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The share exchange described in this press release involves securities of foreign companies. This share exchange is subject to disclosure
requirements of Japan that are different from those of the United States. Financial information included in this press release has been
prepared in accordance with generally accepted Japanese accounting standards and may not be comparable to the financial statements of
companies in the United States.
It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since the
companies are located in a foreign country, and some or all of their officers are residents of a foreign country. You may not be able to sue a
foreign company or its officers in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company
and its affiliates to subject themselves to a U.S. court’s judgment.
You should be aware that the companies may purchase securities otherwise than under the share exchange, such as in open market or
privately negotiated purchases.
Namura Shipbuilding Co., Ltd. (“Namura Shipbuilding”) and Sasebo Heavy Industries Co., Ltd. (“Sasebo Heavy
Industries”) hereby announce that, at their respective board of directors meetings held on May 23, 2014, Namura
Shipbuilding and Sasebo Heavy Industries have determined to enter into a share exchange transaction (the “Share
Exchange”) to make Sasebo Heavy Industries a wholly owned subsidiary of Namura Shipbuilding, and that the companies
have executed a share exchange agreement (the “Share Exchange Agreement”) and a statement of mutual agreement on the
Share Exchange, as described below.
The implementation of the Share Exchange is subject to obtaining all necessary approvals, including those of the relevant
authorities and of the shareholders at the respective shareholders’ meetings of the companies.
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Furthermore, the shares of Sasebo Heavy Industries are scheduled to be delisted from the Tokyo Stock Exchange (the
“TSE”) and the Fukuoka Stock Exchange (“FSE”) on September 26, 2014 (the last trading date being September 25, 2014),
prior to the effective date of the Share Exchange.
Since its incorporation in 1911, Namura Shipbuilding has run a shipbuilding business as its core business, as well as a
ship repair business and steel structure business. In recent years, in accordance with its basic policy of offering a
“product mix”, Namura Shipbuilding has offered at Imari Shipyard & Works, various ships to its customers ranging
from capesize bulkers such as the 250,000 deadweight tonnage-type iron ore carriers (WOZMAX), to small and
medium sized bulkers such as Panamax and handysize bulkers, and the Aframax Tanker. In 2007, Namura
Shipbuilding made The Hakodate Dock Co., Ltd. (“Hakodate Dock”), with which Namura Shipbuilding had entered
into a capital and business alliance, its consolidated subsidiary, and since then has enhanced customer satisfaction by
realizing a synergy effect through joint development for shipbuilding and more efficient procurement. Furthermore,
Namura Shipbuilding has been actively working on jointly developing new technology with customers seeking
differentiation through the use of fuel efficient technology and other environment-related technology. However, in
order to win the battle for survival, Namura Shipbuilding believes that it must: (i) further enhance its design and
development capabilities to respond to customers’ needs for high fuel-efficiency, amendments to international rules,
and energy structure changes such as increasing demand for gas transportation; (ii) improve and enhance its flexibility
to respond to rapid changes in the market through its product mix policy of receiving orders for, and building, several
types of ships; and (iii) expand its scale to make it more competitive by cutting the costs of development and building
per ship.
Since its incorporation in 1946, Sasebo Heavy Industries’ core business has comprised of shipbuilding, ship repair and
machinery by making use of equipment and technologies inherited from the former Sasebo Naval Base, and in recent
years its leading products in the shipbuilding business have included the Panamax Bulker and the Aframax Tanker.
Thus, Sasebo Heavy Industries has accommodated its customers’ requests with its high technological capabilities in
the shipbuilding business as well as the ship repair and machinery businesses. Although Sasebo Heavy Industries’
financial results deteriorated due to the rapid change in the business environment after the “Lehman Shock”, Sasebo
Heavy Industries established on May 17, 2013 its mid-term management plan aiming to establish a profitable structure
resistant to environmental changes, and since then has made managerial efforts to change its sales structure and review
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and strengthen its business operation system. Due to these efforts as well as the recent correction of the yen’s
appreciation and the recent increase in ship prices, the business results of Sasebo Heavy Industries are currently
improving. However, in order to win the future battle for survival and ensure the continuance of manufacturing in the
Sasebo region, there is an urgent need for Sasebo Heavy Industries to enhance its design capability and cost
competitiveness, and enhance and restructure its business platform based on the mid- and long-term growth strategy. In
this regard, Sasebo Heavy Industries has been considering the possibility of cooperating further with competitors.
After consultation on the industry environment and the situation of the companies as set forth above, the companies
concluded that Namura Shipbuilding would make Sasebo Heavy Industries its wholly owned subsidiary. The
companies will focus on realizing two main objectives which they consider to be essential conditions for survival;
enhancing design and development capabilities, and enhancing procurement capabilities, each of which are discussed
further in the next section. In addition, the companies aim to enhance their respective competitiveness and business
development capabilities, as well as those of the group as a whole, by working together in ensuring their respective
flexibility on the sales and production side, cooperating in the ship repair business field, and streamlining
administrative departments. The companies also aim to continuously enhance corporate value through the expansion
of scale and quality improvement. According to the Shipbuilders’ Association of Japan, the total combined new
shipbuilding completion volume of Namura Shipbuilding, Sasebo Heavy Industries and Hakodate Dock for 2013 was
151 million gross tons, and taken together the three companies constitute the third largest shipbuilder in Japan on a
gross tonnage basis.
(2) Outline of Business Strategy after Making Sasebo Heavy Industries a Wholly Owned Subsidiary through the Share
Exchange
The companies aim to maximize a synergy effect by integrating the management of the Imari office of Namura
Shipbuilding and the Sasebo shipyard, which are geographically close, and utilizing the economies of scale when
combined with Hakodate Dock.
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such shares to the shareholders of Sasebo Heavy Industries immediately preceding the time at which Namura
Shipbuilding acquires all of the issued shares of Sasebo Heavy Industries (the “Base Time”) through the Share
Exchange.
In addition, in accordance with a resolution of the meeting of the board of directors of Sasebo Heavy Industries to
be held no later than the day immediately preceding the effective date of the Share Exchange, Sasebo Heavy
Industries will cancel, at the Base Time, all of its shares then held by it as treasury stock (including the shares to be
purchased by it in response to a share purchase demand made by dissenting shareholders upon the Share Exchange
under Article 785, Paragraph 1 of the Companies Act).
Furthermore, the number of shares to be allotted and delivered through the Share Exchange may be subject to
change in the future due to reasons such as the acquisition and the cancellation of treasury stock by Sasebo Heavy
Industries.
(a) Purchase of shares constituting less than one unit (sale by shareholder of shares constituting less than one unit)
In accordance with the provisions of Article 192, Paragraph 1 of the Companies Act, shareholders holding less
than a full trading unit of Namura Shipbuilding shares may request Namura Shipbuilding to purchase the
shares constituting less than one unit.
(b) Further purchase of shares constituting less than one unit (purchase to reach a total of 100 shares)
In accordance with the provisions of Article 194, Paragraph 1 of the Companies Act and the Articles of
Incorporation of Namura Shipbuilding, shareholders holding less than a full trading unit of Namura
Shipbuilding shares may request to purchase from Namura Shipbuilding the number of shares that will, when
taken together with the number of shares constituting less than one unit already held by such shareholder,
result in the shareholder holding a total of one unit.
(4) Treatment of stock acquisition rights and bonds with stock acquisition rights upon the Share Exchange
Sasebo Heavy Industries, which is to become a wholly-owned subsidiary by the Share Exchange, has issued neither
stock acquisition rights nor bonds with acquisition rights.
3. Basis for Calculation of the Content of Allotment Concerning the Share Exchange
(1) Basis and reason for Calculation of the Content of Allotment
As described in 1.(1) “Background and Purpose of Making Sasebo Heavy Industries a Wholly Owned Subsidiary
Through the Share Exchange” above, as a result of discussions on the basis of the severe industry environment and
situations of the companies, Namura Shipbuilding and Sasebo Heavy Industries concluded that it would be the best
choice for the companies to enhance the competitiveness and capability for development of each company and the
whole group through collaboration in various aspects and to aim for constant increases in corporate values through
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an expansion in scale and a reform of quality, and the Companies reached an agreement on the Share Exchange.
With respect to the share exchange ratio set out in 2.(3) “Details of the Content of Share Allotment in the Share
Exchange” above, Namura Shipbuilding appointed Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(“Mitsubishi UFJ Morgan Stanley Securities”) as the third-party valuation institution, and Sasebo Heavy Industries
appointed KPMG FAS Co., Ltd. (“KPMG FAS”) as the third-party valuation institution as described further in (4)
“Measures to Ensure Fairness” below. Namura Shipbuilding and Sasebo Heavy Industries repeatedly negotiated and
consulted with each other while each company used the calculation results of the share exchange ratio submitted by
their respective third-party valuation institutions as a reference, and considered the financial condition, performance
trend, share price trend and other factors. As a result, the companies concluded that the share exchange ratio set out
in 2.(3) above was appropriate. If, however, any material changes occur to the basic terms and conditions for the
calculation of the share exchange ratio, such share exchange ratio may be changed through consultation between the
companies.
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In performing its analysis with respect to the share exchange ratio, Mitsubishi UFJ Morgan Stanley Securities has
assumed and relied upon, without independent verification, the accuracy and completeness of the information that
was publicly available or supplied or otherwise made available to it by the companies, as the appropriate basis for its
analysis. With respect to the financial projections, Mitsubishi UFJ Morgan Stanley Securities has assumed that
they have been reasonably prepared to reflect the best currently available estimates and judgments of the
management of each company of their future financial performance. Mitsubishi UFJ Morgan Stanley Securities
has not made, nor has it obtained from any third party, any independent valuation or appraisal of the assets or
liabilities (including any off-balance sheet assets and liabilities and contingent liabilities) of either Company or their
affiliates. The analysis by Mitsubishi UFJ Morgan Stanley Securities is based on the aforementioned information
made available to it as of May 21, 2014.
Similarly, as market share prices are available for both companies, KPMG FAS made the calculation of the value of
the common stock of the companies using the market price analysis (with May 22, 2014 being the record date for
calculation, KPMG FAS made such calculation based on the closing prices of the shares of the respective
companies on the record date as shown in the first section of the TSE, the simple average of the closing prices of the
shares of the respective companies on each trading day for the period from May 12, 2014 (the business day
immediately following May 9, 2014, when the companies announced the respective financial results for the fiscal
year ended March 2014) to the record date, and the simple average of the closing prices of the shares for the one-
month period and the three-month period immediately preceding the record date). In addition, KPMG FAS made
the calculation of the value of the common stock of the companies using the DCF Analysis in order to reflect future
business operations of the companies in the valuation. The earnings plan of Namura Shipbuilding, on which
KPMG FAS relied for the purpose of DCF Analysis, assumes that after Namura Shipbuilding achieved its record-
high consolidated operating income of 22,291 million yen for the fiscal year 2013, its profit level will decline
substantially in the fiscal year 2014, for which the earnings forecast has been published, and the fiscal year 2015 due
to the building of ships ordered during the market slump following the “Lehman Shock” and other factors, but its
earnings will grow substantially in the fiscal year 2017 due to the recent recovery trend in ship prices, the change in
the type of ships which Namura Shipbuilding receives orders to build, its cost-cutting efforts, and other factors.
The earnings plan of Sasebo Heavy Industries assumes that it will continue to post a net loss until and in the fiscal
year 2014 due to the building of ships ordered during the market slump following the “Lehman Shock” and other
factors, but its operating income will turn a profit from the fiscal year 2015 and its earnings will grow substantially
in the fiscal year 2016 due to the recent recovery trend in ship prices, the change in the type of ships which Sasebo
Heavy Industries receives orders to build, its cost-cutting efforts, and other factors.
The following shows the relevant calculation result of KPMG FAS for each analysis method when the share value
per share of Namura Shipbuilding is set at 1.
In performing its analysis with respect to the share exchange ratio, KPMG FAS has assumed and relied upon,
without independent verification, the accuracy and completeness of the information that was publicly available or
supplied or otherwise made available to it by the companies, and that there is no fact that could have a material
impact on the calculation of the share exchange ratio and that was not disclosed to KPMG FAS, as the appropriate
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basis for its analysis. In addition, KPMG FAS has not made, nor has it obtained from any third party, any
independent valuation or appraisal of the assets or liabilities (including any off-balance sheet assets and liabilities
and contingent liabilities) of either company, its subsidiaries or its related companies, including analysis and
valuation of individual assets and liability.
The analysis by KPMG FAS is based on the information and economic conditions made available to it as of May 22,
2014, and with respect to the financial projections and other future information, KPMG FAS has assumed that they
have been reasonably prepared to reflect the best currently available estimates and judgments of the management of
each Company of their future financial performance.
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Furthermore, Namura Shipbuilding appointed Nagashima Ohno & Tsunematsu, and Sasebo Heavy Industries
appointed Mori Hamada & Matsumoto as their respective legal advisors, and received advice from their respective
legal advisors on the appropriate procedures and correspondence for the Share Exchange from the legal perspective.
Nagashima Ohno & Tsunematsu and Mori Hamada & Matsumoto are independent of Namura Shipbuilding and
Sasebo Heavy Industries, and do not have any material interest.
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4. Outline of the Parties Involved in the Share Exchange (As of March 31, 2014) (In millions of yen, unless otherwise
specified)
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Relationship
Transaction
Not applicable.
Relationship
Status as a Related
Not applicable.
Party
(14) Results of Operations and Financial Condition for Previous Three Fiscal Years
Namura Shipbuilding (consolidated) Sasebo Heavy Industries (consolidated)
Fiscal Year Ended
March 2012 March 2013 March 2014 March 2012 March 2013 March 2014
Consolidated Net
47,643 55,341 66,964 28,514 27,345 25,098
Assets
Consolidated Gross
162,304 147,012 152,891 84,464 65,795 56,087
Assets
Consolidated Net
965.61 1,126.66 1,367.20 177.69 170.41 156.41
Assets per Share (yen)
Consolidated Net Sales 122,633 118,414 124,559 66,082 35,946 30,968
Consolidated
11,677 13,554 22,291 9,862 -1,291 -1,676
Operating Income
Consolidated Ordinary
11,049 14,477 23,677 9,697 -819 -1,626
Income
Consolidated Net
5,640 8,008 12,687 734 ‐533 -2,848
Income
Consolidated Net
116.86 165.77 262.46 4.58 ‐3.32 ‐17.75
Income per share (yen)
Dividend per Share
14.00 18.00 30.00 5.00 - -
(yen)
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7. Further Outlook
Through the Share Exchange, Sasebo Heavy Industries will be a wholly-owned subsidiary of Namura Shipbuilding. The
impact of the Share Exchange on the consolidated operating results of Namura Shipbuilding, etc., has not yet been
determined. In the event that any matter, which necessitates revision of the earnings estimates or that needs to be
announced, arises, such matter will be disclosed without delay.
(End of Document)
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(Reference)
Consolidated earnings estimates for the current fiscal year (announced on May 9, 2014) and consolidated earnings results
for the prior year for Namura Shipbuilding (in millions)
Consolidated Net Consolidated Consolidated Consolidated Net
Sales Operating Income Ordinary Income Income
Earnings Estimates for
the Current Fiscal Year 114,000 9,600 9,300 5,500
(ending March 31, 2015)
Earnings Results
for the Prior Year 124,559 22,291 23,677 12,687
(ended March 31, 2014)
Consolidated earnings estimates for the current fiscal year (announced on May 9, 2014) and consolidated earnings results
for the prior year for Sasebo Heavy Industries (in millions)
Consolidated Net Consolidated Consolidated Consolidated Net
Sales Operating Income Ordinary Income Income
Earnings Estimates for
the Current Fiscal Year 30,000 ‐ 300 -500 -600
(ending March 31, 2015)
Earnings Results
for the Prior Year 30,968 ‐ 1,676 -1,626 -2,848
(ended March 31, 2014)
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