March 29, 2022
Company Name: Nihon Dempa Kogyo Co., Ltd.
Representative: Hiromi Katoh, Representative Director and President(Code: 6779 Tokyo Stock Exchange, 1st Section)
Contact:
Yuzuru Takeuchi, Senior Corporate Officer and General Manager ofAdministration Division(Phone: +81-3-5453-6711)
Re: Acquisition and Cancellation of Class A Shares
Nihon Dempa Kogyo Co., Ltd. (“NDK” or “we”) hereby announces that the Board ofDirectors of NDK, at its meeting held today, passed a resolution to acquire all of the ClassA Shares issued by NDK (total amount of issue price: 5 billion yen) in exchange for cashfrom Japan Industrial Solutions Fund II (the “Class Shareholder”) in accordance with theprovision of Article 6-2, Paragraph 6 of NDK’s Articles of Incorporation (call options, theconsideration for which is cash) (the “Call Option for Money”) and cancel the shares on
condition of the acquisition thereof in accordance with the provision of Article 178 of theCompanies Act.
1.

Reason for Acquisition and Cancellation of Class A Shares

In the past, a difficult business environment continued to surround NDK. For example,in the fiscal year ended March 31, 2018, NDK recorded significant impairment losses
mainly on its production facilities for smartphone devices resulting from a significant
imbalance of demand versus supply for crystal devices in the smartphone market, and, inorder to address such situation, NDK offered voluntary early retirement at nonconsolidated operations, and as a result, had to record expenses associated with structuralreforms. Furthermore, there was the impact of the COVID-19 pandemic in the fiscal year
ended March 31, 2020. However, even in such business environment, owing to the fullscale increase in demand for 5G, and the increase in the number of devices relating toADAS (Advanced Driver Assistance Systems) installed in automobiles in the automotivemarket, where NDK holds a large share, as well as the existing trend for more compact
devices, the demand for highly accurate and highly reliable crystal device products, inrelation to which NDK has competitive advantages, was expected to increase even more.
In light of such circumstances, NDK has worked to establish a strong management
structure that ensures steady progress in pursuing NDK’s growth strategies and stableprofit, by formulating, as described in the “Notice concerning NDK’s Mid-Term
Management Plan” dated June 19, 2020, the mid-term management plan that covers theperiod from FY 2020 to FY 2022 (the “Former Mid-Term Management Plan”), whichcenters on the following important measures: (A) implementing structural reforms
focusing on drastic reduction of fixed costs; (B) reviewing the sales mix of existingproducts and business portfolios; (C) selectively injecting resources into the upstream
process where NDK has competitive advantages; (D) improving productivity in the downstream process (assembly); and (E) improving NDK’s financial position.

Then, the business environment surrounding NDK changed, i.e., while large-scalemonetary easing and aggressive government spending have been implemented in majorcountries in order to respond to the impact of the COVID-19 pandemic, and theautomotive market, the primary business domain of the NDK group companies (the“Group”), is on a recovery trend, the shortage of semiconductors and other parts has
affected production by finished car manufacturers. Under such circumstances, orders
from Tier 1 customers (manufacturers who supply parts to finished car manufacturers)
have remained high. Consequently, in automotive applications, which account for nearly
half of the Group’s sales, consolidated net sales for the first nine months of this fiscal year(the fiscal year ending March 31, 2022) have increased over 30% year on year. In addition,
in mobile communication applications, which account for approximately 20% of sales,
profitability has been improved significantly due to a decline in sales of unprofitableproducts, an increase in sales of profitable products such as 76.8MHz crystal units withbuilt-in thermistors and ultra-compact components for 5G smartphones, and an increasein sales unit price.
Taking into account the improvement of the business environment surrounding NDK
as described above and the status of improvement of results and financial position after
the previous fiscal year (the fiscal year ended March 31, 2021), NDK formulated the midterm management plan that covers the period from FY2022 (the fiscal year ending March31, 2023) to FY2024 (the fiscal year ending March 31, 2025) (the “New Mid-TermManagement Plan”) as disclosed in the “Notice Concerning Formulation of New
Medium-Term Management Plan” dated March 10, 2022. NDK financed 5,000,000,000
yen by issuing 5,000 shares of Class A Shares to Japan Industrial Solutions Fund II on
August 5, 2020 as part of “(E) improving NDK’s financial position,” which is one of theaforementioned important measures under the Former Mid-Term Management Plan.
However, in order to establish a healthy financial position through, among others, theredemption of the Class A Shares and the implementation of the capital increase throughpublic offering as stated in the New Mid-Term Management Plan, NDK determined, asof today, to acquire from the Class Shareholder, and to cancel, all of the Class A Sharesof NDK remaining as of May 26, 2022 in conjunction with the implementation of thefund raising by way of the issuance of new shares through public offering (publicoffering) and the disposal of treasury stock through public offering (public offering) (fordetails, please see the notice “Re: Issuance of New Shares, Disposal of Treasury Stockand Secondary Offering of Shares and Reduction of Amounts of Capital Stock and Legal
Capital Surplus Concurrently with Issuance of New Shares” dated today).
NDK will conduct the currently planned redemption of the Class A Shares by way ofacquisition of the Class A Shares in exchange for money on a day separately specified by
the Board of Directors of NDK pursuant to the provision of the Call Option for Money.
With respect to the acquisition price per share, the later the time of actual acquisition ofthe Class A Shares by the Call Option for Money occurs, the greater will be the amountof the acquisition price per share. Therefore, NDK believes that the redemption of all of
the Class A Shares at an early stage based on the determination stated herein willcontribute to NDK’s establishing a healthy financial position. For details of such Class AShares, please see the notice “Re: Issuance of Class Shares through Third Party Allotment,
Reduction of Amounts of Capital Stock and Legal Capital Surplus and Appropriation ofSurplus, Partial Amendment to the Articles of Incorporation, and Reduction of Amountsof Capital Stock and Legal Capital Surplus on Issuance of Class Shares” dated June 19,
2020.
2.

Details of Acquisition of Class A Shares(1)

Class of shares to be acquiredClass A Shares(2)

5,000 shares(3)

Total number of shares to beacquired
Consideration for acquisition(4)

Acquisition price per share

1,250,000 yen

(5)
(6)
(7)

Money(Note) The above acquisition price is the amount calculated by multiplying
the amount equivalent to the paid-in amount per Class A Share(1,000,000 yen) by the redemption coefficient of 1.25.

Total amount of acquisition price ofshares
Acquisition date

6,250,000,000 yen

Party from which shares are to beacquired

Japan IndustrialSolutions Fund II

May 26, 2022

In addition, acquisition of the Class A Shares is subject to the completion of payment
for the issuance of new shares and the disposal of treasury stock through public offeringresolved at a meeting of the Board of Directors held today.
3.

Details of Cancellation of Class A Shares(1)

Class of shares to be cancelledClass A Shares(2)

Total number of shares to becancelled
Effective date of cancellation

5,000 shares(3)

May 26, 2022

This cancellation of the Class A Shares is subject to the condition that NDK acquires
the Class A Shares in accordance with 2. above.
4.

Impact on operating results

The impact of the acquisition and cancellation of the Class A Shares on NDK’s and its
consolidated performance is immaterial.
End