News Releases
Notice Regarding Conclusion of Basic Agreement for Making Promise a Wholly-owned Subsidiary of Sumitomo Mitsui Financial Group(1/1)
September
30, 2011
Sumitomo Mitsui Financial Group, Inc.
(Code: 8316)
Sumitomo Mitsui Banking Corporation
Promise Co, Ltd.
(Code: 8574)
Notice Regarding
Conclusion of Basic Agreement for Making Promise a Wholly-owned
Subsidiary of Sumitomo Mitsui Financial Group
Sumitomo Mitsui Financial Group, Inc. (“SMFG”, President: Koichi Miyata),
its wholly-owned subsidiary Sumitomo Mitsui Banking Corporation (“SMBC”,
President: Takeshi Kunibe) and Promise Co., Ltd. (“Promise”, President and Representative Director: Ken Kubo) hereby announce that at their respective meetings of the Board of
Directors held today, each company resolved the basic policy for making Promise a wholly-owned
subsidiary of SMFG (the “Making Promise Wholly-owned Subsidiary”), subject to,
among others, the approval of the relevant regulatory authorities, and entered
into a basic agreement for implementation of specific transactions, as follows:
For Making Promise Wholly-owned Subsidiary, today, SMBC, at its meeting of
the Board of Directors, resolved that SMBC will commence the tender
offer for shares and other equity securities of Promise (the “Tender Offer”),
and Promise, at its meeting of the Board of Directors, resolved to express its
opinion in favor of the Tender Offer.
Furthermore, Promise, at its meeting of the Board of Directors held on
the same day, resolved capital increase through the third-party allotment of
shares to be allocated to SMFG or SMBC (the “Third-Party Allotment”), and SMFG
and SMBC, at their respective meetings of the Board of Directors held on the same day, respectively resolved that SMFG or SMBC will subscribe
the shares issued by Promise through the Third-Party Allotment.
If SMBC does not acquire
all issued shares of Promise (excluding treasury shares owned by Promise) through the Tender Offer, Promise, SMFG and SMBC intend in principle
that, subject to the approval of the relevant regulatory authorities, SMFG will
make Promise a wholly-owned subsidiary through the share exchange upon which
Promise will become a wholly-owned subsidiary of SMFG (the “Share Exchange”)
after the Tender Offer. These series of transactions, including making Promise
a wholly-owned subsidiary of SMFG through the Tender Offer and the procedures
for the Making Promise Wholly-owned Subsidiary as well as the Third-Party
Allotment shall be collectively referred to as the “Transactions” hereinafter.
1. Concept and Purpose
of the Basic Agreement
SMFG group considers
Promise group as one of its core entity in its consumer finance business from
the following reasons: (i) although the consumer finance business faces a severe
business environment, due to the strengthening of interest rate ceiling
regulation and the market scale reduction associated with implementation of
restriction on total volume for money lending, while the number of interest
refund claims hovering at a high level, the business still remains a relatively
high margin and continuously and steadily profitable business, therefore, SMFG
intends to, in the medium to long term, emphasize the consumer finance business
as a part of its retail business line-up that support individual consumption,
(ii) Promise will contribute the enhancement of client base of SMFG group as
the banks and consumer finance companies are in supplemental relationship due
mainly to different characteristics of customers, and (iii) credit screening
and other knowhow of Promise is strategically inevitable for the consumer
finance business of SMFG group.
Currently the
management environment surrounding Promise remains severe, as stated above, and
Promise has proactively promoted business structure reform in order to
establish a solid foundation with an aim of becoming the “No.1 consumer finance
company both in terms of quality and quantity.” Specifically, Promise has implemented
various measures: (i) streamlined its business operation through the total
elimination of its staffed branches and substantial personnel downsizing, (ii)
transformed its operational framework effectively while providing sophisticated
services to its customers, including by integration with Sanyo Shinpan Finance
Co., Ltd. and At-Loan Co., Ltd., and (iii) enlarged its operation through
installation of its loan agreement machine and ATMs for SMBC in the branches of
Promise, making loan agreement machine in SMBC’s branches available for
Promise, and commencing guarantee services to a part of the card-type loans
made by ORIX Credit Corporation.
Against backdrop,
based on the recognition that (i) in order to reinforce the consumer finance
business of the SMFG group and to enhance earnings generation capacity
promptly, it is necessary to build up an infrastructure accommodating group-wide
prompt and flexible decision making by further strengthen the cooperation
between Promise and SMFG group companies, and (ii) in order to effectively
achieve the expansion of the consumer finance business centering on Promise, it
is necessary to strengthen financial base of Promise: SMFG and SMBC came to
judge it best that, as stated below, SMFG ultimately makes Promise its wholly-owned
subsidiary through and after the Tender Offer to be conducted by SMBC, and
simultaneously strengthen the financial base of Promise promptly through
subscription of the Third-Party Allotment by SMFG or SMBC.
Promise also is of the
opinion that becoming a wholly-owned subsidiary of SMFG, which focuses on the
consumer finance business as a part of its retail business line-up and place
the Promise group as one of the core players of the consumer finance business,
will enable Promise to implement various measures such as (i) the strengthening
of the ability to develop operations by proactive utilization of the SMBC’s
brand and channels, (ii) the strengthening of overseas business by utilizing
SMFG group’s global management resources, and (iii) the reallocation to sales
promotion and so forth of the management resources required for procurement of
funds or head office functions, and therefore bring huge advantages. From this point of view, Promise convinces
that strengthening alliances with SMFG group companies and promptly
strengthening its business and financial base through becoming a wholly-owned
subsidiary of SMFG will (i) contribute to the establishment of a competitive
advantage in the industry and further the enhancement of its enterprise value,
and (ii) result in the enhancement of its profit-earning capacity in the aspect
that more efficient and flexible business management will be possible by
further utilizing the management resources of the SMFG group.
In addition, as it was
concluded that the tender offer price and other terms and conditions of the
Tender Offer are appropriate for the shareholders of Promise, and that the
Tender Offer will provide a reasonable opportunity for the shareholders of
Promise other than the SMFG Group, to sell their shares, Promise, at the
meeting of the Board of Directors held today, resolved (i) to express an
opinion in favor of the Tender Offer, and (ii) to recommend that the
shareholders of Promise tender their shares in the Tender Offer. In addition, Promise resolved, at the
same meeting, to leave the decision whether to tender in the Tender Offer with
respect to the first series of stock acquisition rights for the stock
compensation-type stock options, the second series of stock acquisition rights
for the stock compensation-type stock options and the third series of stock
acquisition rights for the stock compensation-type stock options (the stock
acquisition rights from the first series to third series shall be collectively
referred to as the “Stock Acquisition Rights” hereinafter) as well as the euro
yen callable bonds with stock acquisition rights due 2015 (the “Bonds with
Stock Acquisition Rights”), up to the judgment of the holders of the Stock
Acquisition Rights and the holders of the Bonds with Stock Acquisition Rights.
After SMFG makes
Promise a wholly-owned subsidiary, through further promotion of the cooperation
with SMFG group companies and utilizing SMBC’s brand and channels proactively,
and also by maximally utilizing the financial base strengthened by the
Third-Party Allotment to SMFG or SMBC, SMFG and Promise plan to enlarge the
Promise’s operations further and to strengthen the position of the SMFG group
in the consumer finance business on a group-wide basis.
2. Process toward
Making Promise a Wholly-owned Subsidiary of SMFG
(1) Tender Offer by
SMBC
For making Promise a
wholly-owned subsidiary, SMBC, which is a wholly-owned subsidiary of SMFG and
holds 27,926,750 shares of common stock of Promise as of today(ratio to the
total number of issued shares of Promise as of June 30, 2011 (134,866,665
shares): 20.71% (rounded off to two decimal places)), will implement the Tender
Offer targeting the issued and outstanding shares of Promise (including shares
of common stock of Promise that may be issued or transferred as a result of
exercising the Stock Acquisition Rights and the stock acquisition rights
attached to the Bonds with Stock Acquisition Rights; the same shall apply
hereafter (the “Shares of Promise”), the Stock Acquisition Rights and the Bonds with Stock
Acquisition Rights. The Tender Offer is scheduled to commence on October 18,
2011, and the Tender Offer Price for shares of common stock of Promise is
scheduled to be JPY780 per share, the Tender Offer Price for the Stock
Acquisition Rights is scheduled to be JPY1 per Stock Acquisition Right and the
Tender Offer Price for the Bonds with Stock Acquisition Rights is scheduled to
be JPY2,765,880 per par value of JPY10 million of the Bonds with Stock
Acquisition Right (the price is an amount obtained by dividing the par value (JPY10,000,000)
of the Bonds with Stock Acquisition Rights by the conversion price in effect as
of the commencement date of the Tender Offer (JPY2,820)) (any fractions less
than one share shall be rounded down), and multiplying such amount by the
Tender Offer Price of JPY780). For details, please refer to the release,
“Notice Regarding Commencement of the Tender Offer for Shares of Promise
by Sumitomo Mitsui Banking
Corporation and Subscription by Sumitomo Mitsui Financial Group or Sumitomo
Mitsui Banking Corporation for New Shares Issued by Promise by Way of
Third-Party Allotment” that was issued today by SMFG and SMBC.
As described above,
Promise, at the meeting of the Board of Directors held today, resolved (i) to
express an opinion in favor of the Tender Offer, and (ii) to recommend that the
shareholders of Promise tender their shares in the Tender Offer. In addition, Promise, resolved, at the
same meeting, to leave the decision whether to tender in the Tender Offer with
respect to the Stock Acquisition Rights and the Bonds with Stock Acquisition
Rights, to the judgment of the holders of the Stock Acquisition Rights and the
holders of the Bonds with Stock Acquisition Rights. For details, please refer
to the release, “Announcement of the Expression of Opinion in Favor of the
Tender Offer by Sumitomo Mitsui Banking Corporation for Shares of the Company”
that was issued today by Promise.
(2) Share Exchange
between Promise and SMFG
If
SMBC does not acquire all issued shares of Promise (excluding treasury shares
owned by Promise), through the
Tender Offer, SMFG, SMBC and
Promise intend in principle that, subject to the approval of the relevant
regulatory authorities, SMFG will make Promise a wholly-owned subsidiary
through the share exchange upon which Promise will become a wholly-owned
subsidiary of SMFG.
From the viewpoint of
ensuring that the Share Exchange reflect the intention of the shareholders of
the Target appropriately and that the Share Exchange be implemented with the
support of the shareholders of the Target, it is agreed among SMFG, SMBC and
Promise that: (i) if the ratio of the total number of shares tendered in the
Tender Offer to the number obtained by subtracting the number of shares of
Promise held by SMBC as of the commencement date of the Tender Offer from the
total number of issued shares of Promise (excluding the number of treasury
shares held by Promise and not including the number of shares to be issued
under the Third-Party Allotment) (the “Number of Shares Held by Minority
Shareholders”) becomes more than 50% (the “Minority Shareholder Tender Ratio”)
(in this case, the ratio of voting rights to be held by SMBC after the Tender
Offer to the number of voting rights of all shareholders as of March 31, 2011,
which is 2,535,922, as stated in the Quarterly Report for the First Quarter of
the 51st Fiscal Year filed by Promise on August 12, 2011, will be more than
61.02% (rounded to the nearest hundredth)), the Share Exchange shall be
implemented on the understanding that the Making Promise Wholly-owned
Subsidiary has obtained sufficient support from the shareholders of the Target;
however, (ii) if the Minority Shareholder Tender Ratio becomes 50% or less, the
Share Exchange shall be implemented only in the case where SMFG, SMBC and
Promise confirm that the ratio of (a) the total number of shares of Promise
tendered in the Tender Offer plus the number of shares of Promise held by
shareholders of Promise (excluding SMBC) who expressed their support for the
Share Exchange upon the solicitation of the Tender Offer or after the Tender
Offer to (b) the number obtained by subtracting the number of shares held by
shareholders to which direct solicitation may not be made in the Tender Offer
for reasons such as their whereabouts were unknown from the Number of Shares
Held by Minority Shareholders becomes more than 50%, and if such confirmation
is not made, the implementation of the Share Exchange shall be postponed or the
details of the Share Exchange shall be changed. In any of the above cases,
implementation of the Share Exchange is subject to receiving from the third
party committee of Promise an opinion to the effect that the implementation and
method of the Share Exchange will not be detrimental to the interests of
minority shareholders.
It is anticipated
that, in the event the Share Exchange is implemented, the shares of SMFG’s
common stock will be allocated and delivered in consideration for Shares of
Promise held by Promise’s shareholders, and every shareholder of Promise, to whom
not less than one share of SMFG's common stock is allocated, will become a
shareholder of SMFG. The share exchange ratio applicable to the Share Exchange,
where it is implemented, will be determined after the completion of the Tender
Offer, through consultations between SMFG and Promise, giving full
consideration to the interest of shareholders of the respective companies;
however, when determining the consideration to be received by Promise’s
shareholders upon the Share Exchange (i.e., SMFG’s shares; provided, however,
that, if fractional number of share less than one (1) share are allocated, the
proceeds for sale of such fractions shall be delivered), Shares of Promise are
expected to be valued based on a price equivalent to the Tender Offer Price. The
Share Exchange is planned to be implemented, aiming the effective date to be in
or around April 2012. Also, SMFG plans to deliver the shares of SMFG’s common
stock to be delivered in consideration for the Share Exchange, upon acquiring
such shares through market purchases, etc., before the Share Exchange. The Share Exchange is planned to be
implemented in the form of a summary share exchange (kanni kabushiki kokan) prescribed in the main text of Article 796,
Paragraph 3 of the Companies Act, without obtaining the approval at a general
meeting of shareholders of SMFG. Further, the Share Exchange may be implemented
in the form of a short form share exchange (ryakushiki
kabushiki kokan) prescribed in the provisions of Article 784, Paragraph 1
of the Companies Act, without obtaining the approval at a general meeting of shareholders of
Promise.
The implementation and
method of the Share Exchange are scheduled to be decided by around February
2012, and the specific procedures and timing for the implementation of the
Share Exchange will be promptly announced as soon as they are decided upon
consultation among SMFG, SMBC and Promise.
3. Promise’s
Additional Provision of Interest Repayments-Related Allowance and Third-Party
Allotment to SMFG or SMBC
In the consumer
finance industry, companies in the industry are facing a severe business
environment due to the strengthening of interest rate ceiling regulation and
the market scale reduction associated with implementation of restriction on
total volume for money lending, while the number of interest refund claims
hovering at a high level, and have been forced to experience a decrease in
their consumer loans outstanding.
In such a challenging business environment, Promise has been making
efforts to improve its management base by carrying out a cost structure reform
and the streamlining of group management resources, through selection and
concentration thereof, based on the Business Structural Reform Plan that
Promise announced in January 2010.
However, as stated in
the “Announcement of Revision of Earnings Forecast and Dividends Forecast”
released today, Promise was required to record the interest
repayments-related allowance (including the allowance for losses on interest
repayments and the allowance for credit losses which is to be applied to the
principal related to the interest repayments) in the amount of approximately JPY390
billion at the end of the second quarter of the fiscal year ending March 31,
2012. Therefore, Promise will
implement an additional provision of the interest repayments-related allowance;
in connection therewith Promise will post a net loss of JPY203.4 billion in the
second quarter cumulative period of the fiscal year ending March, 2012, which
will result in a large equity capital impairment. In such circumstances, Promise has
decided that it is essential to promptly improve its impaired financial base by
sufficiently preparing for the issue of claims for interest repayments, which
is a significant constraint on Promise’s financial base, and to enable the
promotion of aggressive policies toward future growth strategies, and therefore
has come to the decision to implement the Third-Party Allotment.
The amount planned to
be procured through the Third-Party Allotment is approximately JPY120 billion. Promise has come to the decision that as
a method to procure such a large amount of required funds in a prompt and
reliable manner and strengthen the financial base, the Third-Party Allotment
allocated to the SMFG group, which intends to, in the medium to long term,
emphasize the consumer finance business as a part of its retail business
line-up supporting individual consumption and has already placed Promise group
as one of the core players of the consumer finance business, is a reasonable
option in terms of management and is the most effective measure. Promise has decided that the Third-Party
Allotment will (i) enable the SMFG group to further strengthen and nurture the
consumer finance business, which is one of the core businesses in the retail
business, in terms of cross-selling to individuals and (ii) contribute to the
enhancement of the enterprise value of Promise that aims to “realize the No. 1
consumer finance company both in quality and quantity.”
Upon the above
judgment, Promise, at the meeting of its Board of Directors held today,
resolved the Third-Party Allotment to be allocated to SMFG or SMBC, setting the
payment date as December 26, 2011, the amount to be paid per share as JPY531
and the total amount to be paid as JPY119,999,999,700, and SMFG and SMBC, at
their respective meetings of the Board of Directors held today, respectively
resolved that SMFG or SMBC will fully subscribe the shares issued by Promise
through the Third-Party Allotment in the total amount to be paid as JPY119,999,999,700. The allotted party of the Third-Party
Allotment will be determined, around early December, to be SMFG if Making
Promise Wholly-owned Subsidiary is expected to be implemented, or SMBC, if it
is not expected to be implemented, based on the result of the Tender Offer and
considering whether or not the Making Promise Wholly-owned Subsidiary will be
implemented. In accordance with such resolution, SMFG and Promise have entered
into a share subscription agreement dated today with respect to such
Third-Party Allotment.
Further, the
Third-Party Allotment shall be performed for the purpose of strengthening
Promise’s financial base and is scheduled to be implemented regardless of the
result of the Tender Offer (provided, however, that the certain conditions for
subscription have been agreed, including no change to or no retraction of the
resolution by the meeting of the Board of Directors with respect to the
expression of their opinion in favor of the Tender Offer by the Board of
Directors of Promise and to recommend that the shareholders of Promise tender
their shares in the Tender Offer.)
Please refer for more
details the press release by Promise dated today, entitled “Announcement of the
Issuance of New Shares by Third-Party Allotment” and the press release by SMFG
and SMBC dated today, entitled “Notice Regarding Commencement of Tender Offer
for Shares of Promise by Sumitomo Mitsui Banking Corporation and Subscription
by Sumitomo Mitsui Financial Group or Sumitomo Mitsui Banking Corporation for
New Shares Issued by Promise by Way of Third-Party Allotment”
4. Direction of
Enhancement of Business Alliances after Making Promise Wholly-owned Subsidiary
SMFG, SMBC and Promise
entered into a basic agreement dated September 30, 2011 regarding strengthening
of business alliances after SMFG makes Promise a wholly-owned subsidiary of
SMFG. Specifically, under the
common understanding that mutual business collaboration should be further
strengthened, SMFG, SMBC and Promise agree to promptly establish a business
alliance committee, and to the extent permitted by laws and regulations, to
specifically consider the following matters, and strengthen mutual
collaboration.
(1) Further promotion of co-utilization of sales
channel between Promise and SMBC
(2) Enhancement of sales promotion at Promise
through utilization of SMBC brand
(3) Development of Promise’s retail business in
(4) Pursuit of efficiency through consolidation of
servicer and middle back functions* within the group
(5) Fortification of sharing various information
including credit screening knowhow among SMFG group companies
* Middle back
functions mean back-office or support services including office work.
5. Future Prospects
There is no revision
of the earnings forecast for SMFG for the fiscal year ending March 2012
associated with the Transactions.
With respect to the earnings forecast for Promise for the fiscal year
ending March 2012, please refer to the press release by Promise dated today,
entitled “Announcement of Revision of Earnings Forecast and Dividends
Forecast.”
[Reference] Other releases issued today in connection with the Transaction:
(1) SMFG and SMBC: “Notice Regarding Commencement
of Tender Offer for Shares of Promise by Sumitomo Mitsui Banking Corporation
and Subscription by Sumitomo Mitsui Financial Group or Sumitomo Mitsui Banking
Corporation for New Shares Issued by Promise by Way of Third-Party Allotment”
(2) Promise: “Announcement of the Expression of
Opinion in Favor of the Tender Offer by Sumitomo Mitsui Banking Corporation for
Shares of the Company”
(3) Promise: “Announcement of Revision of Earnings
Forecast and Dividends Forecast”
(4) Promise: “Announcement of Issuance of New
Shares by Third Party Allotment”
End
|
Precaution Statement * This press
release contains “forward-looking
statements” (as defined
in the U.S. Private Securities Litigation Reform Act of 1995), regarding the
intent, belief or current expectations of SMFG or Promise and their
respective management with respect to the future financial condition and
results of operations of SMFG or Promise. In many cases but not all, these
statements contain words such as “anticipate”, “estimate”, “expect”, “intend”, “may”, “plan”, “probability”, “risk”, “project”, “should”, “seek”, “target” and similar expressions. Such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and actual results may differ from those
expressed in or implied by such forward-looking statements contained or
deemed to be contained herein. The risks and uncertainties which may affect
future performance include the fragility of any economic recovery, both
globally and in Japan; ability to successfully implement its business and
capital strategy; the success of our business alliances including those in
the consumer finance industry; exposure to new risks as we expand the scope
of our business; significant credit-related costs; declines in the value of
securities portfolio. Given these and other risks and uncertainties, you
should not place undue reliance on forward-looking statements, which speak
only as of the date of this press release. SMFG and Promise undertake no
obligation to update or revise any forward-looking statements. Please refer
to our most recent disclosure press releases such as annual report or the
registration statement on Form 20-F filed with the U.S. Securities and
Exchange Commission filed by SMFG, as well as press release for a more
detailed description of the risks and uncertainties that may affect financial
conditions, operating results, and investors’ decisions of or on SMFG and Promise. * The
transactions are made for the securities of Promise by SMBC, both of which
are Japanese companies. It may be difficult for you to enforce your rights
and any claim you may have arising under the U.S. federal securities laws in
respect of the Tender Offer, since SMBC and Promise are located in Japan and
all of their officers and directors are residents of Japan. You may not be
able to sue SMBC and Promise or their officers or directors in a Japanese
court for violations of the * The
Tender Offer is to be conducted in accordance with the procedures and
information disclosure standards prescribed in the Financial Instruments and
Exchange Act of Japan. However,
these procedures and standards are not necessarily the same as the
corresponding procedures and standards in the * The
financial advisors to SMBC and Promise, the Tender Offer agent and SMBC (including
their respective affiliates), in the ordinary course of their secondary
trading businesses, may engage during the Tender Offer Period in the purchase
and sale of shares or stock acquisitions rights of Promise for their own
account or for their customers’ accounts to the extent permitted under Japanese and U.S. securities laws
and regulations. * Please
note that a person receiving information contained in this press release may
be prohibited from purchasing the share certificates and other securities of
Promise until twelve (12) hours have elapsed after the announcement of the
press release by SMFG and SMBC regarding the Tender Offer (the announcement
of this press release shall be deemed to be made at the time when this press
release is disclosed through the service for inspection of disclosed
information managed by Tokyo Stock Exchange during the afternoon of September
30, 2011) as a primary recipient of information under the insider trading
regulations pursuant to the
provisions of Paragraph 3 of Article 167 of the Financial Instruments and
Exchange Act and Article 30 of the Financial Instruments and Exchange Act
Enforcement Order. Should a
person be subject to criminal, civil or administrative liability as a result
of such purchase mentioned above, neither SMFG, SMCB nor Promise shall assume
any responsibility therefor. * 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, neither this press release (or any part thereof) nor
the distribution thereof shall not be interpreted to be the basis of any
agreement in relation to the Tender Offer, nor otherwise be relied on at the
time any such agreement is concluded. * This
press release is not a part of the offer for invest in any securities. This
press release is for public announcement of the matters in relation to the
conclusion of the basic agreement for making Promise a wholly-owned
subsidiary of SMFG, and it has not been prepared for the purpose of
soliciting investment domestic or overseas. * Since
there may be some nations or regions that legally restrict or limit the
announcement, issuance or distribution of this press release, 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, neither your receipt of this
press release nor its translation shall be deemed as a solicitation of an
offer to sell or an offer to purchase, the shares in connection with the
Tender Offer, but shall be deemed as receipt of information distributed for
reference purposes. * All
the procedures for the Transaction will be conducted in Japanese, unless
provided for otherwise. All or
part of the documents for the Transaction will be prepared in English;
provided, however, that, if any discrepancy arises between English documents
and Japanese documents, Japanese documents shall prevail. |
