(Translation)

January 31, 2020
To whom it may concern:

Company:
Representative:

Tel:

Matsumotokiyoshi Holdings Co., Ltd.
President(Securities Code: 3088, TSE First Section)
General Manager,
Corporate Communications Department,
Corporate Strategy Planning Division047-344-5110

Company:

cocokara fine Inc.

Representative:

President

Atsushi Tsukamoto

Contact:(Securities Code: 3098, TSE First Section)
Senior Executive Officer, General
Manager of Administrative Division045-548-5937

Shunichi Mori

Contact:

Tel:

Kiyoo Matsumoto
Nobuharu Takahashi

Notice by Matsumotokiyoshi Holdings Co., Ltd. and cocokara fine Inc. Concerning Entry Into
Memorandum of Understanding Regarding a Business Integration andCapital and Business Alliance Agreement for such Business Integration
Matsumotokiyoshi Holdings Co., Ltd. (“Matsumotokiyoshi Holdings”) and cocokara fine Inc. (“cocokara fine”)
today entered into a Memorandum of Understanding (the “MOU”) regarding the business integration of bothcompanies (the “Business Integration”) and an agreement (the “Capital and Business Alliance Agreement”)
related to a capital and business alliance (the “Alliance”) for such Business Integration, and hereby notify you asfollows.
1.

Background and purpose of the Business Integration(1)

Background leading up to the entry into the MOU and the Capital and Business Alliance Agreement for
the Business Integration
As announced in the “Notice of Memorandum of Understanding on the Commencement of Discussions
for Business Integration” dated August 16, 2019, Matsumotokiyoshi Holdings and cocokara fine executeda memorandum of understanding regarding the commencement of discussions for a business integrationand involving the granting of exclusive rights. Matsumotokiyoshi Holdings and cocokara finesubsequently established a business integration preparatory committee and have been examining anddiscussing the details for the realization of the Business Integration.
As a result of the numerous sincere discussions between Matsumotokiyoshi Holdings and cocokara finefrom various perspectives, including the industry environment embracing both companies and thesynergies that may result from any future course of action or the integration of both companies in light of1

(Translation)such industry environment, Matsumotokiyoshi Holdings and cocokara fine confirmed that: (i) bothcompanies share a common philosophy of placing the greatest value on promoting the improvement ofbeauty and health as well as the quality of life of our customers in the community and the future goals ofboth companies are the same; and (ii) synergies exceeding the level initially anticipated can be expected,
mainly in terms of procurement, and the feasibility of realizing such synergies is high. As a result,
Matsumotokiyoshi Holdings and cocokara fine reached the same conclusion, that the Business Integration
will contribute to improving the corporate value of both companies, and executed the MOU for theBusiness Integration today with the aim of attaining domestic sales of 1 trillion yen and operating 3,000
stores in Japan, based on the Business Integration, and becoming the “No. 1 company in Asia in the areasof beauty and health” in the future.
Furthermore, as a part of the Business Integration, Matsumotokiyoshi Holdings and cocokara fine decided
to execute the Capital and Business Alliance Agreement and have cocokara fine issue new shares with
Matsumotokiyoshi Holdings as the allotted party (collectively, the “Third-Party Allotment of Shares”)
prior to the implementation of the Business Integration, in order to become an efficient and competitive
company immediately after the Business Integration. Matsumotokiyoshi Holdings and cocokara fineintend to utilize the time up to the Business Integration to improve the corporate value of both companies
and integrate our strategies and corporate cultures, pursuant to the early realization of synergies, andcommence mutual cooperation through consultation between both parties.
(2)

Background and purpose of the Business Integration
The environment surrounding our society is facing a major revolution. People’s lifestyles are diversifying
due to the digitalization of our lives as a result of the expansion of the e-commerce market, pursuant to
the popularization of smartphones and the fusion of online and offline led by leading global U.S. andChinese companies. Moreover, in Japan, globalization is expanding as the number of foreign visitors toJapan reached 30 million people in 2018 pursuant to the government’s tourism strategy, and, with theupcoming Tokyo Olympics in 2020, the number of foreign visitors to Japan is expected to further increase.
Furthermore, Japan is facing a change in its social structure due to a rapidly decreasing birthrate and aging
population and the population is becoming concentrated in three metropolitan areas. These changes to theenvironment surrounding our society have led to the arrival of a society that accepts diversified values
and in which people can choose diversified lifestyles. The retail industry is now required to realize, on a
deeper level, services that meet the needs of each and every one of this diversified base of customers.
Under the foregoing macro environment, the market growth in the drugstore industry is slowing due tointensifying competition beyond any business category and a sharp increase in labor and logistics costs.
Moreover, as drugstores fight to survive by pursuing various strategies, the industry is becoming polarized
between companies that specialize in health and beauty and pursue specialized services, on one hand, andcompanies that improve the convenience of customers through discounts centered on food products, on
the other hand, and an oligopoly of top companies has emerged due to industry reorganization. Meanwhile,
amidst increasing Japanese social security expenditures, the drugstore industry is expected to play animportant role in creating community-based integrated care systems, and is also required to cope with therevision of medical service fees.
By regarding the foregoing drastic change of the drugstore industry as an opportunity for growth,
Matsumotokiyoshi Holdings and cocokara fine will foremost aim to become an infrastructure company

2

(Translation)
supporting society and our customers’ lives and achieve domestic sales of 1 trillion yen and 3,000 storesin Japan, based on the Business Integration. Moreover, by establishing “One to One” marketing utilizing
the customer base of both companies, we will revolutionize the purchase trends of consumers. Also, by
surviving the competition in the domestic drugstore industry by gaining an overwhelming presence in thehealth & beauty arena, we will aim to become the “No. 1 company in Asia in the areas of beauty andhealth” in the future, and also promote the creation of community-based integrated care systems, whichis the social mission of a drugstore.
(3)

Goals of both companies and expected effects of the Business Integration
The group management philosophy of Matsumotokiyoshi Holdings is “1st for you”. By always keeping
the perspective of its customers in mind, Matsumotokiyoshi Holdings seeks ongoing growth and theimprovement of corporate value through the creation of new added values and the provision of thoughtful
services. Matsumotokiyoshi Holdings currently operates 1,681 drugstores/dispensing pharmacies
throughout Japan (of which 302 stores were dispensing pharmacies as of end of September 2019), and isaiming to make the next leap forward as a leading company in the drugstore industry.
Meanwhile, aiming to realize its management philosophy of “To pursue the health of mind and body, andto contribute to the community”, cocokara fine coordinates the management of the 1,333
drugstores/dispensing pharmacies that it operates throughout Japan (of which 299 stores were dispensing
pharmacies as of the end of September 2019) and its caregiving-related businesses. cocokara finepositions and promotes, as its social mission, the “creation of a healthcare network in the community”,
for providing integrated home healthcare and caregiving services in the community, through thecoordination of various professions involved in medical care and caregiving, and aims to make the next
leap forward as a true healthcare company.
Both companies have a common philosophy of placing the greatest value on promoting the improvementof beauty and health as well as the quality of life of our customers in the community, and share thecommon characteristic of operating numerous stores in both cities and suburbs. In addition, bothcompanies are able to complement each other in terms of store locations and, because of their similar
strategies of promoting digitalization and global expansion, both companies can mutually leverage theirvarious management resources such as infrastructure and know-how.
We are aiming to mainly pursue the following synergies through the Business Integration. We believethat the realization of such synergies based on the Business Integration will contribute to the improvementof shareholder value with respect to both companies. We anticipate being able to achieve a combined
profit improvement on a scale of tens of billions of yen on a consolidated basis from around three years
after the Business Integration.
(i)

Joint development and cooperative purchasing of products, etc.
▪

By mutually supplying and selling existing private brand products, which are popularamong the customers of both companies, as well as new private brand products to be jointly
developed by both companies, we will aim to expand sales by further increasing the appealof the private brand products of both companies, and thereby increase sales and improve
profitability.

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(Translation)

▪

(ii)

Customer base and marketing
▪

(iii)

As a result of both companies unifying the procurement of products, including
pharmaceutical products, not only will we be able to reduce purchasing costs througheconomies of scale, we will also aim to improve profitability through an increase in rebatesby reflecting the rebate ratios of both companies.

By integrating the customer base of both companies, it will be possible to implement sales
promotion strategies compatible with digitalization, and we will aim to increase sales by
proposing products that meet the needs of each and every customer and seamlessly
coordinating both offline (stores) and online (EC) channels.

Other
▪

In terms of logistics, we expect improvements in logistical efficiency and a reduction ofphysical distribution costs per store through synergies in areas where stores are being
operated and an increase in our market share by prefecture.

▪

In terms of payment, we expect to reduce payment fees by unifying the payment methodsof both companies.

2.

Summary of the Business Integration and Alliance(1)

Method of the Business Integration
With the establishment of a holding company (the “Integrated Company”) based on a joint share transfer
on the premise of obtaining the approval through the resolution of the general meeting of shareholders ofboth companies and acquiring the permission of authorities required for the Business Integration, bothcompanies will examine, discuss and decide the method of the Business Integration before the executionof a definitive agreement.

(2)

Schedule of the Business Integration
With the following schedule as the goal, the schedule of the Business Integration will be examined anddiscussed by both parties. However, if it becomes necessary to change the schedule of the Business
Integration due to a delay in the acquisition of the approval of the Fair Trade Commission under the Act
on Prohibition of Private Monopolization and Maintenance of Fair Trade and other related guidelines, adelay in the screening procedures of other authorities concerned, or any other reasons, the schedule may
be changed following a separate consultation between both companies.
January 31, 2020 (today): Execution of the MOU
February 2021 (scheduled): Execution of definitive agreement related to the Business Integration
June 2021 (scheduled): Ordinary general meetings of shareholders of both companies (resolution
regarding approval of the Business Integration)
October 1, 2021 (scheduled): Effectiveness of the Business Integration

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(Translation)(3)

Driving force of the Business Integration
Aiming for the smooth realization of the Business Integration, both companies will continue to examineand discuss matters that have not yet been decided, as of the execution of the MOU, through the businessintegration preparatory committee established by both companies.

(4)

Purpose of the Alliance
Please refer to “1. Background and purpose of the Business Integration”.

(5)

Details of the Alliance
Details of business alliance:
While the collaboration and synergies expected through the Business Integration are as described in“1. Background and Purpose of the Business Integration—(3) Goals of both companies and expected
effects of the Business Integration”, in terms of business alliance, both companies will aim to promptly
realize synergies by collaborating in each of the following areas: complementary supply of private brandproducts and expansion of merchandising; unification of procurement of national brand products andprescriptions; integration of merchandising; communalization of sales promotion, group purchasing andpayment contracts; and streamlining and improving store operations.
Details of capital alliance:
Matsumotokiyoshi Holdings will acquire 5,939,600 shares of common stock of cocokara fine through theThird-Party Allotment of Shares (6,006,908 shares of common stock of cocokara fine in total, together
with the 67,308 shares of common stock of cocokara fine currently held by Matsumotokiyoshi Holdings(ratio of voting rights relative to total voting rights after capital increase: 20.04%)) at 6,460 yen per share(total amount of 38,369,816,000 yen).
For details regarding the Third-Party Allotment of Shares, please refer to the “Notice Concerning Capitaland Business Alliance for Business Integration with Matsumotokiyoshi Holdings Co., Ltd., Issues of New
Shares through Third-Party Allotment, and Change of Top Shareholder as Majority Shareholder andOther Related Companies” announced today by cocokara fine.

(6)

Schedule of the Alliance
While the schedule of the Alliance is as follows, the schedule may change depending on the circumstancesof acquiring the approval of the Fair Trade Commission under the Act on Prohibition of Private
Monopolization and Maintenance of Fair Trade and other related guidelines. Matsumotokiyoshi Holdings
is scheduled to make payment pertaining to the Third-Party Allotment of Shares as soon as the approvalof the Fair Trade Commission is acquired, in order to promptly achieve the expected synergies throughthe Alliance.
January 31, 2020 (today): Execution of the Capital and Business Alliance Agreement5(Translation)
March 31 to April 30, 2020: Payment period for Third-Party Allotment of Shares
3.

Overview of the Companies(1)

Overview of Matsumotokiyoshi Holdings(1) Trade name(2) Main business activities

Matsumotokiyoshi Holdings Co., Ltd.
Management and supervision of subsidiaries such as drugstores; purchase and sale ofproducts(3) Date of establishment
October 1, 2007
(4) Location of head office
9-1 Shinmatsudo-Higashi, Matsudo-shi, Chiba-ken(5) Representative
Kiyoo Matsumoto, President(6) Capital
22,051 million yen(7) Number of issued shares
109,272,214 shares(8) Major shareholders andJapan Trustee Services Bank, Ltd. (trust account, trust account 1, trust (11.50%)
ownership percentage
account 2, trust account 4, trust account 5, trust account 6, trust account 7,
trust account 9)
Namio Matsumoto(6.35%)The Chiba Bank, Ltd.
(4.39%)The Master Trust Bank of Japan, Ltd. (trust account)(4.22%)
Tetsuo Matsumoto(3.19%)(9) Relation between
Capital relationship
Matsumotokiyoshi Holdings holds 67,308 shares (0.26%)
Matsumotokiyoshi Holdings andof cocokara fine.
cocokara fine
Personal relationship
N/A
Business relationship
N/A
Related party status
N/A(10) Most recent consolidated management performance and consolidated financial condition
Fiscal term
Term ending March 2017
Term ending March 2018
Term ending March 2019
Net assets
184,060 million yen
204,871 million yen
209,269 million yen
Total assets
285,733 million yen
314,178 million yen
318,324 million yen
Net asset worth
1,738.87 yen
1,935.39 yen
2,038.76 yen
Sales
535,133 million yen
558,879 million yen
575,991 million yen
Operating profit
28,431 million yen
33,565 million yen
36,028 million yen
Ordinary profit
30,828 million yen
36,123 million yen
38,978 million yen
Profit attributable to parent
20,119 million yen
22,755 million yen
25,035 million yen
company’s shareholders
Earnings per share
189.08 yen
215.03 yen
239.42 yen
Dividend per share
95.0 yen
80.0 yen
65.0 yen(11) Number of stores
1,681 stores (consolidated),
among which 302 stores are dispensing pharmacies (consolidated)(As of September 30, 2019)(2)

Overview of cocokara fine

(1) Trade name(2) Main business activities(3) Date of establishment(4) Location of head office(5) Representative

cocokara fine Inc.
Comprehensive provision of health-related services including caregiving, homeprescription and online sales with the drugstore and prescription businesses as corebusinesses
April 1, 2008
Innotech Bldg., 3-17-6 Shin-Yokohama, Kohoku-ku, Yokohama-shi, Kanagawa-ken
Atsushi Tsukamoto, President6(Translation)(6) Capital(7) Number of issued shares(8) Major shareholders
ownership percentage

1,000 million yen
25,472,485 shares
and The Master Trust Bank of Japan, Ltd. (administration trust account)(6.99%)The Master Trust Bank of Japan, Ltd. (trust account)(4.07%)
cocokara fine Employee Shareholding Association(3.74%)
Segami Fudosan K.K.
(3.47%)
Japan Trustee Services Bank, Ltd. (trust account)(3.14%)(9) Relation between cocokara fine Capital relationshipcocokara fine does not hold any shares ofand Matsumotokiyoshi Holdings
Matsumotokiyoshi Holdings.
Personal relationship
N/A
Business relationship
N/A
Related party status
N/A(10) Most recent consolidated management performance and consolidated financial condition
Fiscal term
Term ending March 2017
Term ending March 2018
Term ending March 2019
Net assets
83,237 million yen
87,810 million yen
95,081 million yen
Total assets
146,963 million yen
158,177 million yen
172,727 million yen
Net asset worth
3,392.3 yen
3,655.55 yen
3,958.25 yen
Net sales
377,203 million yen
390,963 million yen
400,559 million yen
Operating profit
10,159 million yen
13,712 million yen
12,915 million yen
Ordinary profit
12,507 million yen
16,019 million yen
15,233 million yen
Profit attributable to parent
7,037 million yen
9,067 million yen
9,158 million yen
company’s shareholders
Earnings per share
286.80 yen
376.41 yen
381.27 yen
Dividend per share
70.0 yen
73.0 yen
76.0 yen(11) Number of stores
1,333 stores (consolidated),
among which 299 stores are dispensing pharmacies (consolidated)(As of September 30, 2019)
4.

Situation following the Business Integration

The overview of the Integrated Company to be established based on the joint share transfer is as follows. Bothcompanies plan carefully examine, discuss and decide the details of a definitive agreement. Note that, as
described in “2. Summary of the Business Integration and Alliance—(1) Method of the Business Integration”,
because the method of Business Integration will be considered and discussed by both companies in the context
of a definitive agreement, if the Business Integration is to be implemented according to a method other than by
way of joint share transfer, both companies will plan to discuss and decide the details separately.
(1)

Trade name of the Integrated Company
Both companies plan to carefully examine, discuss and decide the trade name of the Integrated Company.

(2)

Location of the head office of the Integrated Company
The location of the head office of the Integrated Company is planned to be in Tokyo.

(3)

Vision and management philosophy of the Integrated Company
Both companies are planning to carefully examine, discuss and decide the vision and management
philosophy of the Integrated Company.

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(Translation)(4)

Basic policy of the Integrated Company
By exhibiting synergies through the Business Integration, the Integrated Company will aim to become
the “No. 1 Company in Asia” in the fields of beauty and health.

(5)Corporate governance of the Integrated Company
The corporate functions of Matsumotokiyoshi Holdings and cocokara fine are planned to be integrated
through the examination of and discussions between both companies. The governance system andorganization of the Integrated Company are planned to be decided through consultation of both companies
including the establishment of business divisions to oversee corporate planning, audit, risk management,
general affairs and key human affairs pertaining to the overall management of the Integrated Company
group.

(6)

Representative and constitution of the board of directors of the Integrated Company
The current plan is to have Kiyoo Matsumoto, President of Matsumotokiyoshi Holdings, serve as therepresentative director of the Integrated Company. The details, including the composition of the board of
directors, will be decided in due course through consultation between both parties.

(7)

Handling of brand of the Integrated Company
With regard to the brand of the Integrated Company, while both companies concurrently plan to use their
existing brands for a given period of time after the Business Integration, both companies are planning tocarefully examine, discuss and decide the details, including the use of a new brand, in due course.

5.

Future outlook

While it is currently anticipated that the Business Integration and Alliance will have minimal effect on the
consolidated performance of both companies for the term ending on March 2020, from a mid- to long-term
perspective, we believe that the Business Integration and Alliance will contribute to the improvement of thecorporate values of both companies. In the occurrence of an event that requires the amendment of an earnings
forecast, we will notify you without delay.
End8