Financial Accounting Standards Foundation Member

November 27, 2009
Company name:

Mitsubishi Materials Corporation

Representative’s name:

Akihiko Ide, President

Securities Code No.:

5711

Contact:

First Section of the Tokyo Stock Exchange,
First Section of Osaka Securities Exchange
Nobuyuki Suzuki, Manager,
Corporate Communications & IR Dept.
Tel: +81-3-5252-5206

Company name:

Mitsubishi Cable Industries

Representative’s name:

Hisayoshi Honma, President & CEO

Securities Code No.:

5804
First Section of the Tokyo Stock Exchange,

Contact:

Hideyuki Kushida, General Manager,
Administrative Dept.
Tel: +81-3-3216-1551

Execution of Share Exchange Agreement and Conversion of Mitsubishi Cable
Industries into a Wholly Owned Subsidiary of Mitsubishi Materials Corporation
At meetings of the Boards of Directors of Mitsubishi Materials Corporation (“MMC”) and
Mitsubishi Cable Industries (“MCI”) held today, resolutions were approved to convert MCI
into a wholly owned subsidiary of MMC through a share exchange pursuant to a shareexchange agreement, which was also executed today (the “Share Exchange”).
The share exchange agreement must be approved at an extraordinary general meetingof the shareholders of MCI scheduled for February 9, 2010, and the effective date of the
Share Exchange is scheduled for March 12, 2010. In accordance with Article 796,
Paragraph 3, of the Companies Act, MMC intends to conduct a simplified share exchangethat will not require approval at a general meeting of its shareholders.
In addition, it is expected that MCI’s shares will be delisted on March 9, 2010, in advanceof the Share Exchange effective date, which is scheduled for March 12, 2010. The last dayof trading for MCI’s shares is expected to be March 8, 2010.
1. The Purpose of Creating a Wholly Owned Subsidiary through the Share Exchange
Despite MCI’s efforts to cultivate and strengthen its electronic and electrical distribution
systems business and its instrumental components business as a part of its over all
business structural reforms, these businesses saw a significant decline in profits due tothe global recession caused by last year’s turmoil in the U.S. financial markets, which inturn caused a sudden contraction in the automotive market. This has led to a continuallydifficult business environment for the electronic and electrical distribution systems
business, which primarily serves the automotive industry. In response to this rapidly
deteriorating business environment, MCI has pursued companywide cost savings and-1-other initiatives in accordance with structural reforms of its electronic and electrical
distribution systems business that were announced on February 10, 2009. Althoughsome positive results have been achieved, in response to the unstable market
environment, MCI has decided to drastically downsize its automotive wiring harness
business, which constitutes the core of the electronic and electrical distribution systems
business. In addition, MCI has decided to withdraw from businesses for which a recovery
in profitability seems difficult, such as the general-purpose optical fiber cable business(the “Business Structural Reforms”). MCI will continue to pursue cost reductions while
focusing its efforts on strengthening its ongoing businesses to ensure stable earnings
and aim for further sustainable growth. However, early strengthening of its financial baseis required, because MCI currently forecasts an extraordinary loss of ¥4.0 billion as aresult of the Business Structural Reforms.
On the other hand, MMC is MCI’s biggest shareholder, holding 36.5% of its issued shares.
Over many years, MMC has built a close relationship with MCI through productdevelopment and sales of copper wire rods, which are used for cable. In addition, MMC
has collaborated with MCI in the development of its strategic business by underwriting an
MCI capital increase through a share issuance and by cooperating in the development of
automotive electrical components. MMC believes that, amid growing efforts to realize a
low-carbon society, the use of electricity as a form of green energy will increase and, as aresult, the demand for higher quality copper products with superior conductivity andworkability will grow.
MMC and MCI considered various countermeasures for the above situation. As a result,both companies agreed on the urgent need to set up a management structure thatenables MCI to make rapid business judgments without being distracted by its short-term
performance, so that MCI can push forward with the Business Structural Reforms. Bothcompanies concluded that converting MCI into a wholly owned subsidiary of MMC
through a share exchange would be the best way to solve these issues from theperspective of swiftness and management flexibility of MCI.
For MMC, the conversion of MCI into a wholly owned subsidiary will enable a flexible andexpeditious reinforcement of MCI’s financial base. In addition, while deepening therelationship between the two companies, it will enable the development and sales of new
products to meet diverse market needs by combining MCI’s various technologies and its
solid customer base with MMC’s oxygen-free copper and alloy technologies, resulting inan overall strengthening of the MMC Group’s copper business.
Moreover, the conversion of MCI into a wholly owned subsidiary of MMC and thereinforcement of MCI’s financial base will maintain the MMC Group’s credit quality, while
increasing the flexibility of its management to ensure the implementation of the Business
Structural Reforms and enable MCI’s further developments.
As mentioned above, the conversion of MCI into a wholly owned subsidiary of MMC will-2-

enable the swift and certain implementation of MCI’s Business Structural Reforms while
contributing to the maximization of MMC’s corporate value. Therefore, we haveconcluded that this is in the best interests of the shareholders, the employees, thecustomers and all other stakeholders of both companies.
2. Share Exchange Summary(A) Share Exchange schedule(1)

November 27, 2009

(2)
(3)

November 27, 2009
November 30, 2009 (expected)(4)

December 15, 2009 (expected)(5)February 9, 2010 (expected)

(6)
(7)
(8)

March 8, 2010 (expected)
March 9, 2010 (expected)
March 12, 2010 (expected)

Board meeting for approval of share exchange
agreement (both companies)
Share exchange agreement executed
Announcement of the record date for the
extraordinary general meeting of shareholders(MCI)
Record date for extraordinary general meeting of(MCI)
Extraordinary General Meeting of Shareholders toapprove Share Exchange (MCI)
Final day of share trading (MCI)
Shares delisted (MCI)
Share Exchange scheduled (effective date)Notes:
1. MMC intends to conduct a simplified share exchange that does not require approval at a
general meeting of its shareholders.
2. The date scheduled for the Share Exchange may change upon agreement of both companies.
(B) Share Exchange method
The Share Exchange will make MCI a wholly owned subsidiary of MMC. In accordancewith Article 796, Paragraph 3, of the Companies Act, MMC will conduct a simplified
share exchange that does not require approval at a general meeting of its shareholders.
Approval of the Share Exchange will take place at the MCI extraordinary general

meeting of its shareholders scheduled for February 9, 2010. The effective date isscheduled for March 12, 2010.
(C) Allocation by share exchange
Company
Share exchange
ratio
Notes:

Mitsubishi Materials Corporation(Parent company)

Mitsubishi Cable Industries(Wholly owned subsidiary)

1

0.32

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1. Share exchange allocation ratio
0.32 shares of MMC common stock will be issued for each share of MCI common
stock except for the 78,973,725 shares of MCI common stock currently held by
MMC. Furthermore, the abovementioned share exchange ratio may be modified in
the event of significant changes to the terms used in its calculation and upon
agreement by both companies.
2. New shares issued in the Share Exchange
It is expected that in the Share Exchange, 43,940,021 shares of MMC common
stock will be allocated, which will consist of 35,940,021 shares (truncated) of newly
issued common stock and 8,000,000 shares of MMC treasury stock (common
stock). The number of shares allocated in the Share Exchange may be modified forsuch reasons as the cancellation of MCI’s treasury stock. In addition, MCI plans tocancel all of its treasury stock (including those acquired through the appraisal
remedy as a result of the exercise of appraisal right by dissenting shareholders inconnection with the Share Exchange) by resolution at a meeting of the board of
directors held by the day before the effective date of the Share Exchange.
3. Treatment of shares that make up less than a full trading unit
The Share Exchange will result in some shareholders holding less than one fulltrading unit of MMC’s shares. As at September 30, 2009, there were 19,431
shareholders holding at least one full trading unit of MCI shares and of theseshareholders, about 70% held less than four units. Shareholders holding less than
one full trading unit of MMC’s shares will be unable to trade such shares on thestock exchanges.
MMC considered the possibility of reducing the size of its trading unit, taking into
consideration the unit price of MMC’s shares, the number of MMC shareholders, theliquidity of MMC’s shares on the stock exchanges, the adverse effect of a drastic
decrease of the unit price, and so on. However, MMC has concluded not to reduce
the size of the trading unit at this time, despite the fact that some shareholders will
be unable to trade their shares on the stock exchanges as described above.
MMC offers the following programs for shareholders who hold less than a trading
unit of MMC shares.
• Program for buying back shares of less than a unit
Pursuant to this program, based on Article 192, Paragraph 1 of the Companies Act,a shareholder holding less than a trading unit of MMC shares can request MMC tobuy his or her shares that consist of less than a trading unit.
• Program for additional purchase of shares to complete a trading unit
This is a program where, based on Article 194, Paragraph 1 and the Articles ofIncorporation of MMC, a shareholder holding less than a trading unit of MMC shares
can request to buy a sufficient number of additional shares to make a full trading
unit.
Moreover, according to the Companies Act, MCI’s shareholders can request MCI tobuy their shares while dissenting from the Share Exchange at MCI’s extraordinary
general meeting of shareholders. However, if a purchase price is not agreed
between such shareholder and the company, such shareholder must petition the
court to set a price.
MMC and MCI have concluded that, despite the situations described above, aShare Exchange is in the best interest of the stakeholders of both companies,
including its shareholders, employees and customers, because it will enable MCI toaccomplish quick and definitive business structural reforms, and it will enable the
MMC Group to maximize corporate value.

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(D)

The treatment of MCI Share Warrants and Convertible Bonds
MCI has not issued any share warrants or convertible bonds.

3. The Basis for the Share Exchange Ratio Calculation(A)

The Basis for and Process of Calculation
To ensure the fairness of the share exchange ratio calculation used for the Share
Exchange, each company separately requested an independent third party to
calculate the share exchange ratio. MMC commissioned Nomura Securities Co.,
Ltd. (“Nomura”), and MCI commissioned PwC Advisory Co., Ltd. (“PwC”), to
calculate the share exchange ratio.
Nomura used the average market stock price method to calculate the corporate
value of MMC, because MMC’s shares are listed on the Tokyo Stock Exchange
and the Osaka Securities Exchange. In applying the average market stock pricemethod, we used the closing price of the calculation reference date of November
26, 2009 and the average closing prices of the one-week, one-month, three-monthand six-month periods ended November 26, 2009.
Nomura used the average market stock price method, because MCI’s shares arelisted on Tokyo Stock Exchange, and the discounted cash flow method (“DCF”) toreflect future business activities, to calculate the corporate value of MCI. In
applying the average market stock price method, we used the closing price of thecalculation reference date of November 26, 2009, and the average closing price ofthe one-week, one-month, three-month and six-month periods ended November
26, 2009.
The share allocation of MMC common stock per share of MCI common stock as aresult of each method is as follows:
Calculation method

Share exchange ratio calculation range

Average market stock
price

0.339–0.373

DCF

0.263–0.341

Nomura’s share exchange ratio calculation was based on information provided byboth companies as well as information disclosed to the general public, which it
used as-is and assumed to be accurate and complete. No independent verificationof the accuracy or completeness of these materials or information was conducted.
Furthermore, in regard to the assets and liabilities (including contingent claims) of
both companies and their subsidiaries and affiliated companies, Nomura did notconduct an independent valuation, appraisal or assessment, including any analysis-5-

or valuation of individual assets and liabilities, nor did it request a third party toprovide an opinion or appraisal. Nomura’s share exchange ratio calculation reflects
information and economic conditions as of November 26, 2009. Nomura assumed
that financial forecasts provided by both companies were made reasonably by the
management of both companies based on their current best estimates andjudgment.
PwC used the average market stock price method to calculate the share exchange
ratio for MMC, because MMC’s shares are listed on the Tokyo Stock Exchange
and the Osaka Securities Exchange. And PwC used the average market stock
price method to calculate the share exchange ratio for MCI, because MCI’s sharesare listed on the Tokyo Stock Exchange. PwC also used the DCF method to reflect
future business activities in the calculation of MCI’s share exchange ratio. In
applying the average stock price method, recent market transactions of bothcompany’s shares were incorporated into the calculation as the weighted average
trading volume and average closing price of the two-week, one-month andthree-month periods ended November 26, 2009.
Share allocation of MMC common stock per share of MCI common stock as aresult of each method is as follows:
Calculation method

Share exchange ratio calculation range

Average market stock
price

0.339 ～ 0.373

DCF

0.305 ～ 0.443

PwC’s share exchange ratio calculation was based on information provided by bothcompanies as well as information disclosed to the general public, which it usedas-is and assumed to be accurate and complete. No independent verification of theaccuracy or completeness of these materials or information was conducted.
Furthermore, in regard to the assets and liabilities (including off-balance-sheet
assets and liabilities and other contingent claims) of both companies and theirsubsidiaries and affiliated companies, PwC did not conduct independent valuation,
appraisal or assessment, including analysis and valuation of individual assets andliabilities, nor did it request any third party to provide an opinion or appraisal. PwC
assumed that financial forecasts provided by both companies were reasonably
made by the management of both companies based on their current best estimatesand judgment. PwC’s share exchange ratio calculation reflects information andeconomic conditions as of November 26, 2009. Furthermore, MCI’s business planreflects revisions to its earnings forecast for the fiscal year ending March 31, 2010
(April 1, 2009 to March 31, 2010), announced on November 27, 2009.

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PwC’s share exchange ratio calculation does not represent an opinion of thefairness regarding the share exchange ratio.
MMC and MCI carefully considered, negotiated and discussed the share exchange
ratio using the calculations submitted by the third parties as reference. As a result,both companies approved the final share exchange ratio as reasonable andacceptable for their respective shareholders at each company’s board meeting
held on November 27, 2009, and both companies reached an agreement andexecuted the share exchange agreement on the same day.
In the event of any significant changes to the bases for the calculations, the shareexchange ratio may be modified by the agreement of both companies. Furthermore,
MCI’s business plan forecasts improved earnings as a result of significant
downsizing of the automotive wiring harness business, although a temporary loss
is forecasted.
(B)

Relationship with calculating institutions
Neither Nomura nor PwC has a relationship with MMC or MCI.

(C)

Reason and forecast for delisting
As a result of the Share Exchange, as of the expected effective date of March 12,2010, MCI will become a wholly owned subsidiary of MMC. Therefore, in
accordance with the Tokyo Stock Exchange delisting requirements, shares of MCI
are scheduled to be delisted from the Tokyo Stock Exchange on March 9, 2010
(the final day of trading for MCI’s shares is expected to be March 8, 2010). After
delisting, MCI’s shares will not be tradable on the Tokyo Stock Exchange.

(D)

Measures to ensure fairness
MMC holds 36.7% (including 0.2% held by its subsidiary) of the common stock
issued by MCI. MMC and MCI took the following measures to ensure the fairnessof the Share Exchange: (1) external specialists conducted due diligence and, (2)the share exchange ratio was calculated by third parties. (MMC did not obtain afairness opinion from Nomura, and MCI did not obtain a fairness opinion from
PwC.) Upon consideration of the results of above measures, both companies
discussed and negotiated the share exchange ratio, and both companies approved
the final share exchange ratio as reasonable and acceptable for their respective
shareholders at each company’s board meeting held on November 27, 2009, andboth companies reached an agreement and executed the share exchange
agreement.

(E)

Measures to avoid adverse interest
There are no directors of MMC or MCI who also serve as a director of the other.
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Therefore neither MMC nor MCI have taken any particular measures to avoid
adverse interests in approving the Share Exchange.
4. Profiles of the companies involved in the Share Exchange (As of September 30, 2009)
(1)

Name

Mitsubishi Materials Corporation(Parent company)

Mitsubishi Cable Industries(Wholly owned subsidiary)(2)

Head office(3)

Representative

3-2, Otemachi 1-chome,
Ohtemachi, Chiyoda-ku, Tokyo,
Japan
Akihiko Ide, President(4)

Primary business

4-1, Marunouchi 3-chome,
Marunouchi, Chiyoda-ku,
Tokyo, Japan
Hisayoshi Honma, President &CEO
Manufacture and sales ofelectric wires and cables,
automotive components, andrubber and plastic products

(5)
(6)
(7)
(8)
(9)
(10)

Paid-in Capital
Established
Sharesoutstanding
Fiscal year-end
Employees
Major customers(11)

Primary banks

(12)

Major
shareholders

Manufacture and sales of cement
and cement secondary products;
smelting, processing and sales ofcopper, gold, silver and othermetals; manufacture and sales of
cemented carbide andhigh-performance alloy products;
manufacture and sales ofelectronic materials andcomponents, electrical device
products and polycrystalline
silicon; manufacture and sales ofaluminum beverage cans andmilled aluminum products¥119,457 million
April 1, 1950
1,278,955,330
March 31
19,841 (Consolidated basis)
Users in Japan and overseas of
the cement, copper, processed
metals, electric components,
electric materials, aluminum andother products

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust and Banking
Corp.
Japan Trustee Services Bank,
Ltd. 6.0%
The Master Trust Bank of Japan,-8-¥19,278 million
June 28, 1917
216,495,025
March 31
4,156 (Consolidated basis)
Users in Japan and overseas insuch industries as electricalmachinery, instrumental
component,
telecommunications, electricaland communications
construction, automobile,
semiconductor and so on
The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
Mitsubishi UFJ Trust andBanking Corp.
Mitsubishi Materials
Corporation 36.5%
The Bank of Tokyo-Mitsubishi

(13)Intercompany
relationships

Ltd. 3.7%
UFJ, Ltd. 3.7%
The Bank of Tokyo-Mitsubishi
Mitsubishi UFJ Trust andUFJ, Ltd. 2.9%
Banking Corp. 2.9%
Capital
MMC holds 36.7% (including 0.2% held by its
subsidiary) of MCI common stock; MCI does nothold any MMC common stock.
Personnel
One MMC managing director serves as an MCI
statutory auditor.
Transactions

MMC sells electrolytic copper, copper wire rods
and other materials to MCI.

Relevant
Relationship

MCI is an equity-method affiliate of MMC.

(14)

Three year management and financial summary
Mitsubishi Materials Corporation
Mitsubishi Cable Industries(Millions of yen unless(Parent company)(Wholly owned subsidiary)
otherwise indicated)(Consolidated)(Consolidated)
March 31, March 31, March 31, March 31, March 31, March 31,
Fiscal year-end
2007
2008
2007
2008
2009
2009
Consolidated net assets

481,970

520,289

421,934

30,10927,863

6,645

Consolidated total assets

1,773,899 1,856,276 1,732,003

121,584

113,782

81,693

Consolidated net assets per
share (Yen)

329.35287.44136.94126.1728.80

Consolidated nets sales

1,452,108 1,659,286 1,424,114

94,833

108,251

89,412

Consolidated operating
income (loss)

78,758100,146

35,134892

1,340(4,706)

Consolidated ordinary
income (loss)

107,188

135,984

40,046581

878(6,619)Consolidated net income(loss)

71,382

74,268

6,106

418

588

(17,640)

Consolidated net income(loss) per share (Yen)

60.33

59.14

4.81

1.98

2.72

(81.57)

Cash dividends per share
(Yen)

6.0

8.0

4.0

2.0

2.0

—

362.45

5. Profile after Share Exchange(1)Business name

Mitsubishi Materials Corporation
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(2)

Primary business

Manufacture and sales of cement and cement secondary
products; smelting, processing and sales of copper, gold, silver
and other metals; manufacture and sales of cemented carbide
and high-performance alloy products; manufacture and sales ofelectronic materials and components, electrical device products
and polycrystalline silicon; manufacture and sales of aluminum
beverage cans and milled aluminum products.

(3)

Head office3-2, Otemachi 1-chome, Otemachi, Chiyoda-ku, Tokyo, Japan(4)

Representative

Akihiko Ide, President(5)

Paid-in Capital¥119,457 million(6)

Total assets

Not determined at present(7)

Net assets

Not determined at present(8)

Fiscal year-end

March 31

6. Outline of accounting treatment
The Share Exchange will likely be categorized as an acquisition (to which the purchasemethod is applied) based on corporate merger accounting standards. At present, theamount of goodwill has not been fixed.
7. Estimated impact of the Share Exchange on financial results
As the Share Exchange is scheduled to take place on March 12, 2010, the impact of the
Share Exchange on MMC’s consolidated and non-consolidated performance for fiscal
year 2009 is estimated to be minimal.
For reference: MMC’s forecasted consolidated performance for the current fiscal year
(announced on November 5, 2009) and the results of last fiscal year (millions of yen)
Consolidated
net sales
Forecast for thecurrent fiscal
year (ending
March 2010)
Results of last
fiscal year
(ended March2009)

Consolidated
operatingincomeConsolidated
ordinary income(loss)

Consolidated
net income(loss)

1,050,000

4,000(27,000)(60,000)

1,424,114

35,13440,046

6,106- 10 -