October 26, 2007
To whom it may concern,
Company name

Mitsubishi Materials
Corporation
Akihiko Ide, President

Representative’s
name(Securities Code No.: 5711 1st Section of Tokyo Stock
Exchange and Osaka Securities Exchange)
Toru Suzuki,
Deputy General Manager,
Contact
Corporate Communications and
IR Department(TEL: +81-3-5252-5206)
Company name
Representative’s
nameContact

Sambo Copper Alloy Co., LTD
Takao Hashida, President
Masashi Yamauchi,
General Manager,
General Affairs and Personnel
Department(TEL: +81-72-233-9284)

Regarding Making Sambo Copper Alloy a Wholly Owned Subsidiary of Mitsubishi Materials
Mitsubishi Materials Corporation (hereinafter “Mitsubishi Materials”) and Sambo Copper
Alloy Co., Ltd. (hereinafter “Sambo Copper Alloy”) announced today that Mitsubishi Materials andSambo Copper Alloy have signed a share exchange agreement to make Sambo Copper Alloy awholly owned subsidiary of Mitsubishi Materials, with each company having resolved such atmeetings of their respective boards of directors held today.
The effective date of the share exchange agreement will be December 28, 2007, subject toapproval by Sambo Copper Alloy’s shareholders at an extraordinary general meeting of shareholders
to be held on November 21, 2007. Mitsubishi Materials will use a simplified share exchange
procedure that does not require the approval of a general meeting of its shareholders pursuant to
Article 796, Paragraph 3, of the Corporation Law.
Additionally, Mitsubishi Materials signed a similar share exchange agreement to makeMitsubishi Shindoh Co., Ltd. (¥8,713 million in capital; Masahiro Nishida, President; hereinafter“Mitsubishi Shindoh”) a wholly owned subsidiary. (For details of that share exchange agreement,1refer to the news release issued today by Mitsubishi Materials.) Sambo Copper Alloy is scheduled tomerge with Mitsubishi Shindoh by April 1, 2008, after the share exchange procedure with Mitsubishi
Materials is completed. (The merger will be officially determined and publicly announced in
February 2008 or later.)
1. Purpose of Making Sambo Copper Alloy a Wholly Owned Subsidiary via a Share
Exchange
The copper business of the Mitsubishi Materials Group has established an integrated
operating structure, from mining to making fabricated copper products and recycling. In particular,
Sambo Copper Alloy and Mitsubishi Shindoh produce high-value-added products in collaboration
with Mitsubishi Materials from the development stage of copper alloy materials. Eco Brass∗ inparticular, which Sambo Copper Alloy manufactures, sells and licenses to Japanese and overseas
companies that produce copper alloy, is becoming a global standard as an eco-friendly new material.
Furthermore, Eco Brass is expected to expand its sales for use in automobile and information andelectronics markets, thanks to its high-strength, high-processing properties. Mitsubishi Shindoh’s
wide range of premium precision terminal/connector materials and lead frame materials bound forthe automobile and information and electronics markets are of first-tier quality and performance.
Meanwhile, customer needs are increasingly diversified, sophisticated and complex, thereby
requiring the unique, demanding characteristics of thinner and lighter materials operable under theharsh operating environments of the automobile and electronics industries. Moreover, a more stable
and swifter global supply system has become an essential requirement of customers along with the
expansion of emerging markets, such as China.
Given this environment, Mitsubishi Materials, Sambo Copper Alloy and Mitsubishi Shindohagreed to a study regarding a business alliance for the copper alloy business on July 28, 2006 for the
purpose of enhancing the strength of product development, cost competitiveness and marketing
capabilities in the pursuit of joint development and/or effective utilization of production facilities. As
a result, the three parties agreed on a shared recognition that synergies could be maximized if Sambo
Copper Alloy and Mitsubishi Shindoh became wholly owned subsidiaries of their parent company,
Mitsubishi Materials, and subsequently merged. Accordingly, Mitsubishi Materials and Sambo
Copper Alloy today have agreed to the aforementioned share exchange.

∗

Eco Brass is a new lead-free copper alloy that ensures excellent cutting performance which is coming to

global attention as a material used particularly for water supply devices. It excels in machining
performance, such as high-strength cutting and forging, and it is innovative in that it has resolved such
issues as stress corrosion, cracking and dezincification corrosion.

2

By becoming wholly owned subsidiaries of Mitsubishi Materials and through the intended
subsequent merger, the new corporation to be derived from Sambo Copper Alloy and Mitsubishi
Shindoh will be the leading player in the domestic copper alloy industry with synergies as outlined
below:
1) Making unified and swift management decisions, as well as strengthening the verticalintra-group value chain;2) Increasing earnings with efficient capital investments in local production plants ineastern and western Japan, and by establishing a more flexible, strategic andrisk-responsive production system;
3) Reinforcing development capabilities by gathering development resources andenhancing marketing functions; and
4) Accelerating an overseas presence by gathering group wide management resources.
To carry out these measures, a scale-up expansion and a further increase in the competitiveedge of the group’s copper processing business, one of the three mainstays together with mines andsmelting/refining, are highly expected in the metals sector. Thus, the three existing corporations
would like to meet the expectations of the current shareholders of Sambo Copper Alloy and
Mitsubishi Shindoh, who will become shareholders of Mitsubishi Materials as a result of theexchange, thereby also meeting the expectations of Mitsubishi Materials’ current shareholders.
To ensure the fairness and appropriateness of the share exchange ratio, Mitsubishi Materials
and Sambo Copper Alloy each (a) conducted due-diligence using outside experts and (b) received
and reviewed a calculation of the share exchange ratio by their respective third-party advisors.
Following the results, Mitsubishi Materials and Sambo Copper Alloy carefully considered the shareexchange figures with reference to the calculation results on the share exchange ratio, and bothparties approved the final share exchange ratio as reasonable and acceptable for their respective
shareholders at meetings of their respective boards of directors held today and signed the shareexchange agreement today as well.
In order to avoid any conflict of interests with minority shareholders, at the Sambo Copper Alloy’sboard of directors meeting, Mitsubishi Materials’ senior executive officer who concurrently serves asa director of Mitsubishi Shindoh was not present at the deliberations or resolution of the shareexchange agreement. Additionally, at the Sambo Copper Alloy board of directors meeting,
Mitsubishi Materials’ executive officer and an employee who concurrently serve as Sambo Copper
Alloy’s auditors were not present at the deliberations of the share exchange agreement.

3

Figure: Vertical value chain of the Mitsubishi Materials’ metals business
CopperBusiness

Current Copper Business Structureof the Group
Copper Alloy Business after the Merger

Overseas copper mines
Mines

Copper ore

Copper ore

Naoshima Smelter& Refining

Smelting
Refining

Copperprocessing

ElectrolyticJapan's leading company in the domestic
copper alloy industry

Onahama
Smelting &Refining Co.,Ltd.

Production system with plants in East Japan and West Japan(Aizu-Wakamatsu and Sakai)ElectrolyticEfficient production increase of high-performance copper strips

Recycling

Sakai Plant

Onahama
Smelting &Refining Co.,Ltd.

Copper ingots

Copper ingots↓

Becoming
wholly owned
subsidiaries⇒ Merger

More flexible, strategic and risk-responsive production system

Development of high copper alloys for strips and Excellent
rolling technologies (Mitsubishi Shindoh)+
Development of brass alloys for bars, plates, and strips, andGrain refining technology (Sambo Copper Alloy)+
MakingcopperalloysSambo Copper
Alloy

Mitsubishi
ShindohCopper alloy
products

Copper alloy
products

Development of forming, melting and casting technologies(Mitsubishi Materials Corporation)↓
Further enhancement of the world's top-rated alloy
development capability

Copper alloy
products

Users

Users

2. Outline of the Share Exchange(1)

Schedule for the share exchange
1) October 26, 2007

Resolution of the board of directors regarding theshare exchange agreement (Mitsubishi Materials
and Sambo Copper Alloy)2) October 26, 2007

Signing of the share exchange agreement

3) November 13, 2007 (tentative)

Reference date for an extraordinary general
meeting of shareholders (Sambo Copper Alloy)4) November 21, 2007 (tentative)

Extraordinary general meeting of shareholders forthe approval of the share exchange agreement(Sambo Copper Alloy)5) December 28, 2007 (tentative)

Due date for the proposed share exchange(effective date)6) February 2008 (tentative)

Issue date of Mitsubishi Materials’ sharecertificates4Notes:1. Sambo Copper Alloy is scheduled to merge with Mitsubishi Shindoh by April 1, 2008,
after becoming a wholly owned subsidiary of Mitsubishi Materials through the shareexchange.
2. Mitsubishi Materials will use a simplified share exchange procedure that does not
require the approval of a general meeting of its shareholders according to Article 796,
Paragraph 3, of the Corporation Law.
3. The “due date” for the share exchange above is subject to change by the mutual
agreement of Mitsubishi Materials and Sambo Copper Alloy.
(2)

Share exchange ratio

Company

Mitsubishi Materials(wholly owning parent)

Sambo Copper Alloy(wholly owned subsidiary)

Share exchange
ratio

1

1.25

Notes:
1. Allotment ratio of shares
Mitsubishi Materials will issue 1.25 shares for each share of Sambo Copper Alloy’s
common stock. However, Mitsubishi Materials will not issue any shares for the
14,142,490 shares of Sambo Copper Alloy’s common stock that Mitsubishi Materials
currently holds.
2. Number of new shares to be issued by the share exchange
Shares of common stock: 9,658,262 shares (rouding off a decimal point)
Mitsubishi Materials will issue 1,000,000 shares of Mitsubishi Materials it currently
holds as treasury stock in connection with the share exchange.
(3)

Basis of calculation for the share exchange ratio1) Basis and details of the computation
To ensure the fairness and appropriateness of the share exchange ratio to be calculated in

the share exchange, Mitsubishi Materials designated Mitsubishi UFJ Securities, Co., Ltd.
(hereinafter “Mitsubishi UFJ Securities”) and Sambo Copper Alloy designated GCA Corporation(hereinafter “GCA”) as their respective third-party advisors to perform the calculation of the shareexchange ratio.
To calculate the value of the stock of the respective companies, Mitsubishi UFJ Securities
adopted the market value average method for Mitsubishi Materials, and the multiple method (amethod which applies multiples to the comparable company’s financial metrics), and the discounted

5

cash flow (DCF) method for Sambo Copper Alloy.
Based on each evaluation method, Mitsubishi UFJ Securities calculated that the number of
Mitsubishi Materials shares to be allotted in exchange for each share of Sambo Copper Alloy are asshown in the table below.:

Evaluation method

Range ofshare exchange ratio

Multiple method

1.04 〜 1.29

DCF method

1.01 〜 1.50

In applying the market value average method, Mitsubishi UFJ Securities adopted theaverage closing price per share on all trading days during the six-month, three-month and one-month
periods ending on October 19, 2007, the reference date for evaluation for Mitsubishi Materials.
In calculating the share exchange ratio, Mitsubishi UFJ Securities basically assumed andrelied on the accuracy and completeness of information supplied by both companies and publicly
disclosed information made available to it and did not verify such information independently. It was
assumed that there was no fact undisclosed to Mitsubishi UFJ Securities that might have asignificant effect on its calculation of the share exchange ratio. Moreover, Mitsubishi UFJ Securities
has not undertaken an independent evaluation, appraisal or assessment of any assets or liabilities(including contingent liabilities) of Mitsubishi Materials or Sambo Copper Alloy (or their respective
affiliates) and has not requested any such evaluation or appraisal from any other third-party. With
respect to the financial forecast information of both companies, Mitsubishi UFJ Securities assumed
that it has been reasonably prepared with the best currently available estimates and judgment of the
management teams of Mitsubishi Materials and Sambo Copper Alloy.
To calculate the value of the stock of the respective companies, GCA adopted the market
value average method for Mitsubishi Materials, and the market value average method, the multiple
method (a method which applies multiples to the comparable company’s financial metrics) and thediscounted cash flow (DCF) method for Sambo Copper Alloy.
As for the financial projections being the basis of the DCF analysis, a considerable increaseor decrease in earnings is not expected.
Based on each evaluation method, GCA calculated that the number of Mitsubishi Materials
shares to be allotted in exchange for each share of Sambo Copper Alloy is as shown in the tablebelow.

6

Evaluation method

Range ofshare exchange ratio

Multiple method

1.15 〜 1.33

DCF method

1.18 〜 1.51

In applying the market value average method, GCA adopted the average closing price pershare on all trading days during the six-month, three-month and one-month periods ending on
October 19, 2007, the reference date for evaluation for Mitsubishi Materials.
In calculating the share exchange ratio, GCA basically assumed and relied on the accuracy
and completeness of information supplied by both companies and publicly disclosed information
made available to it and did not verify such information independently. It was assumed that there
was no fact undisclosed to GCA that might have significant effect on its calculation of the shareexchange ratio. Moreover, GCA has not undertaken an independent evaluation, appraisal orassessment of any assets or liabilities (including contingent liabilities) of Mitsubishi Materials or
Sambo Copper Alloy (or their respective affiliates) and has not requested any such evaluation orappraisal from any other third-party. With respect to the financial forecast information of bothcompanies, GCA assumed that it has been reasonably prepared with the best currently available
estimates and judgment of the management teams of Mitsubishi Materials and Sambo Copper Alloy.
Mitsubishi Materials and Sambo Copper Alloy carefully considered the share exchange
figures with reference to the calculation results on the share exchange ratio, which were submitted
by the respective aforementioned third-party advisors and, as a result of subsequent negotiations anddiscussions, both parties approved the final share exchange ratio as reasonable and acceptable for
their respective shareholders at meetings of their respective boards of directors held on October 26,
2007 and signed the share exchange agreement on the same day.
The share exchange ratio is subject to change by the mutual agreement of both companies inthe event of a substantial change to any conditions on which the calculation is based.
2) Relations with third-party advisors
Mitsubishi UFJ Securities is not a related party of Mitsubishi Materials or Sambo Copper
Alloy. Likewise, GCA is not a related party of Mitsubishi Materials or Sambo Copper Alloy.
(4)

Treatment of stock acquisition rights and bonds with stock acquisition rights of Sambo
Copper Alloy
Sambo Copper Alloy has not issued any stock acquisition rights or bonds with stock7

acquisition rights.
3. Overview of Mitsubishi Materials and Sambo Copper Alloy (as of June 30, 2007)

(1)

(2)

(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)

(12)

(13)

(14)

Company name

Mitsubishi Materials(wholly owning parent company)

Sambo Copper Alloy(wholly owned subsidiary)Line of business

Manufacture and sales of cement
and secondary cement products;
smelting/refining, processing andsales of copper, gold, silver andother metals; manufacture andsales of cemented carbide
products for metal fabrication,
diamond-cutting tools, powder
metallurgy products andhigh-performance alloy products;
and manufacture and sales ofelectronic materials andcomponents and polycrystalline
silicon

Manufacture and sales of copperand copper alloy products, andfabricated products

April 1, 1950

May 16, 1935

1-5-1, Otemachi, Chiyoda-ku,
Tokyo
Akihiko Ide, President¥119,457 million
1,252,092,486¥493,127 million¥1,852,598 million
March 31
19,631 (consolidated)(as of March 31, 2007)
Users in Japan and overseas of
cement, copper, processed metal
products, aluminum, electronicparts, electronic materials, energy
systems and other products
Japan Trustee Services
Bank, Ltd.: 8.2%

8-374, Sambo-cho, Sakai-ku,
Sakai-shi, Osaka
Takao Hashida, President¥2,550 million
22,669,100¥14,205 million¥57,942 million
December 31
649 (nonconsolidated)

The Master Trust
Bank of Japan, Ltd.: 6.3%

Yuichiro Kuno:

Date ofestablishment
Location of head
officeRepresentative
CapitalShares issued
Net assets
Total assets
Fiscal term-end
Number of
employees

Major customers

Principal
shareholders andshareholding ratios

Major
correspondent banks

The Bank of TokyoMitsubishi UFJ, Ltd.:

Various users in electronics,
automobile, housing-related,
trading company and wholesalers
Mitsubishi Materials
Corporation: 62.4%
9.3%

Mitsubishi Corporation:

6.6%

2.9%

(as of March 31, 2007)
The Bank of Tokyo-Mitsubishi
The Bank of Tokyo-Mitsubishi
UFJ, Ltd., andUFJ, Ltd., andMitsubishi UFJ Trust and Banking
Resona Bank, Limited
Corporation

8

(15)

(16)

Relationships
between thecompanies
concerned

Capitalrelations

Mitsubishi Materials holds 62.4% of Sambo Copper
Alloy’s issued and outstanding shares. Sambo Copper
Alloy holds no Mitsubishi Materials’ shares.

Human
relations

A senior executive officer of Mitsubishi Materials
currently assumes the position of director of Sambo
Copper Alloy. In addition, an executive officer and an
employee of Mitsubishi Materials currently assume
the position of auditor of Sambo Copper Alloy.

Businessrelations

Mitsubishi Materials sells electrolytic copper, ingot
copper and other products to Sambo Copper Alloy.
Sambo Copper Alloy sells copper and copper alloy
products to Mitsubishi Materials.

Relevance torelated party

Sambo Copper Alloy is a consolidated subsidiary of
Mitsubishi Materials.

Financial results for the most recent three fiscal years

Fiscal term

Mitsubishi Materials(wholly owning parent company)(consolidated)
Year
Year
Year
ended
ended
ended
Mar 2005 Mar 2006 Mar 2007

Sambo Copper Alloy(wholly owned subsidiary)(nonconsolidated)
Year
Year
Year
ended
ended
ended
Dec 2004 Dec 2005 Dec 2006

Net sales

984,776

1,143,699

1,452,108

51,68158,723

92,132

Operating profit

54,084

68,98178,758

947

2,813

2,053

Ordinary income

50,50580,759107,188

666

2,752

2,074

Net income

16,37458,802

71,382(2,134)

238

1,506

Net income per share (yen)

14.44

51.73

60.33

(94.17)

10.52

66.43

Dividend per share (yen)

3.0

4.0

6.0

-

-

5.0

Net assets per share (yen)174.18265.15329.35495.57502.27558.33(Millions of yen)9

4. Parent Company Information after the Share Exchange(1)Company name

Mitsubishi Materials Corporation(2)

Line of business(3)

Location of head office

Manufacture and sales of cement and secondary cement products;
smelting/refining, processing and sales of copper, gold, silver and othermetals; manufacture and sales of cemented carbide products for metal
fabrication, diamond-cutting tools, powder metallurgy products andhigh-performance alloy products; and manufacture and sales ofelectronic materials and components and polycrystalline silicon
1-5-1, Otemachi, Chiyoda-ku, Tokyo(4)

Representative

Akihiko Ide, President(5)

Capital¥119,457 million(6)

Total assets

Not determined at present(7)

Net assets

Not determined at present(8)

Fiscal term-end

March 31(9)

Outline of accounting treatment

As a category under the transactions commonly controlled by both parties, the shareexchange is expected to fall under a transaction with minority shareholders. The value of goodwillthat will be generated in connection with the share exchange has not been determined at present.
(10)

Impact of the share exchange on financial results

As Sambo Copper Alloy is a consolidated subsidiary of Mitsubishi Materials, the effects ofthe share exchange on financial results are considered to be insignificant either on a consolidated or
nonconsolidated basis.

Mitsubishi Materials and Sambo Copper Alloy are Japanese companies.

Information

distributed in connection with the proposed share exchange transaction is subject to Japanese
disclosure requirements that are different from those of the United States.

Financial statements

included herein have been prepared in accordance with Japanese accounting standards that may not
be comparable to the financial statements of United States 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, since the companies are located in Japan, and some or all of theirofficers or directors are residents of Japan.

You may not be able to sue the companies or theirofficers or directors in a Japanese court for violations of the U.S. securities laws. Finally, it may bedifficult to compel the companies and their affiliates to subject themselves to a U.S. court’s
judgment.

10You should be aware that the companies may purchase shares of Sambo Copper Alloy otherwise
than under the share exchange, such as in privately negotiated purchases..

11