The transactions pursuant to the share exchange described in this press release involve
securities of a Japanese company. The share exchange is subject to disclosure requirementsof Japan that are different from those of the United States. Financial information includedin this document, if any, was excerpted from financial statements prepared in accordancewith foreign 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 issuer is located in Japan and some or all of its
officers and directors reside outside of the United States. You may not be able to sue aJapanese company or its officers or directors in a Japanese court for violations of the U.S.
securities laws. It may be difficult to compel a Japanese company and its affiliates tosubject themselves to a U.S. court’s judgment. You should be aware that the issuer may
purchase securities otherwise than under the share exchange, such as in the open market or
through privately negotiated purchases.
This document has been translated from the Japanese-language original for reference
purposes only. In the event of any conflict or discrepancy between this document and theJapanese-language original, the Japanese-language original shall prevail in all respects.
[Translation]
October 28, 2020
To whom it may concern:
Company Name:
Representative:

Contact:

Company Name:
Representative:

1

Tokuyama Corporation
Hiroshi Yokota,
President and Representative
Director(Code No. 4043, First Section TSE)
Taro Kobayashi, General Manager
Corporate Communications &Investor Relations Dept.
(TEL: +81-3-5207-2552)
A&T Corporation
Shigetaka Misaka,President and Representative
Director(Code No.: 6722, JASDAQ)
Yasumasa Niikuni, Managing
Director and Manager of Business
Administration Department(TEL: +81-45-440-5810)

Contact:

Announcement of Execution of Share Exchange Agreement (Simplified Share
Exchange) Regarding A&T Corporation Becoming a Wholly Owned Subsidiary ofTokuyama Corporation.
Tokuyama Corporation (“Tokuyama”) and A&T Corporation, a consolidated subsidiary ofTokuyama, (“A&T;” and Tokuyama and A&T, collectively the “Companies”) hereby
announce that the Companies resolved at meetings of each of the Company’s Board of
Directors held today to execute a share exchange agreement (the “Share Exchange
Agreement”) between the Companies regarding a share exchange (the “Share Exchange”)
whereby Tokuyama will be a wholly owning parent company of A&T and A&T will be awholly owned subsidiary of Tokuyama, and the Companies have executed the Share
Exchange Agreement.
Tokuyama plans to implement the Share Exchange in the form of a simplified shareexchange (kan-i kabushiki kokan) pursuant to the provisions of the main clause of Article
796, Paragraph 2 of the Companies Act (Act No. 86 of 2005, as amended; the same applies
hereinafter), without obtaining approval of its general meeting of shareholders for the Share
Exchange Agreement, and A&T plans to implement the Share Exchange after the Share
Exchange Agreement is approved by resolution of the extraordinary meeting ofshareholders of A&T that is scheduled to be held on December 22, 2020. The Share
Exchange is scheduled to become effective on February 1, 2021. The implementation of
the Share Exchange is conditional on the above approval of the extraordinary meeting ofshareholders of A&T and there being no measures or procedures such as cease and desist
orders taken by the Japan Fair Trade Commission that obstruct the Share Exchange.
Prior to the effective date of the Share Exchange, common stock of A&T (the “A&T
Shares”) are scheduled to be delisted from the JASDAQ (Standard) market (“JASDAQ”)
of the Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”) as of January 28, 2021
(the last trading date of the A&T Shares is scheduled to be January 27, 2021).
1.
Purpose of Making A&T a Wholly Owned Subsidiary of Tokuyama through the
Share Exchange
Tokuyama was founded in Tokuyama Town (now Shunan City), Yamaguchi Prefecture in
February 1918 as Nippon Soda Kogyo Co., Ltd. to domestically produce soda ash (sodium
carbonate), for which Japan was dependent on imports at the time. Soda ash is a basic2

material for industry and was an essential material for the industrial development of Japan
at the time. Tokuyama changed its company name to Tokuyama Soda Co., Ltd. andentered the diversified inorganic chemicals and petrochemicals fields in 1936. In April
1994, Tokuyama changed its company name to its current Tokuyama Corporation andexpanded into the fine chemicals and electronic materials fields, and celebrated its
centennial on February 16, 2018. It has expanded its business globally, covering thesemiconductor-related information and electronics fields (Specialty Products segment), theenvironment field’s cement business and recycling and environment business (Cement
segment), and life and medical fields such as eyeglass lens materials and dental materials
etc. (Life & Amenity segment) as its main business fields, in addition to its founding
chemicals business (Chemicals segment). Tokuyama’s business model has been to create
value alongside customers for over 100 years by leveraging its tangible and intangible
assets such as unique technologies, highly competitive manufacturing hubs and its highly
skilled personnel and organizations to provide products and services to the world inresponse to social needs, and Tokuyama believes these are the strengths of Tokuyama thatit needs to continue refining. Tokuyama aims to continuously contribute to people’s
happiness and social development by maximizing these strengths it has cultivated to date tocontinue creating and providing new value.
Tokuyama identified the following four priority issues in its current medium-term
management plan “Cornerstone of Group’s Revitalization” announced on May 12, 2016 forthe period from fiscal year ended March 2017 through fiscal year ending March 2021, andhas been taking specific measures for each issue.
Priority issues
Change the Group’s
organizational
culture and structure

Rebuild the Group’sbusiness strategies

Strengthen groupmanagement

Measures− Steps will be taken to review personnel evaluation
systems, actively promote the exchange of humanresources between companies of Tokuyama group (the“Group”), and drastically reform structures andsystems through a variety of initiatives including thevigorous introduction of outside personnel.
− The Group will strictly adhere to a customer-oriented
approach on the conduct of its business activities. At
the same time, the Group will transition to a researchand development structure that is in tune withcustomers’ needs. Through these means, energies will
be channeled toward cultivating new business domainsthat employ unique technologies.
− The Group will reinforce management resources
including personnel and information through alliancewith other companies.
− Each company of the Group will once again clarify itsrole and position. Seeking to contribute to the Group’s

3

Improve
Tokuyama’s
financial position

growth strategy as well as the reduction of costs,
particular emphasis will be placed on further
strengthening the management of the Group as a whole.
− Every effort will be made to restore Tokuyama’sshareholders’ equity by steadily building up profits.
− Tokuyama will issue classified stock (preferred stock)
to quickly stabilize Tokuyama’s financial position,
thereby ensuring that the Group is well positioned toflexibly pursue opportunities including M&As that aredesigned to accelerate the pace of growth.

Of these, Tokuyama considers “Change the Group’s organizational culture and structure”
the top priority issue, and aims to shift to a robust business structure that will enable
continuous growth as a top manufacturer with the ability to manufacture products that are
overwhelmingly superior to those of its competitors in the global market in terms of cost,functionality and quality by fostering a vibrant corporate culture where each employee
carries out tasks independently and swiftly. The Medium-Term Management Plan has twopillars: “Transition to a robust business structure that is resilient against changes in its
operating environment and capable of sustainable growth” and “Transition to a Group-wide
low-cost structure by undertaking a comprehensive review of existing work practices”. In
Chemicals segment and Cement segment, which are its traditional businesses fields,
Tokuyama has avidly pursued improving the efficiency in order to become the top in Japanin terms of competitiveness, while in Specialty Products segment and Life & Amenities
segment, which are its growth businesses, Tokuyama has leveraged the unique technologies
developed in its traditional businesses and strived toward definitive profit growth throughmeasures such as reviewing its R&D structure in order to become a global leader inadvanced materials.
With regard to the business environment facing Tokuyama, the Specialty Products segment
is performing steadily because of the increased telework and 5G-related semiconductor
demand. By contrast, in the Chemicals segment and Cement segment, the revenue fromthose segments is showing a downward trend due to the decrease in sales volume triggeredby the spread of COVID-19. The Life & Amenities segment has also been unable to escapethe effects of the spread of COVID-19, with a temporary fall in dental material sales toEurope and the United States expected, and the businesses related to personal consumption
such as the dental materials and eyeglass lens-related businesses are in a severe situation.
Furthermore, in recent years, there has been an international request of creating a carbonfree and sustainable society. The three Tokuyama’s segments excluding the Life &Amenities segment are all energy-intensive businesses that rely on coal-fired power
generation and although Tokuyama itself owns coal-fired power generation plants and thishas been one of its strengths in the past, the current trend towards a carbon-free society
requires Tokuyama to look at the entire Group from the longer-term perspective andreconsider what its businesses should be to enable it to continue achieving sustainable mid-4

to-long-term growth, and to this end, Tokuyama considers the examination andimplementation of specific measures for these challenges as a matter of urgency.
A&T was founded in Fuchu City, Tokyo in May 1978 as Corporation Analytical
Instruments Co., Ltd. to conduct clinical testing-related business. In April 1988, the former
A&T Corporation was established as a joint venture company with Tokuyama Soda Co.,
Ltd., the forerunner to Tokuyama with which A&T had a business alliance with at the time,
and the current A&T was established in April 1994 through the integration of the former
A&T and the Medical Diagnostic Systems Division of Tokuyama. A&T was listed on
JASDAQ of the Tokyo Stock Exchange in July 2003. A&T celebrated its 40th anniversary
on May 25, 2018. A&T is currently engaged in the development, manufacturing, andcustomer support for products covering entire clinical laboratories (C (Chemicals), A(Analyzers), C (Computers), and L (Lab-Logistics)). The C (Chemicals) and A (Analyzers)
fields involve the distribution of blood sugar, electrolytic and coagulation etc. diagnostic
equipment and reagents that are used by medical institutions in Japan and abroad as part ofits blood testing business. The C (Computers) field consists of the manufacture anddistribution of laboratory information systems (LIS) that receive test requests from doctors,
instruct testing devices to carry out tests and accurately and swiftly provide test results onto
electronic medical records, etc. within medical institutions as part of its IT support business.
The L (Lab-Logistics) field involves the manufacture and distribution of laboratory
automation systems (LAS) that connect various clinical testing devices to computercontrolled conveyance lines, and automatically transports and measures all patient samples
as part of its automation support business. A&T will untiringly continue to create value asa company that is capable of integrating these product groups and making new proposals toclinical sites and laboratories, having a corporate philosophy to “support medical care andcontribute to people’s health around the world.”
A&T identified six main issues in its medium-term management plan “Creating a Structure
for Sustained Growth” announced on February 8, 2018 for the period from fiscal year
ended December 2018 through fiscal year ending December 2020, and has formulated abasic policy and key initiatives in relation to these issues.
(1)

Key objectives(i) Prepare for the fact that sales are concentrated on specific OEM clients(ii) Compensate for the decline in sales of some OEM clients, and secure newclients(iii) Increase gross profit (increase sales of original products)(iv) Reduce costs required to secure qualities of products(v) Put the business on the right track in the rapidly growing Chinese market(vi) Reform working styles and train personnel(2)

Basic policy(a) Increase the sales ratio of its own products and improve profitability
5

(b)
(c)
(d)
(3)

Enhance business operations in China and boost the overseas sales ratio
Bolster cooperation between development and manufacturing sections andestablish systems for the stable development and production of high-quality
products
Carry out exhaustively reform of working styles and personnel training

Key initiatives
Blood testing business(C (Chemicals）
and A (Analyzers))

・Prepare for the fall in sales with some OEMs bywinning new OEMs and creating stable
distribution channels with existing OEMs
・Promote technology development to achieve cost
reductions
・Build a high-quality production system by using
the new building at the Esashi plant
IT and automation support ＜LIS＞
business
・Appeal to new customers through an expanded(C (Computers) and L
new product lineup(Lab-Logistics))
・Appoint dedicated staff to win new customers
through direct sales
・Improve productivity by reducing outside work
and increasing in-house production＜LAS＞
・Introduce
additional
lineupstoboost
competitiveness and expand sales
・Establish packaged sales OEM business in orderto achieve stable sales in the Chinese market
・Establish the product support system for thebusiness in China
For blood testing, IT and・Create a structure to link development,
automation support
manufacturing and services in order to improvebusinesses
quality・Focus on sales of its own productsWorking styles and train
・Consolidate and systemize systems and programs
personnelof personnel training and seek to improve
personnel training
・Introduce a new career path system andimplement appropriate placement of personnel
・Introduce a regional permanent employee system
to boost productivity

6

With regard to the business environment facing A&T, with respect to the blood testing
business (C (Chemicals) and A (Analyzers)), as described above, the implementation of the
key initiatives in response to the current situation where sales are concentrated on specific
OEM clients may cause a fall in sales to some OEMs. In addition, the domestic electrolyte
and glucose, etc. testing market (note) has peaked, while growth overseas, especially in
China, is striking. For the IT and automation support businesses (C (Computers) and L(Lab-Logistics)), while the domestic market size and competition is largely unchanged andstable, overseas demand centering on LAS is high. On the other hand, successful
development of business in China in particular requires a wealth of knowledge andinformation, know-how and networking, and given the limitations on implementing further
developments in China on its own, substantial cost and time is required to find a suitablebusiness alliance partners, build strong ties, and then link these to actual business.
Note: The market of equipment and reagents necessary for the analysis of electrolyte andblood sugar which are one of the items for biochemical tests, in blood tests.
Tokuyama recorded a large loss in its overseas business in the fiscal year ended March 31,
2015 and the fiscal year ended March 31, 2016 and resulted in a managerial crisis. In
response to such crisis, Tokuyama formulated the current medium-term management plan
for revitalization titled “Cornerstone of Group’s Revitalization,” and re-evaluated its Group
companies in line with “Strengthen Group management,” one of the priority subjects in the
management plan stated above. This led to Tokuyama, which had long been reliant on coalpowered energy generation, realizing that it was imperative to bolster its health carebusiness in the Life & Amenities segment, which has the potential for becoming a growing
market and is not dependent on coal-powered energy generation while allowing Tokuyama
to leverage its unique technologies cultivated in its research and development field, as partof a fundamental review of its portfolio in order to achieve growth amid the global movetowards the creation of a carbon-free and sustainable society. As part of this, Tokuyama
expected A&T, whose challenge was the expansion of business overseas, as having
potential to further improve its profitability by utilizing Tokuyama’s overseas sales channel
and network and enhancing the joint R&D efforts with Tokuyama that has close affinity
with A&T’s C (Chemicals) business, and started to examine improvement measurescentering on A&T’s C (Chemicals) business in particular due to its close affinity with
Tokuyama since September, 2018. Through this process and after consulting with A&T,
Tokuyama found it shared similar views with A&T about the above key objectives of A&T,
and came to believe it could help, especially in the overseas market where A&T aims forfurther growth through its business development, resolve the issues of A&T by providing
Tokuyama’s own abundant overseas sales channel and network and know-how Tokuyama
has acquired through research and development, such as knowledge regarding importantdevelopment themes and results of its development, to the fullest extent with A&T.
Thereafter, through Tokuyama’s searching for strategies to strengthen the Life & Amenities
segment, Tokuyama discovered that there were certain limits to the financial and personnel
support it could provide to A&T under their current capital relationship, because theCompanies have to take into consideration the interests of the minority shareholders in
7

A&T in the short run while it would take a considerable amount of time to achieve certain
results after the implementation of those initiatives by jointly contributing their managerial
resources while A&T still remains listed, and because the contribution to the profit of
Tokuyama would be limited even if Tokuyama’s injection of its managerial resourcesenhanced A&T’s profit. In addition, although Tokuyama had found that the manufacturing
technology and know-how of A&T might be of use in Tokuyama’s products andmanufacturing equipment, Tokuyama realized that there are certain limitation to asking
A&T for getting involved in Tokuyama’s business proactively given that it is not easy for
A&T to use its resources for the cooperation with Tokuyama in addition to its own businessin a situation where A&T’s resources are limited as a listed company with independent
business operations that also has to consider the interests of minority shareholders, andthere were also restrictions on support from Tokuyama. Tokuyama determined that making
A&T a wholly owned subsidiary of Tokuyama would remove the above restrictions andrender possible proactive financial and personnel support, and that using A&T’s
manufacturing technology and know-how in products and manufacturing equipment soldby Tokuyama would improve the corporate value of A&T by resolving the issues facing
A&T and also improve the corporate value of the entire Tokuyama Group, and to this end,
made an initial offer to A&T in April 2020 for the commencement of discussions to makeA&T a wholly owned subsidiary.
As stated above, A&T came to believe, even before the offer from Tokuyama andfollowing the discussions it had with Tokuyama to share its understanding of the key issues
it faced, that given that there would be, with its limited business resources, substantial
hurdles and uncertainties in developing overseas sales channel and network by itself andconducting research and development of new products upon implementing the basic policy
described in (2) above and the key initiatives described in (3) above, receiving proactive
support from Tokuyama, such as utilizing Tokuyama’s sales channel and network andsharing the findings and the research results in the C (Chemicals) field, would be asignificant driver to steadily pursue these initiatives. Given these circumstances, A&T
stated in response to the initial offer from Tokuyama that it would positively consider
becoming a wholly owned subsidiary of Tokuyama, and agreed to continue discussions.
Thereafter, as described in 3.(1) “Basis and Reason for Calculation of the Allotment
Concerning the Share Exchange” below, Tokuyama subsequently engaged external experts
and proceeded with further consideration and made a formal proposal to A&T at the end of
July 2020 to make it a wholly owned subsidiary through a share exchange. A&T thenestablished its own review structure such as by appointing an outside expert as described in
3.(1) “Basis and Reason for Calculation of the Allotment Concerning the Share Exchange”
below, and Tokuyama and A&T each continued to deepen their consideration of the Share
Exchange while simultaneously conducting repeated discussions and negotiations.
This led to the firm belief of Tokuyama that deepening capital ties between the Companies
by making A&T a wholly owned subsidiary through the Share Exchange would remove theissues, such as requirement of considering the short-term interests of the minority
shareholders in A&T and limitation on the contribution to Tokuyama’s profit even with its
proactive injection of managerial resources, caused by the existence of minority
8

shareholders in A&T, and allow it to aggressively inject managerial resources into A&T
without restrictions on support, thereby significantly contributing to the resolution of thevarious issues facing A&T and improving A&T’s corporate value. At the same time, thiswould also make it easier to use A&T’s manufacturing technology and know-how in
Tokuyama’s business and boost Tokuyama’s health care business in the Life & Amenities
segment with A&T at its core, consequently improving Tokuyama’s corporate value in linewith its aim of building a carbon-free and sustainable society. For its part, A&T concluded
that the formation of a structure that would allow it to receive proactive support from
Tokuyama would enable it to effectively and steadily pursue the basic policy described in(2) above and the key initiatives described in (3) above in its current medium-term businessplan, and the resolution of the conflict of interest issue caused by the existence of minority
shareholders would remove the pressure to always pursue short-term profit, making it
possible to pursue a growth strategy from a medium to long-term perspective. It would
also remove costs necessary to maintain its listing and allow it to apply such capital to
growth investment, and all these factors combined would help it more steadily improve thecorporate value of A&T even in a challenging business environment. Tokuyama and A&T
have exchanged and shared their conclusions with each other and share a common
understanding.
Tokuyama and A&T intend to in principle maintain the current management structure of
A&T after the implementation of the Share Exchange, and mutually utilize the managerial
resources such as networks, development capabilities, know-how etc. of the Companies toimprove the corporate value of the Companies. Specific management policies have not yet
been determined, but Tokuyama and A&T intend to continue discussions.
2.

Outline of the Share Exchange(1)

Schedule for the Share Exchange

Date on which execution of the Share
Exchange Agreement is resolved at
Meetings of Board of Directors(the Companies)

October 28, 2020

Execution date of the Share Exchange
Agreement(the Companies)

October 28, 2020

Date of announcement of record date ofextraordinary meeting of shareholders(A&T)

October 28, 2020

Record date of extraordinary meeting ofshareholders(A&T)

November 12, 2020 (scheduled)9Date of extraordinary meeting ofshareholders(A&T)

December 22, 2020 (scheduled)

Last trading date (A&T)

January 27, 2021 (scheduled)

Delisting date (A&T)

January 28, 2021 (scheduled)

Effective date of the Share Exchange

February 1, 2021 (scheduled)(Note 1)

(Note 2)Tokuyama will implement the Share Exchange in the form of a simplified shareexchange pursuant to the provisions of the main clause of Article 796,
Paragraph 2 of the Companies Act, without obtaining approval by resolution ofits general meeting of shareholders.
If necessary due to the progress of procedures of the Share Exchange or for any
other reasons, the schedule set out above may be changed upon consultation andagreement between the Companies. If there is a change in the schedule set out
above, such change will be announced promptly.

(2) Method of the Share Exchange
Through the Share Exchange, Tokuyama will become the wholly owning parent company
in share exchange and A&T will become the wholly owned subsidiary in share exchange.
Tokuyama plans to implement the Share Exchange in the form of a simplified shareexchange pursuant to the provisions of the main clause of Article 796, Paragraph 2 of theCompanies Act, without obtaining approval by resolution of a general meeting ofshareholders. A&T plans to implement the Share Exchange after the Share Exchange
Agreement is approved by resolution of the extraordinary meeting of shareholders of A&T
that is scheduled to be held on December 22, 2020. The Share Exchange is scheduled to beeffective on February 1, 2021
(3)

Allotment in the Share Exchange
Company name

Tokuyama(wholly owning parent
company in share exchange)

A&T(wholly owned subsidiary inshare exchange)

Ratio of allotment in the
Share Exchange

1

0.68

Number of shares to bedelivered upon the Share
Exchange(Note 1)

Common stock of Tokuyama:
2,543,952 shares (scheduled)

Share allotment ratio
0.68 shares of common stock of Tokuyama (the “Tokuyama Shares”) will beallotted and delivered in exchange for each share of A&T Shares; provided,10

(Note 2)(Note 3)

however, that no shares will be allotted in the Share Exchange for the A&T
Shares held by Tokuyama (2,515,700 shares as of October 28, 2020).
Tokuyama and A&T may consult and agree to change the ratio of allotment in
the Share Exchange (the “Share Exchange Ratio”) described in the table abovein the event of any material changes to the conditions that served as the basis of
the calculation.
Number of Tokuyama Shares to be delivered upon the Share Exchange
Upon the Share Exchange, Tokuyama plans to allot and deliver the number ofshares of Tokuyama calculated based on the Share Exchange Ratio described in
the table above to the shareholders of A&T (excluding Tokuyama) as of thetime immediately preceding the time when Tokuyama acquires all issued sharesof A&T (excluding A&T Shares held by Tokuyama; the “Base Time”) in
exchange for A&T Shares held by such shareholders. The Tokuyama Shares tobe allotted and delivered will comprise new shares to be issued by Tokuyama
and treasury shares of Tokuyama (385,018 shares as of September 30, 2020).
In accordance with a resolution of the meeting of the Board of Directors thatwill be held prior to the day immediately preceding the effective date of the
Share Exchange, A&T will cancel all of its treasury shares it holds at the time
immediately preceding the Base Time (including the treasury shares to beacquired by A&T through the purchase of shares pertaining to the dissenters’appraisal right exercised pursuant to the provisions of Article 785, Paragraph 1of the Companies Act upon the Share Exchange). The total number of common
stock to be allotted and delivered upon the Share Exchange may be subject tochange in the future due to reasons such as the acquisition or cancellation of thetreasury shares by A&T.
Treatment of shares constituting less than one (1) unit (tangen miman kabushiki)
The shareholders of A&T who will hold shares of Tokuyama constituting lessthan one (1) unit (shares less than 100 shares) upon the Share Exchange will beentitled to use the following systems concerning shares of Tokuyama.
Shareholders cannot sell shares constituting less than one (1) unit in thefinancial instruments exchange market.
(i) Further purchase (kaimashi) of shares constituting less than one (1) unit
(purchase to reach a total of 100 shares)
A system whereby holders of shares of Tokuyama constituting less thanone (1) unit may request Tokuyama to sell, and may purchase from
Tokuyama, the number of common stock that will achieve a total of one(1) unit (tangen) together with the number of shares constituting less thanone (1) unit held by such shareholder pursuant to the provisions of Article
194, Paragraph 1 of the Companies Act and Article 10 of the Articles ofIncorporation of Tokuyama.
(ii) Purchase (kaitori) by Tokuyama of shares constituting less than one (1)unit (sale by a shareholder of shares less than 100 shares)
11

(Note 4)

A system whereby holders of shares of Tokuyama constituting less thanone (1) unit may request Tokuyama to purchase, and may sell to
Tokuyama, the shares constituting less than one (1) unit held by suchshareholder pursuant to the provisions of Article 192, Paragraph 1 of theCompanies Act.
Treatment of any fractions of less than one (1) share
With respect to the shareholders of A&T who would receive an allotment anddelivery of Tokuyama Shares including fractions of less than one (1) share of
Tokuyama upon the Share Exchange, Tokuyama will sell Tokuyama Shares
equal to the total number of those fractions of less than one (1) share (anyfractions of less than one (1) share in the total number being rounded down to
the nearest whole number) and deliver the sales proceeds to each of suchshareholders in proportion to the value of such fractions of less than one (1)share, pursuant to the provisions of Article 234 of the Companies Act and otherrelevant laws and regulations.

(4)

Treatment of share options and bonds with share options of A&T in relation to the
Share Exchange
Not applicable, because A&T has not issued any share options or bonds with share options.
3.

Basis for Calculation of the Allotment Concerning the Share Exchange(1)

Basis and Reason for Calculation of the Allotment Concerning the Share
Exchange
As explained in 1. “Purpose of Making A&T a Wholly Owned Subsidiary of Tokuyama
through the Share Exchange” above, Tokuyama made a formal proposal to A&T for the
Share Exchange at the end of July 2020, and after repeated sincere discussions andnegotiations between the Companies, Tokuyama and A&T reached a conclusion that
Tokuyama making A&T a wholly owned subsidiary would be the best course of action to
improve the corporate value of the Companies.
In order to ensure the fairness and validity in their decisions of the Share Exchange Ratio,
the Companies decided to have third-party valuation institutions independent of theCompanies calculate the Share Exchange Ratio respectively. Tokuyama appointed Nomura
Securities Co., Ltd. (“Nomura Securities”) and A&T appointed Mizuho Securities Co.,
Ltd. (“Mizuho Securities”) as their respective financial advisors and third-party valuation
institutions.
As described in (4) “Measures to Ensure Fairness” below, based on the valuation reportconcerning the Share Exchange Ratio received on October 27, 2020 from Nomura
Securities, which is a third-party valuation institution, and based on advice from Mori
Hamada & Matsumoto, Tokuyama’s legal advisor, after careful negotiations anddiscussions, Tokuyama came to the conclusion that the Share Exchange Ratio is12

appropriate and will contribute to the interests of the shareholders of Tokuyama.
Accordingly, Tokuyama came to the conclusion that conducting the Share Exchange with
the Share Exchange Ratio is appropriate.
As described in (4) “Measures to Ensure Fairness” below, based on the valuation reportconcerning the share exchange ratio received on October 27, 2020 from Mizuho Securities,
which is a third-party valuation institution, based on advice from Anderson Mori &Tomotsune, A&T’s legal advisor, and based on instruction, advice, and the response toreferrals (toshinsho) from a special committee (the “Special Committee”) consisting of
independent members who do not have any interests with Tokuyama, which is thecontrolling shareholder (details of the Special Committee are as described in (5) “Measures
to Avoid Conflicts of Interest” below), after careful negotiations and discussions, A&T
came to the conclusion that the Share Exchange Ratio is appropriate and will contribute to
the interests of the shareholders of A&T, and to the conclusion that conducting the Share
Exchange with the Share Exchange Ratio is appropriate.
In addition to the foregoing, each of the Companies engaged in careful review based on the
results of the due diligence conducted by each company with respect to the other company,
and engaged in negotiations and discussions while taking into consideration the financial
condition, business performance trends, share price trends, and other factors related to theother company. As a result, the Companies came to the conclusion that the Share
Exchange Ratio is appropriate and contributes to the interests of their respective
shareholders, and therefore, the Companies agreed to implement the Share Exchange with
the Share Exchange Ratio.
The Share Exchange Ratio may be subject to change upon consultation and mutual
agreement between the Companies in the case of any material changes to the conditions
that served as the basis of the calculation.
(2) Matters Concerning Calculation(i)Names of the valuation institutions and their relationships with the Companies
Both Nomura Securities, which is acting as a third-party valuation institution of Tokuyama,and Mizuho Securities, which is acting as a third-party valuation institution of A&T, arevaluation institutions independent of Tokuyama and A&T, are not related parties ofTokuyama and A&T, and do not have any material interest to be noted in connection with
the Share Exchange.
(ii) Outline of Calculation
As Tokuyama is listed on a financial instruments stock exchange and a market share priceexists, Nomura Securities adopted the average market price analysis for calculation (therecord date for calculation was set as October 27, 2020 and each of the following closing
prices were adopted for calculation: the closing share price of Tokuyama quoted on theTokyo Stock Exchange on the record date for calculation, the average closing price over theperiod of the most recent five (5) business days from October 21, 2020 to the record date13

for calculation, the average closing price for the most recent one-month period from
September 28, 2020 to the record date for calculation, the average closing price for themost recent three-month period from July 28, 2020 to the record date for calculation, andthe average closing price for the most recent six-month period from April 28, 2020 to therecord date for calculation). In addition, in order to take into account the state of futurebusiness operations in the evaluation, the Discount Cash Flow Method (the “DCF
Method”) was adopted for the calculation.
As A&T is listed on a financial instruments stock exchange and a market share price exists,
Nomura Securities adopted the average market price analysis for calculation (the record
date for calculation was set as October 27, 2020 and each of the following closing prices
were adopted for calculation: the closing share price of A&T quoted on the Tokyo Stock
Exchange on the record date for calculation, the average closing price over the period of themost recent five (5) business days from October 21, 2020 to the record date for calculation,
the average closing price for the most recent one-month period from September 28, 2020 to
the record date for calculation, the average closing price for the most recent three-month
period from July 28, 2020 to the record date for calculation, and the average closing pricefor the most recent six-month period from April 28, 2020 to the record date for calculation).
In addition, as there are multiple listed companies comparable with A&T, and it is possible
to infer A&T’s share value through comparing comparable companies, the comparable
company analysis was adopted for the calculation. A&T Additionally, in order to take into
account the state of future business operations in the evaluation, the DCF Method was
adopted for the calculation.
The following shows the assessment ranges for A&T that were derived from eachcalculation method, when the share value per share of Tokuyama is set at one (1).
Methodology adopted

Range of calculation of Share Exchange
Ratio

Tokuyama

A&T

Average Market
Price Analysis

Average Market
Price Analysis

0.51～0.61

Average Market
Price Analysis

Comparable
Company Analysis

0.43～0.75

DCF Method

DCF Method

0.50～0.73

In calculating the share exchange ratio, Nomura Securities used public information andinformation which was provided to Nomura Securities without any independent verificationof accuracy and completeness on the assumption that the information is accurate andcomplete. Nomura Securities did not independently perform any valuation, appraisal orassessment of assets and liabilities (which include derivatives, off-balance sheet assets and14

liabilities and other contingent liabilities) of both Companies and their affiliates, including
the analysis or valuation of individual assets or liabilities, nor separately request any thirdparty institution to make such appraisal or assessment. Nomura Securities assumed that thefinancial projections (including profit plans and other information) of A&T had beenreasonably reviewed and prepared based on the best and faithful projection and judgment
currently available to the management of A&T at this time. The calculation by Nomura
Securities is based on the information available to Nomura Securities and economic
conditions as of October 27, 2020, and the purpose of the calculation by Nomura Securities
is only to serve as reference for the Board of Directors of Tokuyama in reviewing the Share
Exchange Ratio.
The earnings plans of Tokuyama and A&T used by Nomura Securities as the basis for the
DCF Method do not include any other fiscal years in which a significant increase or
decrease in earnings is expected. Additionally, those business plans are not based on thepremise that the Share Exchange is implemented.
As Tokuyama is listed on the First Section of the Tokyo Stock Exchange and A&T is listedon the JASDAQ of Tokyo Stock Exchange and a market share price exists for each of theCompanies, Mizuho Securities adopted the average market price analysis for its calculation,
and as there are multiple listed companies with businesses comparable to the Companies
and it is possible to infer their share value through comparable company analysis, thecomparable company analysis was adopted for its calculation, and in order to take into
account the state of future business operations of the Companies in the evaluation, the DCF
Method was adopted for its calculation.
In the average market price analysis, Mizuho Securities set October 27, 2020 as the record
date for calculation and used the closing share price of both companies quoted on theTokyo Stock Exchange on the record date and the simple average closing price over theperiod of the most recent one-month period, three-month period and six-month period fromthe record date for its calculation.
In the comparable company analysis, for Tokuyama, Shin-Etsu Chemical Co., Ltd., Tosoh
Corporation, Kaneka Corporation, Toagosei Co., Ltd., Osaka Soda Co., Ltd., Denka
Company Limited and Mitsubishi Materials Corporation were selected as similar listedcompanies relatively comparable to Tokuyama based on factors such as a similar businessprofile, profit/loss and financial condition, and the corporate value of Tokuyama analyzes
using its EBITDA multiple. For A&T, Sysmex Corporation, Techno Medica Co. , Ltd,
Eiken Chemical Co., Ltd. Nissui Pharmaceutical Co., Ltd. and Kainos Laboratories, Inc.
were selected as similar listed companies relatively comparable to A&T based on factors
such as a similar business profile, profit/loss and financial condition, and the corporate
value of A&T analyzed using its EBITDA multiple. A range of 0.48 – 0.71 was calculated
as the Share Exchange Ratio range based on these results.
In the DCF Method, the corporate value of Tokuyama was evaluated by considering a
number of factors such as the financial forecasts for fiscal year ended March 2021 throughfiscal year March 2024 prepared by Tokuyama, its latest performance trends and publicly

15

available information and finding the present value of future free cash flow using a specificdiscounted ratio based on reasonable assumptions. The discounted ratio used was 5.80% –6.80%, and the perpetual growth method was used to calculate a going concern value, withthe perpetual growth ratio of -0.50% – 0.50% being used. The corporate value of A&T was
evaluated by finding the present value of the future free cash flow based on the financial
forecasts for fiscal year ended December 2020 through fiscal year ended December 2023
prepared by A&T using a specific discounted ratio. The discounted ratio used was 4.90% –5.90%, and the perpetual growth method used to calculate a going concern value, with theperpetual growth ratio of -0.50% – 0.50% being used. Based on these results, the range of
the Share Exchange Ratio was calculated as 0.41 – 0.75.
In calculating the Share Exchange Ratio above, Mizuho Securities relied on informationthat was provided to Mizuho Securities by the Companies and publicly available
information on the assumption that the information is accurate and complete and there areno facts or the like undisclosed to Mizuho Securities that may have a material effect on thecalculation of the Share Exchange Ratio. Mizuho Securities did not independently verify
the accuracy or completeness of such information. Mizuho Securities did not perform any
independent valuation, appraisal, or assessment of assets and liabilities (which include offbalance-sheet assets and liabilities and other contingent liabilities) of the Companies andtheir subsidiaries and affiliates, including the analysis or valuation of individual assets or
liabilities, nor separately request any third-party institution to make such appraisal orassessment. Mizuho Securities also assumed that the business outlook and financial
projections (including profit plans and other information) of the Companies had beenreasonably and appropriately prepared based on the best and faithful projection andjudgment currently available to the management of the Companies at this time.
The business plans of the Companies on which Mizuho Securities based the adoption of the
DCF Method do not include any fiscal years in which a significant increase or decrease inearnings is expected. Additionally, those earnings forecasts are not based on the premisethat the Share Exchange is implemented.
The calculation results for the Share Exchange Ratio submitted by Mizuho Securities do
not express any opinion on the fairness of the Share Exchange Ratio for the Share
Exchange.
The following shows the assessment ranges for A&T that were derived from eachcalculation method, when the share value per share of Tokuyama is set at one (1).

Methodology adopted

Range of calculation of Share Exchange
Ratio

Market Price Analysis

0.51.～0.61

Comparable Company Analysis

0.48～0.71

DCF Method

0.41～0.75

16(3) Prospects of and Reasons for Delisting
Upon the Share Exchange, Tokuyama will become the wholly owning parent company of
A&T on the effective date (February 1, 2021), and the common stock of A&T, which will
become the wholly owned subsidiary of Tokuyama, will be delisted as of January 28, 2021
(the last trading date will be January 27, 2021) in accordance with the JASDAQ criteria fordelisting. After the delisting, it will be impossible to trade A&T Shares on JASDAQ. Even
after the delisting of A&T Shares, Tokuyama Shares that will be delivered in considerationof the Share Exchange will remain listed on the First Section of Tokyo Stock Exchange,
and remain tradable on the First Section of Tokyo Stock Exchange on and after theeffective date of the Share Exchange. Therefore, Tokuyama believes that for eachshareholder of A&T who holds not less than 148 shares of A&T Shares at the Base Timeand will receive, upon the Share Exchange, an allotment of not less than 100 shares ofTokuyama Shares, which is the number of shares constituting one (1) unit of Tokuyama,although it is possible that such shareholder may receive allotment of a portion of sharesconstituting less than one (1) unit in accordance with the number of shares of A&T held bythat shareholder, it will still be possible to trade shares constituting one (1) unit or greateron the First Section of Tokyo Stock Exchange, and liquidity of shares will be ensured.
However, each shareholder of A&T who holds less than 148 shares of A&T Shares at theBase Time will be allotted Tokuyama Shares in a number that is less than the number ofshares constituting one (1) unit of Tokuyama. Shareholders who will hold sharesconstituting less than one (1) unit of Tokuyama cannot sell such shares constituting lessthan one (1) unit on the First Section of Tokyo Stock Exchange. However, eachshareholder who will hold shares constituting less than one (1) unit may request Tokuyama
to purchase the shares constituting less than one (1) unit held by such shareholder or suchshareholders may purchase additional shares from Tokuyama. For the details of suchtreatment, see (Note 3) “Treatment of shares constituting less than one (1) unit (tangenmiman kabushiki)” in 2.(3) “Allotment in the Share Exchange” above.
For the details in the case where the number of shares of Tokuyama to be delivered upon
the Share Exchange includes any fractions of less than one (1) share, see (Note 4)“Treatment of any fractions of less than one (1) share” in 2.(3) “Allotment in the Share
Exchange” above.
Shareholders of A&T may trade the A&T Shares they hold until January 27, 2021
(scheduled), which is the last trading date, on JASDAQ, and they may exercise up until theBase Time any legal rights they have as provided for in the Companies Act and otherrelevant laws and regulations.
(4) Measures to Ensure Fairness
Upon considering the Share Exchange, since Tokuyama already owns 2,515,700 shares of
A&T Shares (as of June 30, 2020; 40.20% of 6,257,900 shares, which is the total number ofissued and outstanding shares (rounded to two decimal places; the same applies tocalculations of shareholding ratios hereinafter)), A&T is the consolidated subsidiary of17

Tokuyama and some directors of A&T are from Tokuyama, Tokuyama and A&T havedetermined that it is necessary to ensure the fairness of the Share Exchange from theperspective of avoiding doubts concerning conflicts of interest and have implemented thefollowing measures:(i)

Obtainment of Valuation Report from Independent Third-Party Valuation
Institution
Tokuyama has received submission of a valuation report dated October 27, 2020 from
Nomura Securities, which is a third-party valuation institution independent from Tokuyama
and A&T, concerning the share exchange ratio in order to ensure fairness andappropriateness of the share exchange ratio to be used upon the Share Exchange. For an
outline of the valuation report, see (ii) “Outline of Calculation” in (2) “Matters Concerning
Calculation” above. Tokuyama has not received an opinion (fairness opinion) from
Nomura Securities to the effect that the Share Exchange Ratio is appropriate or fair from afinancial viewpoint.
A&T has received submission of a valuation report dated October 27, 2020 from Mizuho
Securities, which is a third-party valuation institution independent from Tokuyama andA&T, concerning the share exchange ratio in order to ensure fairness and appropriatenessof the share exchange ratio to be used upon the Share Exchange. For an outline of thevaluation report, see (ii) “Outline of Calculation” in (2) “Matters Concerning Calculation”
above. A&T has not received an opinion (fairness opinion) from Mizuho Securities to theeffect that the Share Exchange Ratio is appropriate or fair from a financial viewpoint.
(ii) Advice from Independent Law Firms
Tokuyama appointed Mori Hamada & Matsumoto, as Tokuyama’s legal advisor, andTokuyama received legal advice concerning the decision-making methods and procedures
to be implemented by the Board of Directors, including for the procedures of the Share
Exchange.
Mori Hamada & Matsumoto is independent of Tokuyama and A&T and have no materialinterest in either of the Companies.
A&T appointed Anderson Mori & Tomotsune, as A&T’s legal advisor, and A&T received
legal advice concerning the decision-making methods and procedures to be implemented by
the Board of Directors, including for the procedures of the Share Exchange.
Anderson Mori & Tomotsune is independent of Tokuyama and A&T and have no materialinterest in either of the Companies.
(5) Measures to Avoid Conflicts of Interest
Since Tokuyama is already the controlling shareholder of A&T, holding 2,515,700 sharesof A&T Shares (as of June 30, 2020; 40.20% of 6,257,900 shares, which is the total number
of issued shares of A&T (including indirect shareholding)) and some directors of A&T are18

from Tokuyama, A&T has employed the following measures from the perspective of
avoiding doubts concerning conflicts of interest in connection with the Share Exchange.
(i)

Obtainment by A&T of a Response to Referrals (toshinsho) from a Special
Committee that has No Conflicts of Interest
With the aim of taking great care over its decision making for the Share Exchange,
eliminating any possibility of arbitrariness and conflict of interest in the decision-making
process of its Board of Directors as well as ensuring the fairness of the decision-making
process, and to confirm that there was no disadvantage to its minority shareholders from thedecision of its Board of Directors to conduct the Share Exchange, A&T established theSpecial Committee formed of three people, none of whom has interest in Tokuyama: Jun
Mitani (attorney at Mitani Total Law Office) and Akira Tori (certified public accountant at
Torii CPA Office), each, an audit and supervisory committee member and outside directorof A&T registered with the Tokyo Stock Exchange as an independent director, , and Ryo
Suzuki (attorney at City-Yuwa Partners), an outside expert with no interest in Tokuyama or
A&T, and asked the Special Committee for its advice on (i) whether the purpose of thetransaction proposed for the deal to make A&T a wholly owned subsidiary of Tokuyama
through the Share Exchange from Tokuyama to A&T and other means (the “Transaction”)
will be reasonable (including whether the Transaction will enhance the corporate value of
A&T), (ii) whether the fairness of the terms of the Transaction (including the Share
Exchange Ratio for the Share Exchange) will be ensured, (iii) whether sufficientconsideration will have been given to the interests of shareholders of A&T through fair
procedures for the Transaction, and (iv) in addition to (i) through (iii) above, whether it canbe said that the Transaction will not be disadvantageous to minority shareholders ((i)
through (iv) are collectively, the “Advisory Matters”).
The Special Committee was held a total of seven times between August 24, 2020 and
October 27, 2020 for a total of eight hours, and also expressed views, exchanged
information, and collected information, etc. through emails, etc., and consulted as necessary
to carefully examine the Advisory Matters. Specifically, at the first meeting of the Special
Committee, it confirmed that there were no independence issues with the financial advisor
and third-party valuation institution Mizuho Securities and the legal advisor Anderson Mori
& Tomotsune appointed by A&T, and approved them as A&T’s third-party valuation
institution and legal advisor. The Special Committee also confirmed the directors of A&T
to be involved in the examination, negotiation and decision on the Share Exchange for any
conflict of interest with Tokuyama, and approved them.
The Special Committee then carefully deliberated the Advisory Matters through careful
discussion and examination based on the information relating to the Share Exchange
obtained by (a) receiving explanations from Tokuyama of the details of the Share Exchange
proposal, the aim of the Share Exchange and the synergies, etc. to be expected from the
Share Exchange, and holding a Q&A session for these matters, (b) receiving explanations
from A&T about its history, business, background to it receiving the Share Exchange
proposal, the aim of the Share Exchange, A&T’s views on the proposal details from19

Tokuyama, the effect of the Share Exchange on the corporate value of A&T, background to
the formulation and details of the business plan of A&T, etc., and holding a Q&A session
for these matters, (c) receiving explanations from Mizuho Securities on the results of the
Share Exchange Ratio calculation and the Share Exchange scheme, and holding a Q&A
session for these matters, (d) receiving advice from Anderson Mori & Tomotsune on
measures to ensure the fairness of the Share Exchange procedures, and methods andprocesses for the decision making of the Board of Directors of A&T for the Share
Exchange and measures to avoid other conflicts of interest, and holding a Q&A session forthese matters, and (e) receiving materials relating to the Share Exchange.
The Special Committee received reports on the background to and details of discussions
and negotiations between Tokuyama and A&T for the Share Exchange and was involved in
the negotiation process with Tokuyama by discussing negotiation policies, etc. and asking
A&T’s views, etc. multiple times before receiving the final proposal on the Share Exchange
Ratio from Tokuyama. After carefully deliberating and examining the Advisory Mattersbased on the above explanations, calculation results and other examination materials, theSpecial Committee submitted a written response to the Board of Directors of A&T on
October 27, 2020 concluding that the Share Exchange would not be disadvantageous to theminority shareholders of A&T.
For an outline of the opinion of the Special Committee, see 8.(3) “Outline of Opinion
Obtained from a Party who has No Conflicts of Interest Stating that the Share Exchange
would Not be Disadvantageous to the Minority Shareholders” below.
(ii)
Unanimous Approval by the Directors of A&T who Have no Conflicts of Interest
Because A&T directors Shigetaka Misaka, Toru Sakaki, Hiroshi Matsushima, Hiromi
Tamashima, and Takashi Maebara previously held positions in Tokuyama, and Ryo
Sugiyama concurrently serve as an executive officer at Tokuyama, a two-stage procedure
was adopted for resolutions of the Board of Directors on October 28, 2020 relating to the
Share Exchange to avoid doubts concerning conflict of interest issues, (i) with the five
directors of A&T (including two audit and supervisory committee members) after
excluding Shigetaka Misaka, Toru Sakaki, Hiroshi Matsushima, Hiromi Tamashima,
Takashi Maebara, and Ryo Sugiyama discussing the resolution and passing it unanimously,
and then, (ii) in order to secure a quorum of the Board of Directors, ten directors of A&T(including three audit and supervisory committee members) including Shigetaka Misaka,Toru Sakaki, Hiroshi Matsushima, Hiromi Tamashima, and Takashi Maebara who had
simply been employees of Tokuyama in the past and therefore posed a relatively low
conflict of interest risk unanimously passing the resolution once more.
In order to eliminate any potential conflict of interest, A&T directors Shigetaka Misaka,Toru Sakaki, Hiroshi Matsushima, Hiromi Tamashima, Ryo Sugiyama, and Takashi
Maebara did not participate in discussions and negotiations with Tokuyama on behalf of
A&T. Although Shigetaka Misaka belonged to Tokuyama until February 2014, given thathe transferred to A&T in March 2014 and that significant period has elapsed since histransfer, his ties to Tokuyama are considered a low-level conflict of interest risk, and based20also on the crucial necessity of using his detailed knowledge of A&T’s business andtechnological domains to examine the Share Exchange, as stated above, Shigetaka Misaka
participated in the second-stage discussion and resolution at the Board of Directors meetingof A&T on October 28, 2020 in order to achieve a quorum, and, with the approval of theSpecial Committee, also participated in the examination of only the matters for which any
structural conflict of interest risk would have only a small effect on the interests of generalshareholders, such as the synergies expected to be generated from the Share Exchange..
4.

Outline of the Parties to the Share Exchange
Wholly owning parent company
in share exchange

Wholly owned subsidiaryin share exchange(1)

Corporate name

Tokuyama Corporation

A&T Corporation(2)

Head office

1-1 Mikagecho, Shunan-shi,
Yamaguchi

2023-1 Endo, Fujisawashi, Kanagawa(3)

Name and titleof representative

Hiroshi Yokota, President andRepresentative Director

Shigetaka Misaka, Chief
Executive Officer(4)

Description ofbusiness

Production and distribution of
soda, chlor-alkali, vinyl chloride,
NOC
Production and distribution ofelectronic materials (polycrystal
silicon), dry silica, high purity
chemicals
forelectronics
industry, aluminum nitride
Production and distribution of
cement and recycling andenvironment products
Production and distribution offine chemicals, NF, synthetic
resin film, ion-exchange
membranes, and dental materials

Development, distribution
and customer support foranalyzers, diagnostic
reagents, laboratory
information systems,laboratory automation
systems and theirconsumables(5)

Stated capital

10,000 million yen(as of September 30, 2020)

577 million yen(as of September 30, 2020)(6)

Date ofincorporation

February 16, 1918

May 25, 1978

(7)

Number ofshares issued

69,934,375 shares(as of September 30, 2020)

6,257,900 shares(as of June 30, 2020)

21

(8)

Fiscal year end

March 31

December 31(9)Number of
employees(Consolidated) 5,679 employees(as of March 31, 2020)

461 employees(as of December 31, 2019)(10)

Major business
partners

Chemical manufacturers andwholesalers, etc.

Medical manufacturers,
reagent manufacturers, etc.

(11)

Main financingbanks

MUFG Bank, Mizuho Bank,
Yamaguchi Bank

Mizuho Bank, MUFG
Bank, Sumitomo Mitsui
Banking Corporation,
Bank of Iwate, Tohoku
Bank

The Master Trust Bank of Japan,
Ltd. (Trust Account) 12.37%
Japan Trustee Services Bank,
Ltd. (trust account) 6.86%
Nippon Life Insurance Company
3.13%(Standing proxy: Master Trust
Bank of Japan)
The Yamaguchi Bank, Ltd.
2.37%
(Standing proxy: Master Trust
Bank of Japan)
Meiji Yasuda Life Insurance
Company 2.14%(Standing proxy: Custody Bankof Japan, Ltd.)
Sojitz Corporation 1.86%
Sumitomo Metal Mining Co.,
Ltd. 1.70%
Custody Bank of Japan, Ltd.
(Trust Account 5)1.69%
JP MORGAN CHASE BANK
385151 1.67%(Standing proxy: Mizuho Bank
Settlement & Clearing Services
Department)
Tokio Marine & Nichido Fire
Insurance Co., Ltd. 1.59%

Tokuyama 40.20%
JEOL Ltd. 12.22%
A&T employee’s stock
ownership association
6.54%
STATE STREET BANKAND TRUST CLIENTOMNIBUS ACCOUNT
OM02505002 1.65%(Standing proxy: Mizuho
Bank)
BBH FOR FIDELITY
PURITAN TR: FIDELITYSR INTRINSICOPPORTUNITIES FUND
1.24%
(Standing proxy: MUFGBank)SICAV ESSOR JAPONOPPORTUNITES
1.19%(Standing proxy: HSBC)
Isao Sato 1.16%
Kosuke Hatakeyama
1.01%
Rakuten Securities, Inc.
0.99%
Etsuko Yamauchi 0.92%

(12)

Major
shareholders andshareholding
ratio

22

(as of September 30, 2020)
(13)

(14)

(as of June 30, 2020)

Relationships between the parties
Capitalrelationship

Tokuyama is the parent company of A&T, holding 2,515,700
shares in A&T, equivalent to 40.20% of the outstanding shares(6,257,900 shares).

Personnel
relationship

One A&T director combines his role with that of executive
officer at Tokuyama and there are 5 directors appointed to A&T
who are from Tokuyama. A&T has 15 transferred employees
from Tokuyama.

Transaction
relationshipA&T leases facilities from Tokuyama and purchases vinyl
chloride compound moldings from Sun Arrow Kasei Co., Ltd., aconsolidated subsidiary of Tokuyama. A&T pays to Tokuyama
insurance premiums for product liability insurance.

Status as arelated party

A&T is a consolidated subsidiary of Tokuyama, and Tokuyama
and A&T have mutually related parties.

Operational results and financial conditions for the most recent three (3) years

Fiscal year
ended

Tokuyama(Consolidated)

A&T(Non-consolidated)

March
2018

March
2019

March
2020

Consolidated net
assets136,591

163,525

180,429

6,785

7,179

7,764

Consolidated
total assets

361,949

379,630

383,447

12,33012,611

11,881

Consolidated net
assets per share(JPY)

1,806.56

2,199.83

2,431.21

1,084.50

1,147.47

1,240.99

Consolidated net
sales

308,061

324,661

316,096

10,371

10,43011,049Consolidated
operating profit

41,26835,262

34,281

773

774

958

Consolidated
ordinary income

36,19633,40032,837

757

768

943

23

December December December
2017
2018
2019

Net income
attributable tothe shareholdersof the parent
company

19,69834,27919,937

678

518

695

Consolidated net
income per
shareattributable tothe shareholders(JPY)

259.81493.26287.05108.41

82.80

111.21Dividend pershare (JPY)

30.00

50.00

70.00

20.00

24.00

24.00

(In millions of JPY, unless otherwise specified.)(Note) Tokuyama carried out a consolidation of shares at a rate of a five common stock
per share with an effective date of October 1, 2017, and the Net Assets Per Share,
Basic Earnings Per Share and Cash Dividends Per Share of Tokuyama were
calculated on the assumption that the consolidation of shares was carried out at thestart of fiscal year ended March 2018.
5.

Status after the Share Exchange
Wholly owning parent company in share exchange(1)

Corporate name

Tokuyama Corporation(2)

Head office

1-1 Mikagecho, Shunan-shi, Yamaguchi(3)

Name and title ofrepresentative

Hiroshi Yokota, President and Representative Director,(4)

Description of business

Production and distribution of soda, chlor-alkali, vinyl
chloride, NOC
Production and distribution of electronic materials(polycrystal silicon), dry silica, high purity chemicals forelectronics industry, aluminum nitride
Production and sale of cement and recycling andenvironment products
Production and distribution of fine chemicals, NF,
synthetic resin film, ion-exchange membranes, and dental
materials(5)

Paid-in capital

10,000 million yen

24

(6)

Fiscal year end

March 31

(7)

Net assets

Not yet finalized(8)

Total assets

Not yet finalized

6.

Outline of Accounting Treatment

The Share Exchange will constitute a transaction under common control, etc. under the
Accounting Standards for Business Combinations.
7.

Future Outlook

Since A&T is already the consolidated subsidiary of Tokuyama, the impact of the Share
Exchange on the operating results for each of Tokuyama and A&T is expected to be minor.
8.
(1)Matters regarding Transaction, Etc. with a Controlling Shareholder
Applicability as Transaction, etc. with a Controlling Shareholder and Status ofConformity with Policy for Measures to Protect Minority Shareholders

Since Tokuyama is already the controlling shareholder of A&T, the Share Exchange
constitutes a transaction, etc. with a controlling shareholder for A&T.
In I. 4 “Policy on Measures to Protect Minority Shareholders in Conducting Transactions,Etc. with Controlling Shareholders” of its Corporate Governance Report announced on
March, 31, 2020 (the “Corporate Governance Report”), A&T stated that transactions with
Tokuyama were conducted under terms generally considered appropriate in light of market
prices, etc., and were not transactions to benefit specific shareholders, and that it would
give sufficient consideration to avoid transactions that benefited specific shareholders whentransacting with controlling shareholders.
When examining the Share Exchange, A&T took various steps to ensure fairness and avoid
conflicts of interest as set out in 3.(4) “Measures to Ensure Fairness” and 3.(5) “Measures
to Avoid Conflicts of Interest” and gave sufficient consideration to avoid transactions that
benefited specific shareholders when transacting with controlling shareholders. A&T
believes these measures conform with the content of the Corporate Governance Report.
(2)

Matters Regarding Measures to Ensure Fairness and Measures to Avoid Conflictsof Interest
As set out above in (1) “Applicability as Transaction, etc. with a Controlling Shareholder
and Status of Conformity with Policy for Measures to Protect Minority Shareholders,” the25

Share Exchange constitutes a transaction, etc. with a controlling shareholder for A&T.
Therefore, A&T has determined that it is necessary to implement the measures to ensure
fairness and to avoid conflicts of interest in order to address issues such as structural
conflicts of interest and information asymmetry. A&T has carefully discussed andreviewed the terms of the Share Exchange at the Board of Directors meeting of A&T, andhas made a decision after further ensuring fairness and avoiding conflicts of interest by
employing the measures as set out in 3.(4) “Measures to Ensure Fairness” and 3.(5)“Measures to Avoid Conflicts of Interest” above.
(3)

Outline of Opinion Obtained from a Party who has No Conflicts of Interest in aControlling Shareholder Stating that the Transaction, etc. would Not be
Disadvantageous to the Minority Shareholders
As set out in 3.(5) “Measures to Avoid Conflicts of Interest” above, for the purpose of
taking great care over its decision making for the Share Exchange to eliminate any
possibility of arbitrariness and conflicts of interest in the decision-making process of its
Board of Directors and to ensure the fairness of the decision-making process, as well as toconfirm there was no disadvantage to its minority shareholders from the decision of its
Board of Directors, A&T established the Special Committee and requested its advice on theAdvisory Matters.
As a result, A&T received the written response as outlined below from the Special
Committee on October 27, 2020.
(1)

Whether the purpose of the Share Exchange can be judged reasonable (including
whether the Share Exchange will contribute to improving A&T’s corporate value)
According to A&T and Tokuyama, in order for A&T to improve its corporate value
over the medium-to-long term in the business environment facing A&T, it isnecessary to further improve the degree of completeness and quality of products,
realize a reduction in the time to launch products onto the market by seeking toaccelerate research and development, efficiently facilitate expansion to overseas
markets with a focus on the Chinese market, seek to reduce the cost burden throughto market development, and the like, but there are certain limitations to realizing
those initiatives with only the current managerial resources of A&T.
According to A&T and Tokuyama, given these circumstances, it is beneficial for
A&T to be a wholly owned subsidiary of Tokuyama and thereby ally the interests of
the Companies and utilize the Group’s managerial resources to the maximum extent
as well as building a structure that can realize managerial strategies that havemedium-to-long term perspectives and that are not swayed by short-term stock
market valuations. Specifically, such benefits are (i) through leveraging the
research-and-development knowhow and other Tokuyama managerial resources,
accelerated development can be expected and, concurrently, improved productquality and facilitating the launch of peripheral businesses can also be expected; (ii)26

by investing managerial resources of Tokuyama, business alliances and capitalalliances with outside operators as well as the facilitation of the bringing in outside
resources through M&As can be expected; (iii) through using Tokuyama’s overseas
bases, overseas sales companies, and the like, it can be expected that expansion to
overseas markets will be facilitated by improving cost efficiency; and, further, (iv)by reducing costs necessary to maintain the listing, it can be expected that evenmore effective use of managerial resources will be sought; and in the above
explanation by A&T and Tokuyama, no exceptionally unreasonable points can befound. In addition, the decision to elect the Share Exchange as a scheme for making
A&T a wholly owned subsidiary, which decision is made based on thedetermination that such scheme is advantageous to A&T’s shareholders in that
A&T’s shareholders will be able to enjoy, in the future, A&T’s corporate value
being improved in the medium-to-long term through Tokuyama Shares by delivering
Tokuyama Shares as consideration for the Share Exchange, can be judged as theresult of a reasonable consideration.
Further, with respect to disadvantages anticipated to arise due to delisting (impact on
business partners, impact on future means to procure capital, impact on future
personnel recruitment, lowering of morale in existing employees, etc.), it is not seenthat those disadvantages will exceed the advantages expected to arise due to the
Share Exchange or that there is a definite probability that the Share Exchange will
greatly harm the advantages expected to arise due to the Share Exchange.
Comprehensively taking into account the above, it can be said that the Share
Exchange will contribute to improving A&T’s corporate value, and can be judgedthat the purpose thereof is fair and reasonable.
(2)

Whether fairness has been ensured in the terms and conditions of the Share
Exchange (including the Share Exchange Ratio)
Of the results of the share exchange ratio calculation by Mizuho Securities, which is
the third party valuation institution appointed by A&T, it can be found that the Share
Exchange Ratio is “a ratio that is above the upper limit of the range calculated usinga market price analysis and is within and above the median of the ranges calculated
by using a comparable company analysis and the DCF Method”. On this point,
based on an explanation of those calculation results received from Mizuho Securities,
nothing unreasonable is found in the selection of the calculation methods, thecalculation process used for the market price analysis, the process used to selectcomparable companies in the comparable company analysis, or the key parametersin the DCF Method (method for calculating terminal value, discount ratio, etc.).
Further, based on interviews with A&T and Tokuyama, results of due diligence on
Tokuyama conducted by A&T, and the like, no exceptional unreasonable points canbe found with respect to the processes used to prepare the business plans ofTokuyama and A&T served as the basis of calculation using the DCF Method.

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Judging from the above, it can be judged that the calculation results of Mizuho
Securities have a certain reasonableness, and it can be judged that the Share
Exchange Ratio is of a reasonable level in light of the calculation results.
Moreover, in light of premium levels in other share exchange cases in which the
purpose is a parent company making a listed subsidiary a wholly owned subsidiary,
it can be judged that a comparative and suitable premium has been offered.
Further, with respect to transactional terms and conditions other than the Share
Exchange Ratio, it is planned that the details that are ordinary in similar transactions
will be provided for in the Share Exchange Agreement.
In addition, as is stated in (3) below, in the Share Exchange, at it can be judged thatsufficient consideration has been given to the interests of A&T’s shareholders
through fair procedures, it can be judged that the terms and conditions of the Share
Exchange, including the Share Exchange Ratio, were determined through fair
procedures.
Comprehensively taking into account the above, it can be judged that the terms andconditions of the Share Exchange, including the Share Exchange Ratio, are fair andreasonable.
(3) Whether sufficient consideration has been given to the interests of A&T’s
shareholders through fair procedures in the Share Exchange
The Special Committee was stablished from the viewpoint of removing arbitrarinessfrom the decision-making process and avoiding conflicts of interest, A&T
established the Special Committee before specific negotiations took place with
Tokuyama pertaining to the Share Exchange’s terms and conditions, and there wasno reason to doubt the independence of each committee member, it was confirmedthat there were no issues concerning the independence of the third party valuation
institution or of the legal advisor selected by A&T, and, after approving thoseparties as A&T’s third party valuation institution and legal advisor, respectively, a
review and judgment was carried out of the pros and cons of the Share Exchange,
the appropriateness of the transactional terms and conditions, and the fairness ofprocedures. Further, A&T has received legal advice about the decision-making
methods, processes, and the like of its board of directors, including about various
procedures for the Share Exchange, from a legal advisor that is independent from
Tokuyama and A&T, and A&T obtained a valuation report concerning the shareexchange ratio from a third party valuation institution that is independent from
Tokuyama and A&T.
Under the above review structure, and based on opinions on negotiation policy
received from the Special Committee and advice and the like from advisors, fromthe viewpoint of protecting the interests of minority shareholders in relation to theshare exchange ratio presented by Tokuyama, A&T carried out substantive

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negotiations to increase the ratio to a more favorable ratio. As a result, an increase in
the share exchange ratio was realized, and based on the course of these negotiations,
it can be judged that discussions and negotiations that are equivalent to discussions
and negotiations in a transaction between independent parties was carried out
between A&T and Tokuyama. Further, of A&T’s directors, no person who wasformerly at Tokuyama or who concurrently holds a position at Tokuyama
participated in the discussions and negotiations with Tokuyama on behalf of A&T;
there were no unreasonable points with respect to the methods used to vote on
agenda items related to the Share Exchange scheduled to take place at the A&T
Board of Directors meeting, and no facts can be found that which it can be inferredthat a person with a special interest in the Share Exchange unfairly influenced A&T,
in the process of discussions, reviews, and negotiations pertaining to the Share
Exchange.
Further, in the timely disclosure documents pertaining to the Share Exchange, it isunderstood that certain disclosures are planned with respect to information related to
the Special Committee, information related to the content of calculation results forthe share exchange ratio, and other information related to processes, etc., leading up
to implementing the Share Exchange and that disclosure of information sufficientfor minority shareholders to judge the validity, etc., of the transaction terms andconditions is planned.
Comprehensively taking into account the above, in the Share Exchange, it can be
judged that sufficient consideration has been given to the interests of A&T’s
shareholders through fair procedures.
(4) Aside from (1) through (3) above, whether it can be judged that the Share Exchange
is not disadvantageous to A&T’s minority shareholders
Comprehensively taking into account (1) through (3) above, it can be judged that the
Share Exchange is not disadvantageous to A&T’s minority shareholders, and, in
addition, there are no special circumstances that are in conflict with such judgments.
End

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(Reference)
Financial forecasts for the current fiscal year and for the previous fiscal year
Tokuyama (forecasts for the current fiscal year are those announced on October 28, 2020)(in millions of JPY)

Consolidated
Net sales

Consolidated
OperatingincomeConsolidated
Ordinary
incomeNet income
attributable to theshareholders of
the parent
company

Financial forecasts for
current fiscal year
(fiscal year ending
March 2021)

300,000

28,00028,00022,000Financial results forprevious fiscal year
(fiscal year ended
March 2020)

316,096

34,281

32,837

19,937

A&T (forecasts for the current fiscal year are those announced on October 23, 2020)(in millions of JPY)

Net sales

OperatingincomeOrdinary
incomeNet income
attributable to theshareholders of
the parent
company

Financial forecasts for
current fiscal year
(fiscal year ending
December 2020)

10,500

815

800

590

Financial results forprevious fiscal year
(fiscal year ended
December 2019)

11,049

958

943

695

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