for cancellation, share certificates will be immediately returned in accordance with the method contained in the aforementioned “4) Method of Returning Share Certificates” under “(8) Method of Settlement” after the completion of procedures relating to said cancellation request.
 
5) Manner of Disclosure in Case of a Modification of Conditions, etc. of the Tender Offer
Except in instances forbidden under Article 27, Paragraph 6-1 of the Financial Instruments and Exchange Act and Article 13 of the Enforcement Order, the Tender Offeror may change the conditions or other terms of the Tender Offer during the Tender Offer Period. Should any terms or conditions of the Tender Offer be changed, the Company will give public notice thereof through electronic disclosure and publish such fact in the Nihon Keizai Shimbun; provided, however, that, if it is impracticable to make such notice within the Tender Offer Period, the Company will make a public announcement in accordance with Article 20 of the Cabinet Office Ordinance and give public notice forthwith. The purchase of the shares tendered on or prior to such public notice will also be carried out in accordance with the amended terms and conditions.
 
6) Manner of Disclosure upon Filing of an Amendment to the Registration Statement
Except in the circumstances provided for under the provisions of Article 27-8, Paragraph 11 of the Financial Instruments and Exchange Act, if an Amendment Statement is submitted to the Director-General of the Kanto Local Finance Bureau, the Tender Offeror will forthwith make a public announcement of the contents thereof, to the extent relevant to the contents of the public notice of the Tender Offer, in accordance with the procedures set forth in Article 20 of the Cabinet Office Ordinance. The Company will also forthwith amend the Tender Offer Explanatory Statement and provide an Amended Tender Offer Explanatory Statement to the Tendering Shareholders who received the previous Tender Offer Explanatory Statement. If, however, the amendments are limited, the Company, instead of providing an Amended Tender Offer Explanatory Statement, may prepare and deliver to the Tendering Shareholders a document stating the reason(s) for the amendments, the matters amended and the details of such amendments.
 
7) Manner of Disclosure of Results of the Tender Offer
The Company, on the day following the last day of the Tender Offer Period, will make a public announcement regarding the results of the Tender Offer in accordance with Article 9-4 of the Enforcement Order and Article 30-2 of the Cabinet Office Ordinance.
 
8) Other
This Tender Offer shall not, directly or indirectly, be conducted in or targeted at the U.S. Moreover, U.S. postal mail service or another method/means of interstate commerce or international commerce (including, without limitation, facsimile, e-mail, Internet communication, telex or telephone) shall not be used to conduct the Tender Offer, and the Tender Offer shall not be conducted through any U.S. stock exchange facility. Additionally, no application for this Tender Offer shall be made (i) by any of the aforementioned methods/means, (ii) through the aforementioned facilities or (iii) from the U.S.
 
Further, the Tender Offer Registration Statement, or the tender documents related to the Registration Statement, shall not be sent or distributed to, in or from the U.S. by mail or any other method. Any application for the Tender Offer in violation of any of the aforementioned restrictions, either directly or indirectly, will not be accepted.
 
At the time of tender, Tendering Shareholders (standing proxies for non-resident shareholders) may be requested to provide the Tender Offer Agent, with representations and warranties that state the following:
 
i) The Tendering Shareholders are not located or do not reside in the U.S., both at the time of applying for the Tender Offer and at the time of the sending of the Application Form for the Tender Offer; ii) The Tendering Shareholders are not, directly or indirectly, receiving or sending out any information (including copies) related to this Tender Offer to, in or from the U.S.; iii) the Tendering Shareholders have not and will not use, directly or indirectly, in connection with the signature and submission of the Application Form for the Tender Offer, (i) U.S. postal mail service or other method/means of interstate commerce or international commerce (including, without limitation, facsimile, e-mail, Internet communication, telex or telephone) or (ii) any U.S. stock exchange facility; and iii) The Tendering Shareholders are not acting as proxy for any other person without investment discretion or acting as trustee/fiduciary of any other person (not including those who are giving instructions on the tendering of shares from outside the U.S.).
 
(10) Date of Public Notice
January 21, 2013 (Monday)
 
(11) Tender Offer Agent
 
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
 
5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo
 
3. Policy Following the Tender Offer and Future Outlook
(1) Policy Following the Tender Offer
With respect to the policy following the Tender Offer, please refer to “(2) Events Leading Up to the Decision to Conduct the Tender Offer, the Objective and Decision-Making Process of the Tender Offer and Management Policy After the Tender Offer,” “(4) Plans to Purchase Additional Shares After the Tender Offer” and “(5) Outlook for Delisting and Reason” under “1. Purpose of the Tender Offer” above.
 
(2) Future Outlook
The Company is currently looking at the impact of the Tender Offer on its operating results forecasts for the year ending March 2013, and will promptly make a further announcement if it is necessary to revise its forecasts or make any other disclosure.
 
4. Other
(1) Existence of Agreements Between the Tender Offeror and the Target Company or its Officers and Details of Any Such Agreements
According to the Target Company’s Press Release, the Target Company obtained a Valuation Report regarding valuation analysis of the Target Company’s shares from Frontier Management and legal advice from NAGASHIMA OHNO & TSUNEMATSU. Following careful discussions and consideration of various conditions regarding the Tender Offer, all the directors who participated in the voting at a meeting of the Target Company’s Board of Directors held on January 18, 2013 expressed unanimous support for the Tender Offer for the following reasons. The Target Company believes that it can strengthen its earnings power by becoming a consolidated subsidiary of the Company. The Target Company believes that becoming a consolidated subsidiary of the Company will make it possible to strengthen coordination between the Target Company’s meat production and procurement capabilities, food-related product development capabilities, including processed meat products, production technology and production infrastructure, and proposal-based sales capabilities, and the Company’s abilities for procurement of raw materials and production of meat, slaughtering and processing infrastructure and sales capabilities. Furthermore, the Target Company and the Mitsubishi Corporation Group will be able to further strengthen the earnings base and enhance corporate value by maximizing synergies between both companies, including overseas business expansion, while enabling efficient and agile management of business operations through such measures as more effective use of business resources, including those of the Company and its group companies. Furthermore, the Target Company’s Board of Directors has determined that the Tender Offer Price is not unreasonable given that a certain premium has been added to the recent share price of the Target Company’s common shares on the Tokyo Stock Exchange and that the Tender Offer Price is within the range of values indicated by the Valuation Report obtained by the Target Company from Frontier Management. However, since the Company does not plan to delist the shares in the Target Company through the Tender Offer, and the Target Company’s policy is that its shares should continue to be listed after the Tender Offer is completed, all the directors who participated in the voting decided to adopt a neutral position on whether or not to tender shares through the Tender Offer, leaving it to shareholders to decide whether or not to tender their shares. Furthermore, all of the corporate auditors (including outside corporate auditors) who participated in discussions on this resolution expressed an opinion to the effect that they had no objection to the resolution adopted at the meeting of the Board of Directors.
 
To avoid doubt of conflicts of interest and ensure fair and impartial decision-making by the Target Company, Mr. Isao Miyashita, a director of the Target Company, and Mr. Tsutomu Takanose, a corporate auditor of the Target Company, both of whom serve concurrently as employees of the Company, did not participate in any of the above discussions or resolutions at meetings of the Target Company’s Board of Directors regarding these matters, and did not participate in discussions and negotiations with the Company regarding the Tender Offer.
 
The Company and the Target Company have not reached any agreement that would prevent a potential rival bidder from contacting the Target Company, such as an agreement, including deal protection provisions, that would prohibit the Target Company from having contact with a counter offeror. In this way, by ensuring the opportunity for a counter tender, the Company and the Target Company have given consideration to ensuring the fairness of the Tender Offer Price.
 
(2) Other Information Deemed Necessary for Investors to Determine Whether or Not to Subscribe to the Tender Offer
1) Announcement of Notice Concerning Sale of a Consolidated Subsidiary and Extraordinary Losses
On December 21, 2012, the Target Company announced the sale of a consolidated subsidiary and extraordinary losses. According to this press release, the Target Company directors at a meeting held on December 21, 2012 decided to sell all of the shares in wholly owned subsidiary Hirataya  Corp. to KOKUBO ICE CO., LTD. Furthermore, as a result of this move, the Target Company also announced that it would record extraordinary losses of approximately 359 million yen on a consolidated basis in the fourth quarter of the fiscal year ending February 28, 2013. Please note that the following overview contains only excerpts from the announcement, and the Company is not in a position to independently verify the accuracy or validity of this content, and has not undertaken such verification. For details, please refer to the press announcement.
 
2) Announcement of Consolidated Financial Results for the Third Quarter Ended November 30, 2012(Japanese GAAP)
 
On January 7, 2013, the Target Company released its Consolidated Financial Results for the Third Quarter Ended November 30, 2012. The following is an overview of the Target Company’s release. Please note that the following overview contains only excerpts from the announcement, and the Tender Offeror is not in a position to independently verify the accuracy or validity of this content, and has not undertaken such verification. For details, please refer to the Target Company’s release.
 
Consolidated Financial Results for the Third Quarter Ended November 30, 2012
(March 1, 2012 to November 30, 2012)
 
1)    Operating Results (Consolidated)
 
Accounting Period
Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Cumulative)
(March 1, 2012 to November 30, 2012)
Net Sales
104,897 million yen
Operating Loss
315 million yen
Ordinary Loss
481 million yen
Net Loss
670 million yen
 
2) Per Share Data (Consolidated)
 
Accounting Period
Consolidated Financial Results for the Third Quarter Ended November 30, 2012 (Cumulative)
(March 1, 2012 to November 30, 2012)
Net Loss per Share
26.08 yen
Diluted Net Loss per Share
 
3) Notice of Revision of Business Forecasts
On January 18, 2013, the Target Company announced revisions to its business forecasts. The following is an overview of the Target Company’s release. Please note that the following overview contains only excerpts from the announcement, and the Tender Offeror is not in a position to independently verify the accuracy or validity of this content, and has not undertaken such verification. For details, please refer to the Target Company’s release.
 
Revision of Consolidated Business Forecasts for the Year Ending February 28, 2013
(March 1, 2012 to February 28, 2013)
 
 
 
 
(Million yen, %)
 
Net Sales
Operating Income
Ordinary Income
Net Income
Net Income per Share
Previous forecast (A)
150,000
1,400
1,300
400
15.46
Revised forecast (B)
141,000
600
500
30
1.16
Change (B-A)
(9,000)
(800)
(800)
(370)
Change (%)
(6.0)
(57.1)
(61.5)
(92.5)
(Reference)
Results for year ended February 29, 2012
140,796
1,717
2,018
1,359
49.62
 
* Please note that a person receiving information concerning the Tender Offer through this Press Release may be prohibited from purchasing the share certificates and other securities of YONEKYU CORPORATION until twelve (12) hours have elapsed after the announcement of this Press Release (announcement of this Press Release shall be deemed to be made at sometime in the afternoon of January 18, 2013 at which this Press Release is disclosed through the service for inspection of disclosed information by Tokyo Stock Exchange) as a primary recipient of information concerning insider trading regulations in accordance with the provisions of Paragraph 3 of Article 167 of the Financial Instruments and Exchange Act and Article 30 of the Enforcement Order of the Financial Instruments and Exchange Act. Even if a person is subject to criminal, civil or administrative liability as a result of such purchase mentioned above, please note that the Company shall assume no responsibility therefor.
 
* This Press Release is for public announcement of the Tender Offer, and the Press Release has not been prepared for the purpose of soliciting offers to sell shares. If you would like to tender your shares to the Tender Offer, please ensure that you review the Tender Offer Explanatory Statement prepared by the Company prior to tendering your shares for sale at your own discretion. This Press Release shall neither be, nor constitute a part of, an offer to sell or a solicitation thereof or a solicitation of an offer to purchase, any securities. Moreover, this Press Release (or any part thereof) and the distribution thereof shall not be interpreted to be the basis of any agreement in relation to the Tender Offer, and this Press Release should not be relied on at the time any such agreement is concluded.
 
This Tender Offer shall not, directly or indirectly, be conducted in or targeted at the U.S. Moreover, U.S. postal mail service or another method/means of interstate commerce or international commerce (including, without limitation, telephone, telex, facsimile, e-mail and Internet communication) shall not be used to conduct the Tender Offer, and the Tender Offer shall not be conducted through any U.S. stock exchange facility. Additionally, no application for this Tender Offer shall be made (i) by any of the aforementioned methods/means, (ii) through the aforementioned facilities or (iii) from the U.S. Further, the press release concerning the Tender Offer, or the related tender documents, shall not be sent or distributed to, in or from the U.S. by mail or any other method. Any application for the Tender Offer in violation of any of the aforementioned restrictions, either directly or indirectly, will not be accepted. The Company does not solicit the purchase of marketable securities or other equivalent instruments to U.S. residents or within the U.S. The Company will not accept any marketable securities or other equivalent instruments sent from U.S. residents or from within the U.S.
 
There may be some nations or regions that legally restrict or limit the announcement, issuance or distribution of this Press Release. In such case, you are requested to take note of those restrictions or limitations and comply with any and all laws and regulations of such nations or regions. In nations or regions where the implementation of the Tender Offer is illegal, receipt by you of this Press Release shall not be deemed as an offer to purchase, or a solicitation of an offer to sell the shares in connection with the Tender Offer, but shall be deemed as receipt of information distributed for reference purposes only.
 
The details of the Japanese press release shall prevail if there is a difference or other conflict between the content of the Japanese press release and the content of the English translation of that press release.
 
 

Inquiry Recipient

Mitsubishi Corporation
Telephone:+81-3-3210-2171 / Facsimile:+81-3-5252-7705
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