Capital and Business Alliance with NIHON NOHYAKU CO., LTD.
a Subsidiary as well as Commencement of Takeover Bid andUnderwriting of Capital Increase through Private Placement
August 21, 2018

ADEKA CORPORATION
Hidetaka Shirozume
President and Chief Operating Officer
This material is not a disclosure material under the Financial Instruments and Exchange Act and does not guarantee the accuracy andcompleteness of the information contained herein. Forward‐looking statements contained in this material are our judgments based on
information available as of the date of the presentation meeting and include uncertainties. ADEKA CORPORATION will assume no
responsibility for any damage resulting from the use of this material.

1

Contents
1. Overview of This Matter
2. Aims of This Matter
3. Synergies Expected from This Matter4. Corporate Profile of ADEKA
5. Corporate Profile of NIHON NOHYAKU
6. Summary2Overview of This Matter

3

Overview of This Matter

Details announced on August 21••

ADEKA CORPORATION (“ADEKA”) has decided to acquire 51% of the shares of NIHON NOHYAKUCO., LTD. (“NIHON NOHYAKU”) in combination with a takeover bid (“TOB”) and capital increase
through private placement or third‐party allocation shares (“TPA”) (total amount: approx. 20
billion yen).
In addition, ADEKA will enter into a capital and business alliance agreement with NIHON NOHYAKU
to maximize synergies for both companies.

Overview of TOB••

TOB price: 900 yen (the premium on the closing price on August 20 is 34.3%).
Assumed acquisition rate: 35.7% – 42.2% (6.9 billion yen – 10.9 billion yen).
51% in combination with TPA.

Overview of TPA•

Amount to be paid: 8.0 billion yen – 14.0 billion yen (this may change as a result of TOB).
4

Scheme of This Matter
NIHON NOHYAKU will become a consolidated subsidiary of ADEKA as a resultof TOB and TPA.
At present: 24.2%(Equity‐method affiliate)

After this matter: 51.0%(Consolidated subsidiary)

24.2%

51.0%
(in combination with TOB and TPA)

Pursue synergetic effects by concluding
a capital and business alliance agreement
5Future Schedule
August 21 (Tue.) , 2018

• Resolution on this matter at the Board of Directors
meetings of the both companies• Conclusion of a capital and business alliance

August 22 (Wed.)

Commencement of TOB

September 19 (Wed.)

End of TOB

September 27 (Thu.)

Settlement date of TOB

September 28 (Fri.)

Payment date of TPA (completion of the conversion of
NIHON NOHYAKU to a subsidiary)6

Business Outline

ADEKA
Three Main Business

Strengths of ADEKA
1. Various materials and solutions

1
Polymer
additives

2
Chemicalproducts

Additives for polyolefin,
PVC stabilizer, plasticizer,
flame retardant, others

Photo(light)/Thermal curing resin,
photoinitiator, imaging material,
Semiconductor material,
Surfactant, lubricant additive,
cosmetic ingredients, others•

Organic synthesis technology•

High purification technology•

Light wavelength control technology•

Polymer functionalization technology•

Surface active stabilization technology•

Stabilization technology•

Fat and oils processing technology

2. Response to diverse applications
3. Response to multiple needs including electronicmaterials, materials for automobiles and3
Food
products

Margarines, shortening,fats and oils for chocolate,
Frying oil, Whipping cream,otherspersonal care materials
4. Contribution to food cultures in Asia
5. Global expansion of production and sales
networks

7

Aims of This Matter

8

Aims of This Matter
1.
•

2.
•

Strategic acquisition to achieve the mid‐to long‐term vision
Initiative with a view to a mid‐term management plan (FY2021 ‐) after the current Mid‐Termmanagement Plan “BEYOND 3000”.
‒ Actively promote M&A growth for the purpose of expanding business domains anddeveloping new businesses.

Growth and expansion of the fourth business pillar “life science”
Form a capital and business alliance with NIHON NOHYAKU, which has comprehensive knowledgeof authorization process, to accelerate business development with a view to expanding the life
science business (the authorization process of diagnostic pharmaceuticals and medical devices,etc.) by adding the agrichemical business to our portfolio.

3.

Growth prospects of NIHON NOHYAKU•Support growth strategies to become a “Global top 10 agrochemical company.”

9

ADEKA

Mid‐term management plan（FY 2018 – 2020）
FY 2020
Net Sales
Financial
indicator

OPM

10%

ROE

10%

Total amount
Investments
and loans

Over 300 billion yen (organic growth)

Break
down

100 billion yen (Three‐year total)

Capitalinvestment

50 billion yen (Three‐year total)

M&A funds

Prepared with 50 billion yen as the limit(Three‐year total)

Dividend payout ratio: 30%
Dividend(target for the final year of the mid‐term plan after incremental increases)

Appropriate shareholder returns decided after
comprehensive consideration.

10

Mid‐term management plan（FY 2018 – 2020）

Basic Strategies
Basic Policies•

Become an excellent company with sales exceeding 300 billion yen.

Basic Strategies•

Global expansion of three main businesses‒ Globally expand sales of strategic products defined for each of our three main businesses;
Polymer additives, Chemical products, and Food products.

•

Entering new domains‒ Build business models and promote commercialization in the target domains ofLife sciences, Environment, and Energy.

•

Enhancing our management foundation‒ Promote CSR to increase our contribution to society and trust from society.
‒ Enhance mutual cooperation within the ADEKA Group to leverage our comprehensive
ability.

11

Expansion of Life Science Business
事業計画策定の参考資料

FY 2018 ‐‐ FY2020

Mid‐Term Management Plan “BEYOND 3000”

FY 2021 ‐Next plan

Life sciencebusiness

Consolidated sales :Over 300 billion yen

Polymer additives

Enhance the portfolio witha view to the next mid‐termmanagement plan (FY2021 ‐ ).

Chemical products
Food products
12Corporate Profile

ADEKA
Item

Contents

Established

January 27, 1917 （101st year in 2018）

Paid‐in capital

22.9 billion yen

Main business

Chemicals business(Polymer additives, IT chemicals, Advanced
chemicals) and Food business (Margarine, Shortenings, Fat and oils
for Chocolate etc.)

Listed stock exchangeTOKYO STOCK EXCHANGE First Section (4401)

No. of share issued

103,651 thousand shares * As of June 30, 2018

No. of shareholders

4,965

Fiscal year‐end

March 31

Net sales（FY2017）

Consolidated: 239,612 million yen
Non‐Consolidated: 131,319 million yen

No. of employees

Consolidated: 3,551
Non‐Consolidated: 1,639 * As of March 31, 201813

Corporate Profile

NIHON NOHYAKU
ItemContents

Established

November 17 , 1928

Paid‐in capital

10,939 million yen

Main business

Manufacture, import/export and sale of Agrochemicals(Agriculture/Professional Turf/Home & Garden), Wood Preservative,
Agricultural Materials, Pharmaceuticals & Veterinary Products

Listed stock exchangeTOKYO STOCK EXCHANGE First Section (4997)

No. of share issued

66,836 thousand shares* As of June 30, 2018, treasury stock 3,190 thousand shares is deducted

No. of shareholders

14,347 * As of March 31, 2018

Settlement Period

September 30

Net sals（FY2017）

Consolidated: 60,033 million yen,
Non‐Consolidated：37,829 million yen

No. of employees

Consolidated: 1,461
Non‐Consolidated：419 * As of September 30, 201714

Business Outline

NIHON NOHYAKU
Main businessWith the manufacture and sale of agrochemicals as the corebusiness, NIHON NOHYAKU has expanded its businessdomains to chemical products, pharmaceuticals and animal
health care products and provides safe, high‐quality products.

Strengths of NIHON NOHYAKU(solid base for creating new drugs)
Invention of newcompounds that can makea contribution in multiple
areas including agriculture

Invention

Chemical products,
Termiticide andthe Others

Agrochemicals• Japan’s first manufacturer specializing inagrochemicals• Research and development capabilities andreliability• Global development• Community‐based
Pharmaceuticals,
Animal health care products,
Athlete's footOthersGreening,
Residue analysis,etc.

Discovery
Multifaceted verification ofeffects conducted byrepeating laboratory tests,
greenhouse tests andagricultural land tests

Guarantee
Multilaterally conduct safetyassessments of new
agrichemicals for people,
animals and the environment

15

Growth Prospects of NIHON NOHYAKU

16Overview of the Agrochemical Market
Overview of the agrochemical market

Direction of NIHON NOHYAKU(Japanese market)••

Decline in bearers due to the aging of farmers
Downward pressure on expenses for
agricultural materials

Securing of
profit and influence(Overseas markets)
•
•

•
•

Large‐scale mergers of leading agrochemicalcompanies and the acquisition of items
Increase in demand for food due to theincreasing population and economic
development
Expansion of generic products
Expansion of emerging markets

Active developmentin overseas markets

17

Reference

Trends in the Global Agrochemical Market（Billion dollars）
542
474
405

564
512

537
499

Other

442
379

383

Asia

EuropeLatin
America

NAFTA

Source: Philips McDougall
Note: Provisional value for 201718

Synergies Expected from This Matter

19Synergies Expected from This Matter
Synergies

Synergies

for ADEKA

for NIHON NOHYAKU・Acquisition of a range of expertisein the area of life science
・Expansion of sales and profit

・Acquisition of funds and stabilityof management due to TPA・Expansion of the agrochemicalbusiness, development in emerging
countries and consideration of M&A

Personnel exchange, enhancement of mutually complementary powerin the R&D domain, mutual utilization of production technologies andprocess chemistry, and mutual exchange of organic synthesis technologies
with “chemicals” as the platform
Because NIHON NOHYAKU is a company created by the merger of the agrochemical department of ADEKA and
FUJII SEIYAKU CO., LTD. in 1928, it has high affinity.
20Future Prospects
We will proceed with the preparations for the business alliance so that we will be able tocreate synergies at an early stage while complementing each other’s business domains
by building a more solid cooperative relationship as a result of NIHON NOHYAKU
becoming a consolidated subsidiary of ADEKA.

Details of business alliance
1.

2.
3.
4.
5.

Acceleration of development speed through mutual complement in the R&D domain
a. Enhancement of the life science areab. Utilization of compound database
Improvement of productivity through the mutual utilization of production technologies andprocess chemistry
Expansion of sales channels through the mutual utilization of global networks
Development of high performance compounds through the provision of technologies such assynthesis reaction, dispersion technology and analysis technology
Exchange of researchers with knowledge in multiple areas

21

Summary22

Summary
Overview of this matter•

ADEKA has decided to acquire 51% of the shares of NIHON NOHYAKU in combination with a TOB
and capital increase through private placement (TPA) (Total amount: approx. 20 billion yen)

Aims of this matter•••

ADEKA Group will add the portfolio of the agrochemical business as the fourth business pillar.
Though ADEKA is advancing the development of diagnostic pharmaceuticals and medical devices
as the life science business, it has determined that expertise in the authorization process shallbe necessary for further business expansion.
ADEKA has decided to implement this matter because business synergies are expected giventhat NIHON NOHYAKU’s core business is the authorization process of agrochemicals,
pharmaceuticals, quasi‐pharmaceuticals and animal health care products, etc.

Schedule for this matter•••

Period of TOB: August 22 (Wed.) – September 19 (Wed.)
Settlement date of TOB: September 27 (Thur.)Payment date of TPA: September 28 (Fri.)

23

Disclaimer statement
The Tender Offer is not being made directly or indirectly in or into the United States, and no
application to the Tender Offer will be accepted from any person resident in the United States orfrom any U.S. person. Copies of this document and any related materials to the Tender Offer are
not being and should not be mailed or otherwise distributed or sent directly or indirectly in or
into the United States by any means (including facsimile, e‐mail, Internet communication, telex,
or telephone). This document does not constitute the solicitation of an offer to buy any securities
from any person resident in the United States or from any U.S. person.
In case of an application, applicant shareholders (standing agent in case of foreign shareholders)
may be asked to represent and warrant to the Tender Offer agent to the effect that they are notin the United States neither at the time of the application nor the time of sending an application
form for the Tender Offer, that no information regarding the Tender Offer, including copies, hasbeen received or sent in, to or from the United States, directly or indirectly, that mail systems in
the United States, other methods or means of inter‐state trade or international trade (including
but not limited to, facsimile, e‐mail, Internet communication, telex, or telephone) or securities
exchange facilities in the United States have not been used for signing and delivering theapplication form for the Tender Offer, directly or indirectly, and that they are not acting as anagent, custodian or a fiduciary for others without discretion (excluding cases where such others
are giving all the instructions on the Tender Offer from outside the United States).

24

This material is not a disclosure material under the Financial Instruments and Exchange Act and does not guarantee the accuracy andcompleteness of the information contained herein. Forward‐looking statements contained in this material are our judgments based on
information available as of the date of the presentation meeting and include uncertainties. ADEKA CORPORATION will assume no
responsibility for any damage resulting from the use of this material.

New Growth Strategy
through a capital and business alliancewith ADEKA Corporation
August 21, 2018

Nihon Nohyaku Co., Ltd.
President Yosuke Tomoi
26

Background of business alliance (1)1. Current state of NNC*/Nichino Groupa) With Group Vision “Nichino Group - Growing Global to become
an outstanding globally competitive group”, we’re promoting
growth strategy with the aim of becoming an enterprise withsales over 200 billion yen.
b) On the other hand, improvement of our capital base is required
for further strengthening of R&D capability and expansion ofbusiness through M&A etc.
c) NNC can be said to be a company that has relatively few total
assets and cheaper stock prices than large companies, so weneed to improve our corporate value.
*NNC=Nihon Nohyaku Co., Ltd.

2. Current state of ADEKAa) In recent years, ADEKA has been working to strengthen life
science business as a growing field.
27

Background of business alliance (2)3. Relationship with ADEKAa) Originally NNC spun off from ADEKA 90 years ago, and ADEKA has
been a major shareholder of NNC since then.
b) The top executives of NNC & ADEKA have always exchanged theviews on the business environment, management strategies andcapital policies.
c) NNC & ADEKA shared the view that further cooperation in the future
will contribute to acceleration of growth strategies and improvementof corporate value of both companies.

28

Aim of business alliance
1. Stabilization of capital base(to be described later)

2. Strengthening of life science business through collaboration with ADEKAa) Agrochemical business will be main business of ADEKA’s Life Science sectorb) Expand business by utilizing know-how and experiences of both companies(1)Improve efficiency of new agrochemicals/pharmaceuticals creation throughintegration/mutual utilization of organic synthesis technology of both companies(2) Utilize production technology mutually(3) Expand agrochemical derivative products business through collaboration(4) Utilize global business bases of both companies mutually

3. Human resources development and mutual expansion of business fields
through personnel interactionsa) Expand business field and maximize business synergies through exchange of researchpersonnelb) Develop managers with global perspective in both companies through exchange of managerial
personnel of sales, production and administration division
29

Stabilization of capital base (1)Marketcapitalization of¥46.9 billion(Assumption:
670yen per share)

Issue of new shares to ADEKA(third party allotment)

ADEKA⇒ Raise fundfor growth

ADEKA

24.2%

51.0%

Stabilize
capitalTender Offer (TOB)
by ADEKA

Company
share

Present

After the alliance30

Stabilization of capital base (2)1. Raise 8 to 14 billion yen through the issueof new shares
2. Use of fundsa) R&D cost for new products; 11 billion yenb) Investment in production facilities (for new
products or existing products); 2-3 billion yenc) Others (M&A etc.)
31

Conclusion
1. We promote new growth strategy through a capital andbusiness alliance with ADEKA.
2. As a result of this alliance, NNC will become aconsolidated subsidiary within ADEKA group, but we will
maintain listing on the First Section of the Tokyo Stock
Exchange and secure independent management.
3. We pursue synergies with ADEKA and improve corporate
value of both companies.

Nichino Group - Growing Global
To become an outstanding globally competitive group32

Summary of Questions and Answers at Joint Press Conference on August 21, 2018
Date/Time

August 21, 2018（Tuesday）6:00PM～7:30PM

Briefer

ADEKA CORPORATION
President and Chief Operating Officer Hidetaka Shirozume（here in after reffered toas Shirozume）
Nihon Nohyaku Co., Ltd. President Yosuke Tomoi（here in after reffered to as Tomoi）

Explanatory “Capital and Business Alliance with NIHON NOHYAKU CO., LTD. a Subsidiary as
Materials

well as Commencement of Takeover Bid and Underwriting of Capital Increase
through Private Placement”“New Growth Strategy through a capital and business alliance with ADEKA
Corporation”

Q1：I would like you to explain the specific details of the business alliance agreement to as far as you
can tell. In addition, each of the strengths of the company's technologies has been identified.
What are the specific strengths of the company's technologies?
Shirozume：At this point, we have not yet decided about the details. After the TOB and TPA are
concluded, we will organize a Business Alliance Promotion Team and determine the ways tostrengthen our interaction with the specific content of the business alliance.
Tomoi： Nihon Nohyaku(here in after referred to as NNC) has earned profits through R&D on thesynthesis of chemicals specializing in agrochemical and pharmaceuticals. ADEKA sells resin
additives, electronic materials, and compounds such as liquid crystal materials. Although thechemical structure of each company’s products differs, we share the same point that we
synthesize organic compounds and commercialize them. By gathering researchers from bothcompanies and exchanging opinions, we hope to find out what can be obtained from them andlink them to new synthetic methods and new technological developments that have not beenachieved yet.
Q2: Adding about ¥60 billion of NNC’s sales, ADEKA will achieve its mid-term Management Plan
target of ¥300 billion. I would like to know if ADEKA will review the mid-term Management Planor not, referring NNC's growth, as well as what is expected to be a synergy between ADEKA
and NNC.
Shirozume：We do not currently plan to revise our BEYOND 3000 medium-term management plan by
2020. In addition of NNC’s sales, we exceeded ¥300 billion, however we will not review the
mid-term Management Plan. Rather, we intend to achieve ¥300 billion in organic growth in
the field of plastics additives, chemicals, and foodstuffs under our current medium-term
management plan. In addition of NNC joining the ADEKA group, firm pillars of life scienceand agrochemical will stand in our portfolio. However, we intend to proceed with the steadycommercialization of life science-related materials that are currently being developed.
Whether or not firm collaboration can be seen as a result at this point depends on what kind1

of exchange of opinions can be made in the research field. For example, in the case of
ADEKA’s chemical products, it is necessary to consider existing chemical substances first.
We will continue our approach of creating new compounds, registering them as existingchemical substances, and making them one of the foundations for our sales activities.
However, I feel that it is difficult to respond to such a situation in small quantities. If it is acompound that can make some profit even in small quantities, this approach would beappropriate. Otherwise, ADEKA had not actively added substances that are not conventional
chemical substances to its product lineup. On the other hand, NNC has the spirit of drug
discovery to create compounds that are not in the world. NNC has a very abundant databaseon how to guide new compounds using various synthetic routes. Therefore, I think that there
is a great possibility that chemical structures that ADEKA does not have at present can beused immediately. I think this point is very important in terms of whether synergies can berealized immediately.
Tomoi：I also think that there are great synergies in the sharing of NNC's technologies and compound
databases. However, in development pharmaceuticals and agrochemical, we need to conduct
thorough safety studies, and it takes more than 10 years for us to obtain agrochemicalregistrations and make them available to the public. I think that synergies that lead to newtechnologies through joint research will take some time before they can be reflected in NNC'sbusiness as profits.
Q3：Which proposed the business alliance? ADEKA or NNC? Why is this timing?
Shirozume：In July 2017, ADEKA proposed the alliance to NNC. Although it is difficult to explain why
this is the current situation, it is true that how to commercialize the life science business in
ADEKA was an extremely important issue. There have been many interesting materials andrevolutionary merchandise, but I was just beginning to realize that ADEKA was immature,such as how to sell as a life science business or how to build platforms.
In formulating the BEYOND 3000 medium-term management plan, one of the major goal wasto establish a solid business goal for life science, environment, and the energy field during
this mid-term Management Plan. When we clearly recognized the issues and objectives of the
ADEKA and decided which companies we should work together, we had NNC, which candeeply sympathise with. This was the process and the background to this implementation.
Q4：Taking this alliance as a opportunity, will the life science business be further expanded throughM&A?
Shirozume：In the Mid-term Management Plan, it does not specify priorities for M&A. With athree-year M&A budget of 50 billion yen, we decided to use part. Although I can't talk about
specific issues at this stage, I believe that there is a possibility that if there is any relationshipin the process of advancing various businesses, there will be a possibility that they will be
implemented.

2

Q5：How will NNC compete as major global agrochemical companies merge?
Tomoi： Major agrochemical companies around the world have sales of about ¥1 trillion, making it
difficult for NNC to compete on a global scale. However, NNC has the fifth to sixth mostefficient drug discovery probability in the past 20 years. We intend to further enhance andcounter this. Yes, without a certain business scale, the amount of money spent on R&D
investment is limited. NNC invests about 10% of sales in R&D,10% of the sales of 60billion
yen is about 6billion yen, if it is 120billion yen, 12billion yen can be invested in R&D, so wewant to actively expand the scale. We intend to expand our business by effectively using the¥10 billion growth fund acquired through this capital and business alliance.
Q6：Is there a possibility that ADEKA will continue to engage in M&A with other agrochemical
manufacturers?
Shirozume：This M&A does not mean that agrochemical will be our business framework. Since NNC
was the main premise for consolidation this time, we have no intention of actively acquiringother agrochemical manufacturers at present. However, in the growth strategy of NNC, if
there is a request for cooperation, I think that it is possible to take up the topic for discussion
at that time.
Q7: Are there any changes in NNC's growth strategy since NNC will obtain a large amount of fund?
Tomoi: We invest considerably in R&D and aim to launch a new drug every three years.
Although we have made steady progress in recent years, we still have a number of new drugcandidates in our pipeline.
If the current financial condition remains unchanged, it will be necessary to select anddevelop limited number of candidates. However, by acquiring funds for growth this time, there
is a possibility we will develop new drug more aggressively and launch them at a faster pacethan before. Therefore, we intend to make such efforts.
Then, we are, and will continue to, considerate further acquisitions of other companies in thesense of discontinuous growth of the company.
I can't talk about any specific details, but I believe that we can make effective use of this fundfor such growth.
Q8: Are you thinking about transferring businesses to each other to enhance synergies between
ADEKA and NNC? Do you have any ideas about setting up a joint laboratory in view of advancesin chemical technologies?
Shirozume: I believe it is necessary to organize Business Alliance Promotion Team and fully discuss
them. Since we and NNC have been actively exchanging technologies among different
generations, I believe the foundation for business tie-ups has been established to a certain
extent. I would like to entrust whether to create a platform to the committee that will beorganized in the future, and to further deepen the discussion.
Q9: Are there any synergies that can be expected other than R&D?
3

Tomoi: I think there are synergies outside of research and development too.
For example, in manufacturing, NNC has synthetic techniques for agrochemical TGs andformulation techniques for TGs.
Formulation requires various techniques, such as pulverizing, mixing, solidifying and so on.
ADEKA also recognizes that resins and other additives require technologies, such as
pulverizing and formulating the drug substance.
In this sense, we have similar technology base, and we are looking to collaborate with eachother to mutually utilize each other's production bases.
NNC's Indian and Brazilian subsidiaries could use NNC's pharmaceutical technologies for
production of ADEKA's products, and conversely, ADEKA could produce NNC's products.
In addition, we believe that NNC's know-how in the pharmaceuticals field will help ADEKA
develop their life sciences business, and we expect synergies in a variety of situations.
Q10: R&D expenditure has been about 10% of sales. Is there a possibility of raising the percentage
in the future? Did NNC suddenly need money because NNC has a plan to development drugs
with large potential?
Tomoi: We invest about 10% , recently about 12%, of sales in R&D.
The reason for the increase in R&D expenses is that it is expensive to development new drugs,
and we have registered about 25 our own agrochemical in Japan, Europe, the United Statesand other countries, but due to the tightening regulations on agrochemical, maintenance ofregistrations itself costs a lot.
In addition, we promote R&D activities aiming to create a drug every three years, but it is also
true that there are some potential pipeline drugs at present.
In the current situation, we can’t invest more than “one drug every three years” pace, so I would
like to utilize this fund for acceleration.
It is true this project will strengthen our financial base, and we would like to use it to invest morethan ever before.
Q11: In the formulation process of the Mid-term Management Plan of ADEKA, I suppose the story ofthis alliance, which began in July last year, has been included in the plan. However, why does
the Mid-term Management Plan of life sciences business contain no agrochemical?
Shirozume: I have known about this issue, but the people who formulated the Mid term Management
Plan did not know it at all.
Therefore, Mid-term Management Plan "BEYOND 3000” announced in April, 2018 dose notinclude this alliance.
Q12: ADEKA's current Mid-term Management Plan does not have any synergies with NNCs in thelife sciences field, so can we expect the synergies with NNC will be a surplus above the plan?
Shirozume: I hope so. Mid-term Management Plan does not expect NNC to become our consolidated
subsidiary, and we have not include it in the numerical figures.
As an expression, the Mid-term term Management Plan included the concept of "cultivating life4

science business into the next pillar". Please understand that this alliance agreement is for theacceleration of this concept.
Q13: NNC aims to be the world's top 10 with net sales of more than ¥200 billion. However, when
NNC becomes ADEKA’s subsidiary, are there any concerns that the restriction will increase on
NNC own activity like M&A, and make them slow down?
Tomoi: It is difficult to create new drugs more efficiently, and we cannot reach our goal without
expanding our business scale. ADEKA also understands this situation and NNC will continue tobe listed and operate independently in order to develop markets more agile and capture more
external value.
We have consulted with ADEKA as our major shareholder until now, and after 51 % shareacquisition, we intend to continue consulting with them as before.
We are able to obtain growth funds for the purpose of expanding business scale, and we intend
to use this to accelerate NNC's growth.
Rather than being unable to do so because of 51% share acquisition, ADEKA has agreed that
we will take the lead in restructuring and expand the scale of our business.
If we fail to achieve our goals, NNC will not grow, and there will be no return on the investment
made by ADEKA. Therefore, we are aiming at the same thing, and ADEKA will cooperate in
NNC's future growth.
It is possible that ADEKA's capital structure may decline slightly in the future due to capitalincreases through mergers and acquisitions, but I am confident that ADEKA will continue toadhere to this framework and support NNC's growth. I think there is no concern.
Q14: If NNC would make additional M & A, will ADEKA maintain 51% stake in NNC? Will ADEKA
invest in M&A?
Shirozume: It will be executed based on the agreement, but we intend to discuss on that premise.
Q15. I think the decision to invest ¥20.0 billion was made with a view of returns. How did you
examine the consistency between the return of 51% share acquisition of NNC and the targetsof operating income and ROE set in Mid term Management Plan?
Shirozume: Consideration of consistency is a somewhat difficult issue. However, as a result of thisdeal, we are estimating the projection of our financial position, operating income margin, andROE as of FY 2020. This consideration was made on the assumption that both ADEKA’s
business and NNC’s business proceeded as planned, the numerical figure will be like this in FY
2020.

5