News Releases


Strategic Joint Business in Leasing and Auto Leasing Businessesbetween Sumitomo Corporation Group and Sumitomo Mitsui Financial Group(1/1)

October 13, 2006

To whom it may concern:

Sumitomo Corporation
(Code No. 8053)
Sumisho Lease Co., Ltd.
(Code No. 8592)
Sumisho Auto Leasing Corporation
Sumitomo Mitsui Financial Group, Inc.
(Code No. 8316)
SMBC Leasing Company, Limited
SMBC Auto Leasing Company, Limited


Strategic Joint Business in Leasing and Auto Leasing Businesses between Sumitomo Corporation Group and Sumitomo Mitsui Financial Group


œSumitomo Corporation (hereinafter referred to as gSCh; Mr. Motoyuki Oka, President and CEO);

œSumisho Lease Co., Ltd. (hereinafter referred to as gSumisho Leaseh; Mr. Hideki Yamane, President);

œSumisho Auto Leasing Corporation, a wholly owned subsidiary of SC (hereinafter referred to as gSumisho Auto Leaseh; Mr. Hironori Kato, President);

œSumitomo Mitsui Financial Group, Inc. (hereinafter referred to as gSMFGh; Mr. Teisuke Kitayama, President),

œSMBC Leasing Company, Limited, a wholly owned subsidiary of SMFG (hereinafter referred to as gSMBC Leasingh; Mr. Koji Ishida, President); and

œSMBC Auto Leasing Company, Limited, a wholly owned subsidiary of SMBC Leasing (hereinafter referred to as gSMBC Auto Leasingh; Mr. Sumio Saito, President),

today announced that they have reached a basic agreement to pursue strategic joint businesses in leasing and auto leasing, summarized as follows:


1.Strategic Joint Business in Leasing and Auto Leasing Businesses

The domestic leasing market, which makes up about 10 percent of the private-sector capital spending, has been expanding among large as well as small-to-medium companies due to increase in capital spending sustained by their improvements in business performance, and the market size has reached 8 trillion yen. As for the domestic auto leasing market, the number of automobiles held for leasing purposes still only makes up less than 4 percent of the total number of automobiles in Japan, and therefore further growth of the auto leasing market is expected as Japanese corporations become more interested in improving efficiency. On the other hand, there are uncertainties in both markets, such as the concerns about rising interest rates and modifications of the accounting standard for leasing.

Given these circumstances, the Sumitomo Corporation Group and the Sumitomo Mitsui Financial Group agreed to position their leasing and auto leasing businesses as strategic joint business and to jointly aim to establish the best leasing and auto leasing businesses in Japan through the merger of SMBC Leasing and Sumisho Lease, and the merger of Sumisho Auto Lease and SMBC Auto Leasing. Sumisho Lease and Sumisho Auto Lease, utilizing various value chain of the Sumitomo Corporation Group, have unique customer base and know-how. On the other hand, SMBC Leasing and SMBC Auto Leasing, leveraging capabilities of the Sumitomo Mitsui Financial Group to provide financial solutions, have different customer base and know-how. These mergers will enable two groups to combine different customer base and know-how of each group.

In merging SMBC Leasing and Sumisho Lease, and also in merging Sumisho Auto Lease and SMBC Auto Leasing, we will make it a basic policy to provide our customers with value-added products and services by recognizing each other as best partners and pursuing best practices (such as thorough fairness, transparency, and a merit system) under mutual respect and spirit of cooperation, and aim for the early realization thereof. In addition, SC and SMFG will fully cooperate as parent companies, and will render assistance to the fullest extent for the development of both businesses.


‚Q.Summary of Strategic Joint Business

(1) Joint Business in the Leasing Business (Merger of SMBC Leasing and Sumisho Lease)

(i) Goal

EAchieving the highest volume of leases being handled in Japan through diversification of the types of leases being handled, etc., based on the high-quality customer bases of both the Sumitomo Mitsui Financial Group and the Sumitomo Corporation Group.

ECreating a high quality leasing company that can respond appropriately to market needs which are becoming increasingly sophisticated, by combining and blending the know-how of SMBC Leasing as a subsidiary of a financial institution and Sumisho Lease as a trading firmfs subsidiary, thereby promoting diversification and differentiation of products and providing more value-added products with freeing from the traditional approaches.

ECreating a strong management culture to effectively adapt to environmental changes, by strengthening funding capabilities and by promoting management efficiency.

(ii) Form of Merger


SMBC Leasing and Sumisho Lease plan to merge on October 1, 2007. Before this merger, SC plans to acquire the shares of Sumisho Lease by the tender offer (the gTOBh). If SC cannot acquire all outstanding shares of Sumisho Lease by the TOB (except for the shares of Sumisho Lease currently held by SC and Sumisho Leasefs treasury shares), SC plans to make Sumisho Lease its wholly-owned subsidiary by share exchange (gkabushiki kokanh) with cash as the consideration pursuant to Item 2, Paragraph 1, Article 768 of the Company Law. In such TOB and share exchange, shares of Sumisho Lease will be delisted in accordance with the criteria for delisting securities on the Tokyo Stock Exchange and the Osaka Securities Exchange. For details of the TOB and share exchange, please see the announcements separately made today by SC and Sumisho Lease.


Note: Each step will be conducted subject to the approvals at the general shareholdersf meetings of each party and/or of the relevant authorities, etc. under applicable laws and regulations.


(iii) Summary of New Leasing Company (Planned)


Business description: General leasing business
Address of the head office: 9-4, 3-chome, Nishi-Shimbashi, Minato-ku, Tokyo
Shareholder composition: SMFG 55% (a consolidated subsidiary of SMFG)
SC 45% (an equity-method affiliate company of SC)
Representative: Representative Chairman of the Board (Co-CEO)
Mr. Hideki Yamane (current President of Sumisho Lease)
Representative President (Co-CEO)
Mr. Koji Ishida (current President of SMBC Leasing)

Details of the merger such as the trade name and amount of capital, etc. will be determined prior to the execution of the merger agreement.


(iv) Summary of Accounting Treatment

The new leasing company is expected to become a consolidated subsidiary of SMFG and an equity-method affiliate company of SC. This merger is an acquisition under the accounting standards for business combinations, and upon this merger taking effect, SMFG plans to recognize goodwill for purposes of its consolidated financial statements. However, the amount to be recognized has not yet been determined at present.


(2) Joint Business in the Auto Leasing Business (Merger of Sumisho Auto Lease and SMBC Auto Leasing)

(i) Goal

EWinning a place in the auto leasing industry that is becoming increasingly competitive and establishing a structure aiming to be ranked number one with respect to the market share, based upon the high-quality customer bases of both the Sumitomo Corporation Group and the Sumitomo Mitsui Financial Group.

EEstablishing a highly profitable company by combining high-value-added services based on Sumisho Auto Leasefs value chain and business network of SMBC Auto Leasing.

EAchieving better customer satisfaction by combining and blending the know-how of Sumisho Auto Lease as a trading firmfs subsidiary and SMBC Auto Leasing as a subsidiary of a financial institution, thereby pursuing various services.


(ii) Form of Merger

Sumisho Auto Lease and SMBC Auto Leasing plan to merge on October 1, 2007 after making SMBC Auto Leasing a direct subsidiary of SMFG, which is subject to the approval at the general shareholdersf meetings and other requirements.

(iii) Summary of New Auto Leasing Company (Planned)


Business description: Leasing business of various automobiles
Address of the head office: 20-2, 3-chome, Nishi-Shinjuku, Shinjuku-ku, Tokyo
Shareholder composition: SC 60% (a consolidated subsidiary of SC)
SMFG 40% (an equity-method affiliate company of SMFG)
Representative:

Representative Chairman of the Board (Co-CEO)
Mr. Katsuyuki Shibabuki (the current Chairman of the Board of SMBC Auto Leasing)
Representative President (Co-CEO)
Mr. Hironori Kato (the current President of Sumisho Auto Lease)


Mr. Sumio Saito, the current President of SMBC Auto Leasing is scheduled to become Representative Director, Vice President of the new auto leasing company.

Details of the merger such as the trade name and amount of capital, etc. will be determined prior to the execution of the merger agreement.


(iv) Summary of Accounting Treatment

The new auto leasing company is expected to become a consolidated subsidiary of SC and an equity-method affiliate company of SMFG. SC will apply the accounting standard under the accounting principles generally accepted in the United States of America (gU.S. GAAPh). However, the amount of goodwill, etc. has not been determined at present.


(3) Business Cooperation

The Sumitomo Corporation Group and the Sumitomo Mitsui Financial Group will engage in necessary business cooperation such as introducing customers and deals to the merged companies so as to jointly promote the leasing business and the auto leasing business, and they will develop the structure with which the merged companies can effectively and smoothly utilize customer bases and know-how of both the Sumitomo Corporation Group and the Sumitomo Mitsui Financial Group.


3.System for Promoting Joint Business

For the purpose of smoothly implementing the joint business in leasing and auto leasing businesses, a gMerger Preparatory Committeeh will be established for each business. The committee for the leasing business will be chaired by the presidents of SMBC Leasing and Sumisho Lease, and the one for the auto leasing business will be chaired by the presidents of Sumisho Auto Lease and SMBC Auto Leasing. At the same time, separate subcommittees to discuss individual topics such as planning, financial accounting, human resource management, system development, etc. will be constituted under the gMerger Preparatory Committee.h In addition, a merger preparatory office will be constituted in each of the four companies.


4.Schedule (Planned)

(1) Leasing Business


October 13, 2006 (Today) Signing of a letter of intent
October 31, 2006 Commencement of the TOB of Sumisho Lease by SC
December 7, 2006 Completion of the TOB of Sumisho Lease by SC
May, 2007 In case SC cannot acquire all the shares of Sumisho Lease:
Execution of a share exchange agreement
(SC and Sumisho Lease)
June, 2007

Annual general meeting of shareholders to approve the share exchange (SC and Sumisho Lease)

If the share exchange is deemed to be a simplified share exchange (gkanfi kabushiki kokanh) or a short-form share exchange (gryakushiki kabushiki kokanh), a resolution of approval by the general meeting of shareholders may not be needed.

July, 2007 Delisting of shares of Sumisho Lease
August, 2007 SC makes Sumisho Lease its wholly-owned subsidiary by the share exchange
August, 2007 Extraordinary general meeting of shareholders to approve the merger (SMBC Leasing and Sumisho Lease)
October 1, 2007

Merger of SMBC Leasing and Sumisho Lease


(2) Auto Leasing Business


October 13, 2006 (Today) Signing of a letter of intent
August, 2007 Extraordinary general meeting of shareholders to approve the merger (Sumisho Auto Lease and SMBC Auto Leasing)
October 1, 2007 Merger of Sumisho Auto Lease and SMBC Auto Leasing

SMFG plans to make SMBC Auto Leasing its wholly-owned subsidiary by acquiring all the shares of SMBC Auto Leasing from SMBC Leasing, prior to the merger on October 1, 2007.

The schedule above may be changed upon consultation among the parties upon unforeseen circumstances.


5.Process of Integration

(1) Current Status



(2) Sumisho Lease becomes a wholly-owned subsidiary of SC by the TOB(and share exchange)of shares of Sumisho Lease.
SMBC Auto Leasing becomes a wholly-owned direct subsidiary of SMFG


(3) Merger of SMBC Leasing and Sumisho Lease.
Merger of Sumisho Auto Lease and SMBC Auto Leasing.


6.Business Forecast

(1) SC:

The business forecast for the year ended march 31, 2007 is not revised as a result of this transaction.

(2) Sumisho Lease:

The business forecast for the year ended march 31, 2007 is not revised as a result of this transaction.

(3) SMFG:

The business forecast for the year ended march 31, 2007 is not revised as a result of this transaction.




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