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  7. Notice Regarding Fujitsu Devices Inc. Becoming a Wholly Owned Subsidiary of Fujitsu Limited through an Exchange of Shares

Notice Regarding Fujitsu Devices Inc. Becoming a Wholly Owned Subsidiary of Fujitsu Limited through an Exchange of Shares

Fujitsu Limited,Fujitsu Devices Inc.

Tokyo, May 24, 2007

Fujitsu Limited (TSE-1 Code: 6702; hereafter "Fujitsu") and Fujitsu Devices Inc. (TSE-2 Code: 7582; hereafter "FDI"), in accordance with the decisions today by their respective boards of directors, announced that they have signed a share exchange agreement through which FDI will become a wholly owned subsidiary of Fujitsu by means of an exchange of shares (hereafter "share exchange"). This agreement is outlined below.

Following approval at FDI's annual shareholders' meeting on June 22, 2007, the exchange is scheduled to take effect on August 1, 2007. In accordance with Article 796, Section 3 of the Company Law, Fujitsu does not plan to seek approval for the share exchange at its annual shareholders' meeting.

As a result of the exchange, Fujitsu will become the parent company of FDI on August 1, 2007, and, as a wholly owned subsidiary, FDI is scheduled to be delisted on July 26, 2007, with July 25, 2007 as the final trading day for its stock.

1. Objectives for Making FDI a Wholly Owned Subsidiary through Share Exchange

Fujitsu develops, manufactures, and sells products and provides services in areas such as software and services, information processing, telecommunications and electronic devices. FDI is Fujitsu's Electronic Devices Business Group's largest distributor in Japan.

In the field of electronic devices, from device manufacturing to the provision of solutions principally based on LSI devices, the Fujitsu Group seeks to provide support for a variety of customer business models by building various sorts of partnerships with customers. Moving forward, in order to expand business in ASSPs and other devices that meet the needs of our customers while at the same time further expanding the scale of its business by consolidating the product strengths of its Electronic Devices Business Group, Fujitsu has determined that it is essential to strengthen its operating structure to enhance collaboration between sales and product development, and to further integrate its electronic devices-related business operations.

In order to respond to the growing and increasingly diverse services needs of customers in a timely manner, Fujitsu is implementing a number of organizational reforms, including realignment of Group companies, to create a responsive business structure that will enable the company to meet a wide range of customer needs, from device manufacturing to LSI solutions.

As part of these organizational reforms, in order to create a new sales structure that unifies Fujitsu's and FDI's sales organizations and personnel, today, the boards of directors of the two companies have decided to make FDI a wholly owned subsidiary of Fujitsu. Under the new sales structure, in addition to continuing sales of products from other vendors that FDI is currently engaged in, Fujitsu will place greater emphasis on fulfilling its role as a supplier of one-stop solutions, including those covering sales of foundry customers' products.

Through steps described here, in addition to pursuing intra-group synergies and further improving customer services by strengthening sales capabilities, Fujitsu will create a structure that will enable it to respond flexibly to rapid business changes and expand the Group's devices business. In doing so, it aims to meet the expectations of Fujitsu's shareholders, including the shareholders of FDI who will become holders of Fujitsu shares.

In considering this share exchange, since Fujitsu holds 66.76% of FDI's voting rights, to ensure that the share exchange ratio is fair and appropriate, the two companies held negotiations and deliberations after each side had received advice on calculating the exchange ratio from separate third-party advisors. As a result, a mutually-agreed-upon exchange ratio was considered and decided at meetings of each company's respective board of directors.

In order to avoid conflicts of interest, corporate executive officers of Fujitsu who serve on FDI's board of directors as non-executive directors did not participate in the decision regarding this share exchange.

2. Outline of the Share Exchange

(1) Schedule of the Share Exchange

May 24, 2007 Board of directors decides upon the share exchange
May 24, 2007 Share exchange agreement signed
Jun. 22, 2007 (tentative) Share exchange approval at annual shareholders' meeting
(FDI only)
Jul. 26, 2007 (tentative) Delisting of FDI
Aug. 1, 2007 (tentative) Effective date of the share exchange
Late Sep., 2007 (tentative) Date of share certificate delivery

Note 1: In accordance with Article 796, Section 3 of the Company Law, the share exchange will occur without Fujitsu seeking approval for the share exchange at its annual shareholders' meeting.

Note 2: The effective date of the share exchange is subject to change upon agreement by Fujitsu and FDI.

(2) Share Exchange Ratio

  Fujitsu (Parent Company) FDI (Wholly Owned Subsidiary)
Share Exchange Ratio 1 2.70

Note 1: Share Allocation Ratio
For each share of FDI common stock, 2.70 shares of Fujitsu common stock will be allocated and distributed. However, for the 16,169,940 shares of FDI common stock held by Fujitsu, there will be no allocation or distribution.

Note 2: Shares to Be Issued as a Result of the Share Exchange
As a result of the share exchange, 21,754,008 shares of Fujitsu common stock will be allocated and distributed, but because Fujitsu plans to allocate shares currently held as treasury stock (2,939,706 shares as of April 30, 2007) or that it subsequently acquires by the effective date of the share exchange, it is anticipated that no new shares will be issued.

Details on any planned stock repurchases will be announced once they are confirmed.

(3) Approach to Calculating the Share Exchange Ratio

(3-1) The Basis and Process Used in the Calculation

To ensure that the share exchange ratio used in this share exchange was fair and appropriate, each side retained the services of independent advisors to calculate the share exchange ratio. Fujitsu retained the services of CFA Corporate Finance Corporation (hereafter "CFA") and FDI retained the services of Nomura Securities Co., Ltd. (hereafter "Nomura").

To calculate the value of Fujitsu shares, CFA used Market Share Price Analysis. To calculate the value of FDI shares, CFA used Market Share Price Analysis, Adjusted Book Value Analysis, Discounted Cash Flow Analysis (hereafter "DCF Analysis"), and Comparable Companies Analysis. In accordance with these valuation methods, the number of Fujitsu shares to be allocated per share of FDI was calculated as follows: using Market Share Price Analysis, between 2.088 shares and 2.260 shares; using Adjusted Book Value Analysis, between 1.980 shares and 2.090 shares; using DCF Analysis, between 3.803 shares and 4.779 shares; and using Comparable Companies Analysis, between 2.510 shares and 2.928 shares. Additionally, after taking all considerations into account, such as the fact that Fujitsu holds 66.76% of FDI's voting rights (including indirect holdings), and with an emphasis on Market Share Price Analysis and Adjusted Book Value Analysis, a final exchange ratio of 2.426 shares to 2.763 shares was calculated and submitted to Fujitsu.

In applying Market Share Price Analysis, average stock prices were calculated for the following periods: the one-month period from April 12, 2007 to May 11, 2007; the three-month period from February 13, 2007 to May 11, 2007; and the six-month period from November 13, 2006 to May 11, 2007.

Nomura performed Market Share Price Analysis with respect to Fujitsu, and performed Market Share Price Analysis and DCF Analysis with respect to FDI. The number of shares of Fujitsu to be allotted to one share of FDI implied from each analysis is as follows: Market Share Price Analysis, which implied an exchange ratio of 2.226 shares; DCF Analysis, which implied an exchange ratio of 3.531 shares and 4.735 shares; and Comparable Companies Analysis, which implied a ratio of 2.800 shares and 3.871 shares. These results were submitted to FDI.

Market Share Price Analysis is based on the average closing price during the period commencing on May 07, 2007 and ending on May 18, 2007.

Because shares of both companies are publicly traded, Fujitsu and FDI have discussed and agreed to use Market Share Price Analysis as the base method for calculations and consider the calculated share exchange ratios proposed by the independent advisors mentioned above to be expert analyses and advice. In addition, considering such factors as capital ties between Fujitsu and FDI, the exchange ratio of previous share exchanges of a similar nature, and each company's financial condition, and after negotiations and discussions, the share exchange ratio recorded above 2. (2) was applied and deemed to be in the best interest of each company's shareholders. At their respective boards of directors meetings held on May 24, 2007, the share exchange ratio for the share exchange was decided upon, and the two companies executed the share exchange agreement.

The share exchange ratio is subject to change by the mutual agreement of Fujitsu and FDI if there are any significant changes in the terms and conditions underlying the calculation of the share exchange ratio.

(3-2) Relationships with Firms Used to Perform the Calculations

Neither CFA nor Nomura are considered a related party to Fujitsu or FDI.

(4) Treatment of Share Warrants and Bonds with Warrant Attached Issued by Wholly Owned Subsidiary Involved in Share Exchange

This issue is not applicable because FDI has not issued any share warrants or bonds with warrant attached.

3. Summary Information on Companies Exchanging Shares

(As of March 31, 2007)

(1) Trade Name Fujitsu Limited (Consolidated)
[Company becoming wholly owning parent company]
Fujitsu Devices Inc.(Consolidated)
[Company becoming wholly owned subsidiary]
(2) Principal Lines of Business Development, manufacture, sales and service of products in the fields of software and services, information processing, telecommunications equipment and electronic devices Development, manufacture and sales of semiconductor elements/integrated circuits and components for electronic and telecommunications equipment, as well as related software development, production and sales
(3) Date of Incorporation June 1935 May 1952
(4) Registered Head Office Kawasaki, Kanagawa Shinagawa-ku, Tokyo
(5) Representative Hiroaki Kurokawa, President Kunihiko Wada, President
(6) Capitalization 324,625 million yen 3,645 million yen
(7) Shares Issued 2,070,018,213 shares 24,226,980 shares
(8) Net Assets (Consolidated) 1,160,719 million yen 38,239 million yen
(9) Total Assets (Consolidated) 3,943,724 million yen 121,774 million yen
(10) Fiscal Year-End March 31 March 31
(11) Employees (Consolidated) 160,977 867
(12) Major Customers Governmental entities,
telecommunication carriers,
manufacturers,
distributors, and
financial institutions
Customers :Manufacturers
Suppliers :Fujitsu Limited,
Fujitsu Group companies
(13) Principal Shareholders and Ownership as of March 31, 2007 The Master Trust Bank of Japan, Ltd. (Trust Account)
7.30%

Japan Trustee Services Bank, Ltd. (Trust Account)
4.59%

Fuji Electric Holdings Co., Ltd.
4.50%

Mizuho Trust & Banking Co., Ltd.
Retirement Benefit Trust
(for Fuji Electric Systems Co., Ltd.)
2.74%

State Street Bank and Trust Company 505103
2.09%
Fujitsu Limited
66.74%

CB New York Oppenheimer Quest International Value Fund, Inc.
2.30%

Japan Trustee Services Bank, Ltd. (Trust Account)
1.57%

Mizuho Bank, Ltd.
1.23%

The Master Trust Bank of Japan, Ltd. (Trust Account)
1.16%
(14) Major Banks Japan Bank for International
Cooperation,
Meiji Yasuda Life Insurance Company,
Mizuho Corporate Bank, Ltd.
Mizuho Bank, Ltd.,
The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
Sumitomo Mitsui Banking Corporation,
(15) Relationship Between the Parties Capital Fujitsu owns 66.76% of FDI's voting rights.
Personnel Four of FDI's directors are Fujitsu's corporate vice presidents/employees/standing auditors.
Business 66.6% (138.8 billion yen for the year ended March 31, 2007) of FDI's purchase amounts are generated by business from Fujitsu.
Status FDI is a consolidated subsidiary of Fujitsu.
(16) Financial Results for the Three Most Recent Fiscal Years (Consolidated).
  Fujitsu Limited
(billion yen, except per share data)
Fujitsu Devices Inc.
(billion yen, except per share data)
Fiscal Year Ended March
2005
March
2006
March
2007
March
2005
March
2006
March
2007
Net Sales 4,762.7 4,791.4 5,100.1 244.9 228.2 258.8
Operating Income 160.1 181.4 182.0 5.3 5.9 6.6
Ordinary Profit 89.0 126.0 147.2 5.3 6.1 6.9
Net Income 31.9 68.5 102.4 3.2 3.6 4.1
Net Income per Share
[Yen]
15.42 32.83 49.54 131.26 149.86 172.33
Annual Dividend per Share
[Yen]
6 6 6 24 24 35
Net Assets per Share
[Yen]
414.18 443.20 469.02 1,291.67 1,431.96 1,578.60

4. Situation Following Share Exchange

(1) Trade Name Fujitsu Limited
(2) Principal Lines of Business Development, manufacture, sales and service of products in the fields of software and services, information processing, telecommunications equipment and electronic devices
(3) Registered Head Office Kawasaki, Kanagawa
(4) Representative Hiroaki Kurokawa, President
(5) Capitalization 324,625 million yen
(6) Total Assets (Consolidated) 3,943,724 million yen
(7) Net Assets (Consolidated) 1,160,719 million yen
(8) Fiscal Year-End March 31
(9) Summary of Accounting Procedure This transaction is expected to fall under the category of transaction with minority shareholders of the entity under common control. Goodwill is expected to be generated in conjunction with this transaction. Although the amount of the goodwill has not yet been determined, it is estimated to be small.
(10) Impact on Financial Results As FDI is already a consolidated subsidiary of Fujitsu, the share exchange is expected to have negligible effect on both consolidated and unconsolidated operating results for the year ended March 31, 2008.

About Fujitsu

Fujitsu is a leading provider of customer-focused IT and communications solutions for the global marketplace. Pace-setting device technologies, highly reliable computing and communications products, and a worldwide corps of systems and services experts uniquely position Fujitsu to deliver comprehensive solutions that create infinite possibilities for its customers' success. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 5.1 trillion yen (US$43.2 billion) for the fiscal year ended March 31, 2007. For more information, please see: www.fujitsu.com

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Date: 24 May, 2007
City: Tokyo
Company: Fujitsu Limited, Fujitsu Devices Inc., , , ,