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| SANYO Finalizes Terms for
Increasing Share Capital |
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| Tokyo, January 25, 2006 ---- SANYO Electric Co., Ltd. (SANYO), announced
today the terms of the final agreement with Daiwa Securities SMBC
Principal Investments Co. Ltd. (Daiwa Securities SMBCPI), the Goldman
Sachs Group Inc., and the Sumitomo Mitsui Banking Corporation (SMBC),
regarding SANYO’s plan to increase its share capital. |
| 1. Need for increasing share capital: |
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| SANYO’s profitability decreased following the intensification
of global competition across the electronics sector, surge in raw
material prices and rapid fall in the prices of finished products,
especially in the digital consumer electronics division. Moreover,
the Niigata earthquake in October 2004 caused immense damage to SANYO’s
Semiconductor business, resulting in a consolidated net loss of 171.5
billion yen in the FY 2004 financial results. In FY 2005, unavoidable
additional costs due to structural reforms centered around the Semiconductor
business resulted in a forecasted net loss of 233 billion yen. As
a result, if the current share capital is not increased, the consolidated
stockholders’ equity would reduce to 75 billion yen, and stockholders’
equity ratio will fall sharply to 3.9% - far below the standards of
other companies in the same sector. Also, there is a tendency of the
outlook of external rating agencies on SANYO’s creditworthiness
becoming stringent.
In addition, SANYO embarked on a 3-year reform plan called ‘SANYO
EVOLUTION PROJECT’ in July 2004, based on which a Mid-Term
Business Plan (FY 2005 – FY 2007) was launched in November
2004. In order to achieve the targets set in the Mid-Term Business
Plan and regain the foundation for continuous operation of its businesses,
it is estimated that to enable SANYO to conduct capital investment
and research and development investments that are necessary for
a growth strategy centered on SANYO’s core businesses, SANYO
would need to make investments to the amount of approximately 220
billion yen in FY 2006, another 230 billion in FY 2007, and for
the acceleration and implementation of its structural reforms, an
additional 100 billion yen.
Taking all these into consideration, SANYO decided that it was
indispensable to increase its share capital by approximately 300
billion yen through the issuance of new shares within this fiscal
year.
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| 2. Details of the Newly Issued Shares |
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Focusing on the ability to procure funds to underwrite an increase
in capital stock in such a short period of time, and its certainty,
SANYO requested the following groups and funds operated by these groups
to inject capital, on the condition of approval by SANYO’s stockholders.
SANYO completed a stock subscription agreement on January 25, 2005
with the following as capital investors, based on their high creditworthiness
combined with proven underwriting ability:
1) Its main bank, Sumitomo Mitsui Banking Corporation (SMBC); 2) Daiwa
Securities SMBC Principal Investments Co. Ltd. (Daiwa Securities SMBCPI),
subsidiary of SANYO’s lead securities firm, Daiwa Securities
SMBC Group; and 3) Oceans Holdings Co. Ltd. (Oceans HD), an affiliate
company of The Goldman Sachs Group Inc., the world’s top investment
bank, which has a deep understanding of SANYO.
Based on this stock subscription agreement, on the condition of approval
of all related agenda etc. at the Extraordinary Shareholders’
Meeting scheduled for February 24, 2006 and date of stock payment
being March 14, 2006 (however, the date might change owing to national
licenses relating to preferred stock issuance etc.), preferred shares
worth approximately 300 billion yen would be issued.
Regarding the issuing price and terms, taking into consideration
SANYO’s severe financial condition and profitability, as well
as unexpected fluctuations of stock price in the future etc., SANYO
decided on the following terms based on careful deliberations with
the capital investors:
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| (1) |
Class of Shares:
No.1 Class A preferred shares and No. 1 Class B preferred shares
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| (2) |
Number of Newly Issued Shares:
182,542,200 shares of No.1 Class A preferred shares and 246,029,300
shares of No.1 Class B preferred shares
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| (3) |
Issuing Price:
One preferred share of each class equals 700 yen
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| (4) |
Portion of Issuing Price not to be Incorporated into
Common Stock:
350 yen for each preferred share of each Class
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| (5) |
Stock Payment Date:
March 14, 2006 or alternative date decided upon in the Board
Meeting
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| (6) |
Method of Allocation:
Based on the method of third party allocation, Daiwa Securities
SMBCPI (or a 100% subsidiary of Daiwa Securities SMBCPI) would
be allocated 89,804,900 shares of Class A shares and 88,766,600
shares of Class B shares; Oceans HD (or another affiliate company
of The Goldman Sachs Group Inc.) would be allocated 89,804,900
shares of Class A shares and 88,766,600 of Class B shares; and
the Sumitomo Mitsui Banking Corporation would be allocated 2,932,400
shares of Class A shares and 68,496,100 shares of Class B shares.
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| (7) |
Contents of No. 1 Class A Preferred Shares &
No. 1 Class B Preferred Shares
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No. 1 Class A Preferred Shares
| 1. |
No.1 Class A preferred shares (Issuing price of 1 share
equals 700 yen) have a conversion right, which allows
them to be converted at the rate of 10 common shares per
each preferred share between March 14, 2007 and March
13, 2026. Thus, each No.1 Class A preferred share may
be converted into 10 common shares.
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| 2. |
Cash dividends and interim cash dividends of No.1 Class
A preferred shares will be paid in the same priority as
to the holders of common stock and shareholders of other
types of shares. Cash dividends and interim cash-dividends
for each common share would be multiplied according to
the conversion rate then in effect as provided in 1 above,
to calculate the cash dividends and interim cash-dividends
for each preferred share.
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| 3. |
Whenever SANYO engages in a distribution of residual
assets, it shall pay to No.1 Class A preferred shareholders,
700 yen per each No.1 Class A preferred share, in preference
to common shareholders.
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| 4. |
No.1 Class A preferred shares would have voting rights
at the Shareholders Meeting.
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| 5. |
The number of shares in each stock unit of No.1 Class
A preferred shares (100 shares) is one-tenth the number
of shares in each stock unit of common shares (1000 shares).
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No. 1 Class B Preferred Shares
| 1. |
No.1 Class B preferred shares (Issuing price of 1 share
equals 700 yen) have a conversion right, which allows
them to be converted at the rate of 10 common shares per
each preferred share after the stock payment date up to
March 13, 2026. Thus, each No.1 Class B preferred share
may be converted into 10 common shares.
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| 2. |
Cash dividends and interim cash dividends of No.1 Class
B preferred shares will be paid in the same priority as
to the holders of common stock and shareholders of other
types of shares. Cash dividends and interim cash-dividends
for each common share would be multiplied according to
the conversion rate then in effect as provided in 1 above,
to calculate the cash dividends and interim cash-dividends
for each preferred share.
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| 3. |
Whenever SANYO engages in a distribution of residual
assets, it shall pay to No.1 Class B preferred shareholders,
700 yen per each No.1 Class B preferred share, in preference
to common shareholders.
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| 4. |
No.1 Class B preferred shares would not have voting
rights at the Shareholders Meeting, unless otherwise stipulated
by law.
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| 5. |
The number of shares in each stock unit of No.1 Class
B preferred shares (100 shares) is one-tenth the number
of shares in each stock unit of common shares (1000 shares).
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| (8) |
Conversion Rights of Preferred Shares and Restrictions
on Transfer of
Common Stock After Conversion:
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| 1. |
The conversion of No.1 Class A preferred shares into
common shares is restricted until March 13, 2007.
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| 2. |
According to the stock subscription agreement, common
stock issued after conversion from No.1 Class B preferred
shares cannot be transferred to third parties without
SANYO’s consent until March 13, 2007.
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| 3. |
It is understood that according to the agreement between
the shareholders, Daiwa Securities SMBCPI, Oceans HD and
SMBC, Daiwa Securities SMBCPI and Oceans HD would each
retain 24.5% of total shareholder voting rights for 2
years after the subscription, with the exception of the
case in which they sell their shares with the consent
of all the three parties.
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| 3. Regarding New Candidates, Retiring
Directors and New Management Structure: |
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For the issuance of preferred shares, accomplishment of structural
reforms based on the Mid-Term Business Plan, and further selection
and focus on SANYO’s core businesses by making optimum use of
its strengths as a provider of cutting-edge Environment and Energy
products and services, SANYO plans to make the following changes in
the Board of Directors:
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| (1) |
Resignation of Directors and Executive Director on
the Board of Directors:
SANYO’s Executive Director, Satoshi Iue, is scheduled
to resign as of the holding of the Extraordinary Shareholders
Meeting, scheduled on February 24, 2006. In addition, Outside
Directors, Nobuaki Kumagai and Louis E. Lataif, are scheduled
to resign as of January 31, 2006. Moreover, Directors, Satoshi
Inoue and Osamu Kajikawa are scheduled to resign as Directors
as of the holding of the Extraordinary Shareholders Meeting
but would continue to hold office as Executive Officers.
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| (2) |
New Candidates for the Board of Directors:
As principal stockholders of SANYO, Daiwa Securities SMBCPI,
the Goldman Sachs Group and SMBC will take part in the company’s
management in order to raise its corporate value. Thus, SANYO
would accept the dispatch of board directors from each of these
companies. Five persons, whose profiles are attached on a separate
sheet, would be new candidates for the Board of Directors. In
addition, 2 new candidates for the board of directors would
be nominated from SANYO, to strengthen the core businesses of
the Mid-Term Business Plan. Following the approval of their
appointment at the Extraordinary Shareholders Meeting scheduled
on February 24, 2006, all the candidates would be appointed
as Directors on the same day.
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| (3) |
Changes in Number of Directors & Term of Office:
At the holding of the Extraordinary Shareholders Meeting on
February 24, 2006, the following two amendments will be proposed:
1. Changing the number of Board of Directors to not be more
than 9 directors. 2. Changing the term of office of directors
such that the term of office of any director shall expire at
the conclusion of the ordinary general meeting of shareholders
held with respect to the final closing of accounts falling within
one year after such director’s assumption of office.
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| (4) |
Strengthen Requirements of Decisions made by Board
of Directors:
In a change for SANYO’s Board of Directors rules and internal
rules, in the case of important decisions, a total of more than
2/3rd of the total directors will have to vote in the affirmative.
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| (5) |
Other:
SANYO plans to abolish the Top Management Meeting, which undertakes
preliminary review of agenda for the meeting of Board of Directors,
newly establish a Management Meeting and also abolish the appointment
of CEO, COO and CFO. The details of these plans would be decided
upon further deliberations with each of the investors.
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| February 24, 2006 |
Date of Extraordinary Shareholders Meeting |
| March 14, 2006 |
Date of Payment |
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| Attachment: New Candidates for
the Board of Directors |
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| Name |
Koichi MAEDA |
| Date of Birth |
December 20, 1948 |
| Education |
March 1971 |
Graduated in Economics, Kyoto University |
| Work History |
April 1971
May 1998
June 1999
June 2002
November 2003
November 2005
December 2005 |
Joined Sumitomo Bank (Currently, Sumitomo
Mitsui Banking Corporation (SMBC))
Manager, Corporate Finance Department,
Sumitomo Mitsui Banking Corporation
Senior Officer, Sumitomo Mitsui Banking
Corporation
Deputy Executive Officer, Sumitomo Mitsui
Banking Corporation
President, Corporate Recovery Servicer Co.,
Ltd., a subsidiary of Sumitomo Mitsui
Financial Group (SMFG)
Vice President and Officer, SANYO Electric Co., Ltd.
(Current Position)
Headquarters Administration In-Charge
(Current Position) |
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| Name |
Kazuhiko SURUTA |
| Date of Birth |
January 7, 1955 |
| Education |
March 1977
May 1984 |
Graduated in Political Science from the
Department of Law, Keio University
Masters Degree, Claremont Graduate University
(located in California) |
| Work History |
April 1977
May 1998
April2001
February 2003
June 2003
April 2005 |
Joined Daiwa Securities Co. Ltd.
Manager, Corporate Institutions Department (III),
Daiwa Securities Co. Ltd.
General Manager, Corporate Institutions
Strategy Department, Daiwa Securities SMBC Co. Ltd.
Manager, Financial Institutions
Department (I), Daiwa Securities SMBC Co. Ltd.
Executive Officer, Daiwa Securities SMBC Co. Ltd.
Senior Executive Officer, Financial Institutions
and Corporate Institutions, Daiwa Securities
SMBC Co. Ltd. (Current Position) |
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| Name |
Toshinao Matushima |
| Date of Birth |
February 13, 1959 |
| Education |
March 1981 |
Graduated from Department of Literature, Tokyo
University |
| Work History |
April 1981
April 2001
October 2001
April 2005 |
Joined Daiwa Securities Co. Ltd.
Manager, Principal Finance, Daiwa Securities
SMBC Co. Ltd.
Corporate Executive Officer and COO, Daiwa
Securities SMBC Principal Investments Co. Ltd.
Executive Officer, Products Division Planning
Officer, Daiwa Securities SMBC Co. Ltd. (Current Position) |
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| Name |
Tetsuo NARAHA |
| Date of Birth |
April 25, 1960 |
| Education |
March 1984
May 1992 |
Graduated from Department of Education, Tokyo
University
MBA, Sloan School, Massachusetts Institute of Technology (MIT) |
| Work History |
June 1986
June 1992
October 1994
October 1999
December 2004 |
Joined Benesse Corporation
Transferred to Berlitz International
Joined McKinsey & Company
Joined The Goldman Sachs Group Inc.
Managing Director, The Goldman Sachs Group Inc.
(Current Position) |
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| Name |
Ankur SAHU |
| Date of Birth |
October 18, 1969 |
| Education |
June 1991
June 1996 |
Graduated from Department of Electronic
Engineering, Tufts University
MBA, Harvard Business School |
| Work History |
October 1998
June 2000
January 2004
July 2004
August 2004
November 2005
January 2006 |
Joined The Goldman Sachs Group Inc.
Vice President, The Goldman Sachs Group Inc.
Vice President, Principal Investment Area, The
Goldman Sachs Group Inc. (Current Position)
Director, Fujita Corporation (Current Position)
Director, Universal Studios Japan (Current Position)
Managing Director, The Goldman Sachs Group Inc.
(Current Position)
Observer to Board of Directors, eMobile Ltd. (Current Position) |
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| Name |
Mitsuru HONMA |
| Date of Birth |
November 6, 1947 |
| Education |
March 1970 |
Graduated from Department of Law, Konan University |
| Work History |
April 1970
August 1982
April 1998
April 2002
April 2003
April 2004
April 2005
August 2005 |
Joined SANYO Electric Co., Ltd.
Vice President, SANYO Fisher Corporation
General Manager, Soft Energy Company,
SANYO Electric Co., Ltd.
Vice President, Soft Energy Company, SANYO Electric Co., Ltd.
Officer, SANYO Electric Co., Ltd. and
President, Mobile Energy Company, SANYO
Electric Co., Ltd. (Current Position)
Senior Officer, SANYO Electric Co., Ltd.
Executive Officer, SANYO Electric Co., Ltd.
(Current Position) & Group Executive, Power
Solutions Group, SANYO Electric Co., Ltd.
(Current Position)
General Manager, Corporate DNA Evolution
Plan Management HQ, SANYO Electric Co., Ltd.
(Current Position) |
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| Name |
Hidetoshi ARIMA |
| Date of Birth |
March 26, 1952 |
| Education |
March 1977 |
Graduated from Department of Engineering, Kobe
University |
| Work History |
April 1977
March 1998
April 2001
April 2005
September 2005
Other positions
held |
Joined SANYO Electric Co., Ltd.
Vice President, Dalian SANYO Refrigeration Co., Ltd.
General Manager, Overseas Administration Department, SANYO
Air Conditioners Co., Ltd.
Officer, SANYO Electric Co., Ltd. (Current
Position) & Vice President, Commercial
Company (Current Position)
Deputy General Manager, Corporate DNA
Evolution Plan Management HQ, SANYO
Electric Co., Ltd. (Current Position)
Executive President, SANYO Commercial
Service (Current Position)
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