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

Notice Regarding Fujitsu Wireless Systems Limited Becoming a Wholly Owned Subsidiary of Fujitsu Limited through an Exchange of Shares

Fujitsu Limited,Fujitsu Wireless Systems Limited

Tokyo, May 24, 2007

Fujitsu Limited (TSE-1 Code: 6702; hereafter "Fujitsu") and Fujitsu Wireless Systems Limited (hereafter "FWL"), in accordance with the decisions today by their respective boards of directors, announced that they have signed a share exchange agreement through which FWL 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 FWL's annual shareholders' meeting on June 29, 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.

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

The wireless networks business is positioned as among the core businesses of the Fujitsu Group. Fujitsu has established a solid foundation in this field through an organization in which FWL is responsible for the manufacturing of digital multiplex wireless equipment, mobile communications systems equipment, and mobile phones, and Fujitsu has overall responsibility for wireless and mobile communications-related business.

Going forward however, as evidenced by the building of next-generation networks (NGNs), fixed-mobile convergence (FMC) and network distribution of video media, networking needs are becoming increasingly sophisticated, transcending the traditional boundaries of optical transmission, wireless, and switching segments. Even among these trends, with wireless technology at the core of emerging next-generation networks, and with the advent of the ubiquitous networking era, wireless technologies are rapidly spreading throughout many sectors, including societal infrastructure, automobiles, healthcare, and even in the home, attesting to their growing importance to the business activities of customers and society as a whole.

In light of this evolving business environment, and in order to appropriately meet various customer needs in the wireless networking field, Fujitsu has determined that it is essential to strengthen its operating structure by consolidating its wireless technology business and enhancing collaboration between sales and product development, further unifying the wireless business group.

As part of these organizational reforms, today the boards of directors of Fujitsu and FWL have decided to make FWL a wholly owned subsidiary of Fujitsu in order to create a coherent structure encompassing development, manufacturing, sales and marketing of wireless networking equipment and mobile communications systems equipment, thereby striving to expand business revolving around services and enhancing the development of new products.

Through the steps described here, in addition to improving services for customers, Fujitsu will be able to respond with greater speed and assurance to the wireless network system needs of customers arising from their rapidly changing business environments. Furthermore, these measures will deepen Fujitsu's wireless network systems business model and improve the corporate value of the Fujitsu Group.

In considering this share exchange, since Fujitsu holds 73.57% of FWL's voting shares, 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 an independent advisor. 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, employees of Fujitsu who serve as directors on FWL's board of 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. 29, 2007 (tentative) Share exchange approval at annual shareholders' meeting
(FWL only)
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 FWL.

(2) Share Exchange Ratio

  Fujitsu (Parent Company) FWL (Wholly Owned Subsidiary)
Share Exchange Ratio 1 13.36

Note 1: Share Allocation Ratio
For each share of FWL common stock, 13.36 shares of Fujitsu common stock will be allocated and distributed. However, for the 220,697 shares of FWL 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, 1,059,488 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, Fujitsu and FWL each retained the services of CFA Corporate Finance Corporation (hereafter CFA) as an independent advisor to calculate the share exchange ratio.

To calculate the value of Fujitsu shares, CFA used Market Share Price Analysis. To calculate the value of FWL 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 FWL was calculated as follows: using Market Share Price Analysis, between 11.755 shares and 12.410 shares; using DCF Analysis, between 12.701 shares and 15.438 shares; and using Comparable Companies Analysis, between 11.876 shares and 13.857 shares. Additionally, after taking all considerations into account, such as the fact that Fujitsu holds 73.57% of FWL's voting rights, a final exchange ratio of 12.111 shares to 13.901 shares was calculated and submitted to Fujitsu and FWL.

In applying the average stock price method in the evaluation of Fujitsu, 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.

Fujitsu and FWL 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 advisor mentioned above to be expert analysis and advice. In addition, considering such factors as capital ties between Fujitsu and FWL, 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 FWL if there are any significant changes in the terms and conditions underlying the calculation of the share exchange ratio.

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

CFA is not considered a related party to Fujitsu or FWL.

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

This issue is not applicable because FWL 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 Wireless Systems Limited
[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 Design and manufacture of multiplex wireless equipment and manufacture of mobile communication system equipment, mobile phones and modules for digital transmission equipment
(3) Date of Incorporation June 1935 September 1955
(4) Registered Head Office Kawasaki, Kanagawa Kumagaya, Saitama
(5) Representative Hiroaki Kurokawa, President Yoshiaki Suzuki, President
(6) Capitalization 324,625 million yen 150 million yen
(7) Shares Issued 2,070,018,213 shares 300,000 shares
(8) Net Assets (Consolidated) 1,160,719 million yen 2,705 million yen
(9) Total Assets (Consolidated) 3,943,724 million yen 8,646 million yen
(10) Fiscal Year-End March 31 March 31
(11) Employees (Consolidated) 160,977 281
(12) Major Customers Governmental entities,
telecommunication carriers,
manufacturers,
distributors, and
financial institutions
Fujitsu Limited,
Fujitsu Group companies,
telecommunication carriers,
manufacturers and distributors
(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
73.57%

Resona Bank, Limited.
4.00%

Itochu Corporation
3.25%

Tokyo Electron Limited
3.15%

Kawasaki Kisen Kaisha, Ltd.
2.98%
(14) Major Banks Japan Bank for International Cooperation,
Meiji Yasuda Life Insurance Company,
Mizuho Corporate Bank, Ltd.
Saitama Resona Bank, Limited,
Mizuho Bank, Ltd.
(15) Relationship Between the Parties Capital Fujitsu owns 73.57% of FWL's voting rights.
Personnel Two of FWL's directors are Fujitsu employees.
Business 81.0% (12.7 billion yen for the year ended March 31, 2007) of FWL's revenues are generated by business from Fujitsu.
Status FWL 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 Wireless Systems Limited
(million 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 15,352 15,334 15,746
Operating Income 160.1 181.4 182.0 253 732 372
Ordinary Profit 89.0 126.0 147.2 131 681 488
Net Income 31.9 68.5 102.4 77 373 307
Net Income per Share
[Yen]
15.42 32.83 49.54 257.7 1,243.4 1,023.5
Annual Dividend per Share
[Yen]
6 6 6 100 100 100
Net Assets per Share
[Yen]
414.18 443.20 469.02 6,950.30 8,093.75 9,017.27

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 FWL 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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Company:Fujitsu Wireless Systems Limited

Date: 24 May, 2007
City: Tokyo
Company: Fujitsu Limited, Fujitsu Wireless Systems Limited, , , ,

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