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Aeon Delight | 9787 |Shared Research Report

Aeon Delight | 9787 |This PDF document is an updated note on the company. A comprehensive version of the report on the company, including this latest update, isavailable on our website at http://www.sharedresearch.jp and various professional platforms. Our sponsored research reports provide an in-depth
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On October 27, 2015, AEON DELIGHT, Co. Ltd. announced a tender offer for Hakuseisha Co., Ltd.

Summary of tender offer
AEON DELIGHT is the third largest shareholder of Hakuseisha, owning 450,000 shares (5.58% ownership) through wholly
owned subsidiary Kankyo Seibi Co., Ltd. On October 27, 2015, AEON DELIGHT reached an agreement with J. FRONTRETAILING Co., Ltd., (the parent of wholly owned subsidiary Daimaru Matsuzakaya Department Stores Co., Ltd.,
Hakuseisha’s leading shareholder with 2,046,170 shares [25.36% ownership]). The agreement was on the outsourcing ofHakuseisha’s operations and the transfer of personnel on loan, as well as the acquisition of all Hakuseisha’s common stock(excluding shares held by Kankyo Seibi) and the execution of a tender offer with the intent of making Hakuseisha a wholly
owned subsidiary of AEON DELIGHT.

Hakuseisha announces acceptance of tender offer and recommendation
At meeting of the board of directors held on October 27, 2015, Hakuseisha decided to support the tender andrecommend acceptance by shareholders.

Tender offer price: JPY800 per share, JPY6.1bn total.
The planned pricing of the tender offer is JPY800 per share (October 27 closing price: JPY335), for a total purchase priceof JPY6,095,365,600 based on the planned acquisition of 7,619,207 shares. The minimum number of shares to beacquired via the tender offer is 3,593,000 (44.53%), so that Hakuseisha can be made a wholly owned subsidiary of AEON
DELIGHT to strengthen the capital partnership and achieve synergies.

Scheduled to become wholly owned subsidiary
If AEON DELIGHT is unable to acquire all of Hakuseisha’s common stock, it intends make it a wholly owned subsidiary,with AEON DELIGHT and Kankyo Seibi as the only shareholders of Hakuseisha. This is under the condition that the total
number of tendered and other shares is greater than the minimum (4,933,000 shares, equivalent to 66.7%) and anagreement is reached with the majority of shareholders other than those with a conflict of interest.

Background on tender offer
About Hakuseisha
Established in 1954, Hakuseisha is a comprehensive building maintenance company engaged primarily in cleaning,security, and facilities management. Now an equity-method affiliate of J. Front Retailing, Hakuseisha provides building
maintenance services mainly for large retail facilities, such as the department stores operated by J. Front Retailing.
AEON DELIGHT thinks that Hakuseisha can offer skills gained from over 20 years in clean-room cleaning at facilities
manufacturing precision equipment for industrial applications and at facilities making pharmaceuticals, and from over 13
years' experience in sanitation management systems at food-processing facilities.

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Aeon Delight | 9787 |Shared Research ReportIndustry environment
AEON DELIGHT expects securing earnings to become more difficult given the limited growth expected in the number ofcommercial facilities and office buildings in Japan, and also given the continual pressure to reduce costs from existingcustomers, which will be exacerbated by anticipated increases in labor and materials costs.
Moreover, the company sees the need to shift from a labor-intensive to a knowledge-intensive business structures, as
customer needs continue to grow more diverse and sophisticated. This is necessary to increase visibility of operations andensure standardized methods; to develop IT technologies, equipment and materials while acquiring more advanced
technology and knowledge; and to improve operation productivity and quality, including through consulting sales andquality-assurance contracts. To achieve this shift, the company requires a network that provides sophisticated andwide-ranging technology, expertise, and staff, as well as major investments to acquire relevant assets.

Events leading to the tender offer
AEON DELIGHT began considering working with Hakuseisha when Aeon, Co., Ltd. acquired all shares of Peacock Stores
Inc. from J. Front Retailing in April 2013. Hakuseisha handled cleaning services and security for Peacock Stores. AEON
Delight and Hakuseisha entered a subcontracting agreement in January 2014. The two companies began pursuing further
cooperation through a capital relationship. Through synergies, the two companies recognized the potential to raise theircorporate values. AEON DELIGHT approached J. Front Retailing in October 2014 about selling all its shares of Hakuseisha’scommon stock. In June 2015 AEON DELIGHT proposed strengthening the capital alliance and the two companies began
specific talks.
AEON DELIGHT and Hakuseisha concluded that the corporate value and business foundations of each would benefit fromthe tender offer. They also decided that making Hakuseisha a non-listed company would eliminate the expenses
associated with maintaining stock exchange listings.

Expected synergy▶ Stronger sales capabilities▶ Reinforced service quality and cost competitiveness▶ Stronger business development▶ Improved back-office efficiency

The impact on FY2/2016 consolidated earnings is expected to be limited.
Hakuseisha results summary
Sales
YoY
Gross Profit
SG&A
Operating Profit
Recurring Profit
Net Income
Net Assets
Total Assets
Net Cash

FY03/13
9,723
1.1%
1,178
823
354
455
296
6,169
8,024
3,123

100.0%
12.1%
8.5%
3.6%
4.7%
3.0%FY03/14
10,0373.2%
1,121856
265
449
290
6,501
8,604
3,661

100.0%

FY03/15
9,343

100.0%

11.2%
8.5%
2.6%
4.5%
2.9%

140
232
142

1.5%
2.5%
1.5%

Source: Shared Research based on company data

This note is the most recent addition to the full report.

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