Making PARCO Co., Ltd. a WhollyOwned Subsidiary

December 26, 2019
J. FRONT RETAILING Co., Ltd.

Create and Bring “New Happiness” to Your Life

Outline of the Conversion of PARCO Co., Ltd. Into a WhollyOwned Subsidiary (This Deal)■ Target company:■ Method:

PARCO Co., Ltd. (First Section of the Tokyo Stock
Exchange: securities code 8251)
Tender offer (TOB)■ Tender offer price:

1,850 yen per share

・ Premium of 35.63 % on the closing price of 1,364 yen on December 25, 2019

■ Number of shares tobe purchased :35,534,216 shares
・ All except for the number of shares held by J. FRONTRETAILING Co., Ltd. and treasury shares held by PARCOCo., Ltd.
■ Total purchase amount: About 65.8 billion yen■ Tender offer schedule・ December 26, 2019 (Thur.) Announcement of this deal・ December 27, 2019 (Fri.)

Start of the tender offer period

・ February 17, 2020 (Mon.) Expiration of the tender offer period
・ February 18, 2020 (Tue.)Announcement of purchase results

・ February 25, 2020 (Tue.)

Purchase price settlement date1

Current Medium-Term Plan is a “Phase of Changing the GroupStructure”
FY 2014–16 Medium-Term Business PlanFY 2014

FY 2015

FY 2016

Realizingthe Vision

FY 2017-21 Medium-Term Business Plan

<Phase of Building Foundations><Phase of Changing the Group Structure>

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

Towards a “Multi-Service Retailer”
that transcends the traditionalboundaries of the retail business
Growth in the demand to
remove unease anddissatisfaction in life

Emergenceof the sharing
economyArrival of the IoT era

From the consumption of tangible goods
to the consumption of intangible goods
and experience-based
experience based consumption

Urbanization progress

Growing demand for
personnel servicesDiversification of settlement methods
Increasing sophistication of financial
services

Development of multiple retail business brands(Multi retailer)

Strong customer assets of 6million people
Store assets held in urban areas2History of Capital Ties between two companies
Capital ties
March 2012

J. FRONT RETAILING Co., Ltd. acquired 33.2% of PARCO
Co., Ltd., making it into an equity-method affiliate

July 2012

J. FRONT RETAILING Co., Ltd. entered into a capital andbusiness alliance agreement with PARCO Co., Ltd.
Decided to implement a tender offer (TOB) with the purpose ofmaking PARCO Co., Ltd. a consolidated subsidiary

August 2012 J. FRONT RETAILING Co., Ltd. conducted an additional
acquisition of PARCO Co., Ltd. up to 65% through a TOB,
making it a consolidated subsidiary

3Major Initiatives by Both Companies to Date
Strengthening business foundation as a retail business group

Enhancing competitive edge as retail facilities

Improving sales capabilities by making customer bases

Specific examples
Jointdevelopment
Joint sales
promotion
OtherUeno Frontier Tower (November 2017), the north wing of Daimaru Shinsaibashi
store (planned for Fall 2020)
Roll out sales promotions by utilizing both companies’ customer bases
represented by the Nagoya area
Personnel exchanges, mutual introduction of business partners, etc. 4

Changing Environment Surrounding theManagement of Both Companies
Consumption tax increase, heightened sense of economic uncertainty after theTokyo Olympics and Paralympics
Declining population
Shrinking fashion retail market
Changing business environment of established businesses, particularly physicalstores due to the rise of e-commerce
Information and Communication Technology (ICT) Progress
Diversification of consumer’s lifestyles and values

It is essential to promote cooperation between two companies
that is broader and deeper than to date with a sense of speed
based on rapid decision-making5

Scheme in This DealAcquisition for cash consideration through the procedures for a tender offer (TOB) for PARCO
Co., Ltd.
The tender offer price will be 1,850 yen per share, and the total purchase amount will be about 65.8
billion yen
The tender offer period will be from December 27, 2019 (Fri.) until February 17, 2020 (Mon.)[Current status]
J. FRONTRETAILING Co.,
Ltd.

About65%[TOB]

J. FRONTRETAILING Co.,Ltd.

Minorityshareholders
About
35%

PARCO

[After this deal]

Cash
J. FRONTRETAILING Co.,Ltd.

Minorityshareholders

100%

PARCOshares
PARCO

If the Company cannot acquire all of PARCO Co., Ltd.’s issued shares under the TOB, the Company
plans to implement procedures for the purpose of acquiring all of PARCO Co., Ltd.’s issued sharesusing a demand for share cash out or a share consolidation after the conclusion of the tender offer.
6Financial impact of this deal
Fundraising
Funds required for the tender offer will be obtained from borrowingsRefinancing into long-term debt, etc. will be considered in the future

Financialleverage
Interest-bearing liabilities will be about 485 billion yen, and net D/E will temporarily rise to 1.17x
Furthermore, net D/E will be 0.61x on the basis that it excludes lease liabilities

Shareholder
equityThe difference of roughly 22 billion yen between the acquisition price of 65.8 billion yen and noncontrolling interest etc. will be reduced due to a direct deduction from J. FRONT RETAILING Co.,
Ltd.’s shareholder equity

ROE
The equivalent of 35% of PARCO's profit for current term will contribute to an increase in net
profit attributable to the owners of the parent due to the removal of external outflows of noncontrolling interest
The aforementioned reduction in owned capital, in conjunction with the effect of increasing ROE
that this will lead to, will increase the likelihood of the company achieving its current medium- 7
term plan target of at least 8% ROE

Direction the Group Will Aim for From Now
Group vision“Create and Bring to life ‘New Happiness’”
Accelerate changing of the group structure towards realization
Businessmodel reform

Department
storeShopping center
Realestatebusinessbusiness

FutureInformation(LTS-HUB)

UrbandominantLife solutions

Pathways

lifestyleBusinessbusinessCredit andfinancebusiness* LTS-HUB (lifetime service hub) = Group integrated database

Business area expansion

8Synergies Aimed For in This Deal
1. Strengthening the Business Base as a Retail/Real Estate Business Group・ Further promotion of the joint development of stores, including large-scale multi-purpose facilities that would be difficult to handle alone
・ Strengthened real estate development capabilities through effective utilization of land and building holdings
・ Transfer of the real estate business to PARCO after making PARCO a wholly-owned subsidiary. Consolidation of group resources andcentralization of management and development functions
・ Improvement of sales capabilities through mutual utilization of customer data

2. Strengthening Related Businesses Aimed at Development as a Multi-Service Retailer
・ Promotion of cooperation not only for store development, but also in similarly related businesses such as design andconstruction
・ Expand the service area and business offerings by as a group utilizing to the fullest extent PARCO’s superior business know-how inareas like the entertainment business3. Improving Management Efficiency
・ In response to the increasing diversification of lifestyles, as a group work to develop new businesses to improve management
efficiency
・ Improve management efficiency by integrating indirect departments and operations such investor-related operations,financing operations and those related to general meetings of shareholders
・ Generate substantial efficiency improvements by implementing systems investments across the group

4. Enhancement Competitiveness by Sharing Expertise through Personnel
exchange
・ Promotion of an even greater degree of cross-business-unit personnel exchange

・ Provision of a broad range of services to meet increasingly diverse customer needs by sharing the expertise respectively
built by both companies

9Role Expected From PARCO
Intended future
J. FRONT RETAILING groupstructure

Shopping center

Department
store

RealestatebusinessbusinessFuture

Urban development
Incubation

Information(LTS-HUB)

Life solution

Pathways

enjoy life

Businessbusiness
Credit andfinancebusiness

Information transmission

Centralization of real estate businessTransfer the real estate business held by
Daimaru Matsuzakaya to PARCO. In thefuture, the real estate business will be led byPARCO, having a variety of real estatedevelopment solutions and capabilities.

Full-scale expansion of business areas
The group utilizes to the fullest extent
PARCO’s superior business know-how inareas like entertainment and ICT. Aim tocreate business synergies aimed atdevelopment as a Multi-Service Retailer

While maintaining PARCO’s business structure, trade name, and store names, aim for the creation of
new value through the maximization of group synergies that leverage the cutting-edge corporate
10culture, atmosphere and personnel that were fostered by PARCO.

https://www.j-front-retailing.com

Create and Bring“New Happiness”
to Your Life

These materials are reference materials intended for the purpose of explaining the tender offer by the Company for shares of PARCO Co., Ltd. For the detailsof this deal, please see the company’s press release entitled “Notice Regarding Commencement of Tender Offer for Shares of PARCO Co., Ltd. (Securities
Code: 8251)” released on this date.

Soliciting Regulations
These materials are intended to announce the Tender Offer to the public and have not been prepared for the purpose of soliciting an offer to sell shares. Ifshareholders wish to make an offer to sell their shares, they should first read the tender offer explanation statement concerning the Tender Offer and makean offer to sell their shares at their own discretion. These materials shall neither be, nor constitute a part of, an offer to sell or purchase, or solicitation to sellor purchase any securities, and neither these materials (or a part of these materials) nor their distribution shall be interpreted to constitute the basis of anyagreement in relation to the Tender Offer, and these materials may not be relied upon at the time of entering into any such agreement.
U.S. Regulations
The Tender Offer shall be implemented in compliance with the procedures and information disclosure standards provided by the Financial Instruments andExchange Act of Japan, which procedures and standards are not necessarily identical to the procedures and information disclosure standards applied in theUnited States. Specifically, Article 13 (e) and Article 14 (d) the Securities Exchange Act of 1934 (as amended; hereinafter, the “1934 Securities ExchangeAct”) and the rules promulgated under such Articles do not apply to the Tender Offer, and the Tender Offer is not necessarily in compliance with theprocedures and standards thereunder. All of the financial information contained in these materials is based on Japanese accounting standards or theInternational Financial Reporting Standards (IFRS), not U.S. accounting standards, and may not necessarily be comparable to financial information based on
U.S. accounting standards. Further, it may be difficult to enforce any right or demand arising under U.S. federal securities laws, because both the TenderOfferor and the Target Company are incorporated outside the United States and none of their officers are U.S. residents. It may be impossible to take legal
action against a non-U.S. company or its officers in a non-U.S. court for a violation of U.S. securities laws. Furthermore, there is no guarantee that a non-U.S.
company or officer is subject to the jurisdiction of a U.S. court.
All procedures in connection with the Tender Offer shall be conducted in the Japanese language. While all or part of the documents in connection with theTender Offer may be prepared in English, the Japanese documents shall prevail in case of any discrepancy between the Japanese documents and thecorresponding English documents.
The Tender Offeror, its affiliates, and their respective financial advisors (including their affiliates) may, in the ordinary course of their business, purchaseshares of the Target Company, or act in preparation for such purchase, for their own account or for their customers’ account before or during the purchaseperiod of the Tender Offer, in accordance with the requirements of Rule 14e-5(b) of the U.S. Securities Exchange Act of 1934 and to the extent permitted
under Japanese financial instruments and exchange regulations and other applicable laws and ordinances. If any information concerning such purchase isdisclosed in Japan, the relevant purchaser will also disclose such information on its English website.
Forward-Looking Statements
These materials contain statements of what the Tender Offeror and other companies “anticipate,” “expect,” “intend,” “plan,” and “believe” about futurebusiness, and other "forward-looking statements" as defined in Article 27A of the United States Securities Act of 1933 (as amended) and Article 21E of the1934 Securities Exchange Act. The actual results may significantly differ from the projections implied or expressly stated as "forward-looking statements" dueto known or unknown risks, uncertainties or other factors. The Tender Offeror and its affiliates are not in the position to covenant that the projections impliedor expressly stated as "forward-looking statements" will actually be realized. The “forward-looking statements" contained herein have been prepared basedon the information available to the Tender Offeror as of the date of these materials and, unless required by laws and regulations, neither the Tender Offeror
nor its affiliates is obligated to update or correct the statements made herein in order to reflect future events or circumstances.
Other Countries
The announcement, issuance, or distribution of these materials may be legally restricted in some countries or territories. In such case, shareholders should
be aware of and comply with such restrictions. The announcement, issue or distribution of these materials should not be interpreted as an offer to purchaseor a solicitation of an offer to sell, but simply as a distribution of information.

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