TOKYO, Aug. 1 /PRNewswire-FirstCall/ -- Oji Paper Co., Ltd.
(OTC:OJIPF) ("Oji") will commence a tender offer (the "Tender
Offer") for shares of the common stock (the "Common Shares") of
Hokuetsu Paper Mills, Ltd. (Code: 3865; "Hokuetsu"), as set forth
below. The board of directors of Oji (the "Board") approved the
transaction at a meeting held today. 1. Background and Purpose of
the Tender Offer As described in Oji's earlier press release,
"Proposal of Business Integration with Hokuetsu Paper," dated July
23, 2006 (the "Business Integration Press Release"), by combining
Hokuetsu's proven highly efficient business operations and Oji's
extensive management resources, the business integration between
Oji and Hokuetsu (the "Business Integration") represents a
strategic best fit: the Business Integration will simultaneously
achieve both an expansion of corporate scale and an improvement in
efficiency. The combined corporate group will be able to utilize an
ample cash-flow to make large-scale investments which are essential
to compete on a global level. In addition, a more efficient
production system will be established through a combination of
Hokuetsu's currently planned expansion of its coated paper
production facilities and the scrapping of Oji's aging, small-scale
facilities. The Business Integration will bring about synergies
across various areas, such as optimizing production and sales
operations, streamlining logistics through a rationalization of
transportation resources and technical exchange. After the Business
Integration, the new Oji/Hokuetsu Group will be the fifth largest
pulp and paper manufacturer in the world in terms of revenues. The
Business Integration will increase the potential for growth by
enhancing both companies' existing competitive advantages as well
as supplementing each other's areas for improvement. Oji is
convinced that the prompt implementation of the Business
Integration will bring positive results not only to the
shareholders of Hokuetsu, but also to its other stakeholders, such
as employees, trading partners, consumers and local communities. In
the belief that the Company can achieve the benefits as described
above, on July 3, 2006, the representative directors of Oji
submitted to Hokuetsu for its consideration a proposal of the
Business Integration (the "Proposal") detailing the specific terms
therefor (including a tender offer for all the Common Shares of
Hokuetsu at the price of 860 yen per share), and requested Hokuetsu
to respond in writing to Oji by 9:00A.M. on July 24 on whether it
would agree to the Proposal. In response, on July 21, Hokuetsu
announced that its board of directors had resolved to place
50,000,000 new Common Shares (representing 30.5% of the issued
Common Shares as of July 21) (the "Placement") at 607 yen per
share, and enter into a business alliance, with Mitsubishi
Corporation ("Mitsubishi") (such business alliance, the "Business
Alliance"). In light of the above development, on July 23, 2006,
the Board approved the Proposal, including a tender offer for all
the Common Shares of Hokuetsu at the price of 860 yen per share,
and resolved to proceed with the Business Integration on the
condition that Hokuetsu withdraw the Placement and the Business
Alliance. In addition, Oji urged Hokuetsu and Mitsubishi to
withdraw the Placement and the Business Alliance. Regrettably,
Hokuetsu issued press releases announcing that it would not
withdraw the Placement and the Business Alliance (Hokuetsu's July
24 press release in Japanese entitled "Regarding the Press Release
by Oji Paper Co., Ltd." and July 29 press release in Japanese
entitled "Certain Media Reports Regarding Tender Offer") and
neither Hokuetsu nor Mitsubishi has agreed to withdraw the planned
Placement and Business Alliance. Under the Proposal, the Tender
Offer was scheduled to commence in mid-August. However, the board
of directors of Hokuetsu resolved to proceed with the Placement and
the Business Alliance, an option which would not be compatible with
the Business Integration. As the Hokuetsu board chose such option
and has already expressed twice its intention not to withdraw the
Placement and the Business Alliance, Oji felt obligated to bring
this matter directly to the shareholders of Hokuetsu for their
consideration. In light of the foregoing and despite the fact that
the Placement and Business Alliance have not yet been withdrawn,
the Board resolved at a meeting held today to commence the Tender
Offer. The details of the purpose of the Tender Offer will be
described in the "Purpose of the Tender Offer" section of the
Japanese Tender Offer Statement to be filed on August 2, 2006. (The
Tender Offer Explanatory Statement, which will contain an identical
discussion of such details, will be available in English on August
3, 2006 (EST).) 2. Tender Offer Price Adjustment Caused by the
Placement As described in the Business Integration Press Release,
the Placement will affect the terms of the Tender Offer. The price
for Tender Offer Oji proposed in the Business Integration Press
Release was determined without taking into account the dilution
that would result from the Placement: the price per share as
adjusted to take into account of such dilution will be 800 yen (the
"Tender Offer Price"). Oji will carry out the Tender Offer even if
the Placement is not withdrawn, and, therefore, set 800 yen as the
Tender Offer Price. However, if the Placement and the Business
Alliance are withdrawn during the Tender Offer period, absent
special circumstances that may adversely affect the terms of the
Tender Offer, Oji will raise the Tender Offer Price to 860 yen.
Similarly, Oji has determined the number of Common Shares to be
purchased (the "Tender Offer Minimum") by taking into account the
increase in the number of Common Shares caused by the Placement.
However, in the case that the Placement and the Business Alliance
are withdrawn, absent any special circumstances that may adversely
affect the terms of the Tender Offer, Oji will lower the Tender
Offer Minimum. 3. Tender Offer: Summary of Terms A. Subject Company
(1) Trade name Hokuetsu Paper Mills, Ltd. (2) Principal business
Manufacturing, processing and sale/purchase of paper/pulp products
and their by-products (3) Date of incorporation April 27, 1907 (4)
Principal office 5-1, Nishizao 3-chome, Nagaoka, Niigata Prefecture
(5) Representative Masaaki Miwa Representative Director and
President (6) End of fiscal year March 31 (7) Number of employees
2,822 (including those at consolidated subsidiaries; as of March
31, 2006) (8) Capital 26,820 million yen (as of March 31, 2006) (9)
Total number of issued Common Shares 164,052,054 shares (as of June
28, 2006) (10) Major shareholders and ownership percentages (as of
March 31, 2006) (thousands of shares) The Master Trust Bank of
Japan, Ltd. (Trust Account) 13,867 8.45% Japan Trustee Services
Bank, Ltd. (Trust Account) 13,715 8.36% NIPPONKOA Insurance Co.,
Ltd. 5,992 3.65% Japan Trustee Services Bank, Ltd. (Common Shares
re-trusted with The Sumitomo Trust and Banking Company for Oji
Pension Trust Accounts) 5,614 3.42% Mizuho Corporate Bank, Ltd.
4,697 2.86% The Daishi Bank, Ltd. 4,217 2.57% The Hokuetsu Bank,
Ltd. 4,215 2.57% Japan Trustee Services Bank, Ltd. (Trust Account
4) 3,660 2.23% The Chase Manhattan Bank N.A., London, SL Omnibus
Account (Standing Agent: Mizuho Corporate Bank, Ltd.'s Kabutocho
Custody & Proxy Department within the Settlement & Clearing
Division) 3,437 2.10% The Norinchukin Bank 2,950 1.80% (Note) The
Common Shares held by Japan Trustee Services Bank, Ltd. (the
portion re-trusted with The Sumitomo Trust and Banking Company for
Oji Pension Trust Accounts) are the Common Shares owned by Oji in a
pension trust. These Common Shares have been placed in trust as
trust assets and the voting rights represented by those shares will
be exercised pursuant to Oji's instructions. (11) Trend of the
consolidated business results in the recent fiscal years (millions
of yen) Year ended March 2005 March 2006 Sales 151,204 153,692
Operating income 12,908 6,932 Ordinary income 12,548 7,205 Net
income 6,959 3,238 Total Assets 221,437 232,486 Net Assets 107,211
112,800 (12) Relationship with Oji Equity Relationship: Oji holds
3.42% of the total issued Common Shares of Hokuetsu. (Note) The
above percentage includes the 5,614,000 shares held by Japan
Trustee Services Bank, Ltd. (re-trusted with The Sumitomo Trust and
Banking Company for the Oji Pension Trust Accounts) in addition to
the 1,045 shares held by Oji. Personal relationship: None. Trade
relationship: Manufacturing consignment of thermal paper (sales
volume of 13,000,000 yen for the fiscal year ending March 2006) B.
Class of Shares to be Purchased Common stock C. Tender Offer Period
From August 2, 2006 (Wednesday) To September 4, 2006 (Monday) (34
calendar days) D. Tender Offer Price 800 yen per share. If the
Placement and Business Alliance is withdrawn during the Tender
Offer period, absent special circumstances that may adversely
affect the terms of the Tender Offer, the Tender Offer Price is
scheduled to be raised to 860 yen per share. E. Basis of Tender
Offer Price The Tender Offer Price of 800 yen per share is
determined by taking into account the impact of the Placement and
the Business Alliance on a price (860 yen per share) representing
an approximately 34% premium over the one-month average closing
price of the Common Shares on the Tokyo Stock Exchange (the "TSE")
from June 1, 2006 to June 30, 2006, which predates Oji's submission
of its Proposal for Business Integration to Hokuetsu on July 3,
2006. The details of the foregoing calculation are as follows: (1)
The Tender Offer Price Prior to the Announcement of the Placement
The Tender Offer Price proposed prior to the announcement of the
Placement (the "Unadjusted Tender Offer Price") was 860 yen per
share, representing an approximately 34% premium over the average
closing price of the Common Shares on the TSE for a one-month
period (June 1, 2006 to June 30, 2006) prior to the date of the
Proposal, and has been determined based on a comprehensive analysis
of various factors, such as historic stock price movements,
financial performance and forecast of future earnings of Hokuetsu.
The Unadjusted Tender Offer Price also represents an approximately
32% premium over the average closing price of the Common Shares on
the TSE for a one-month period (June 22, 2006 to July 21, 2006)
prior to the date of Oji's press release entitled "Proposal of
Business Integration with Hokuetsu Paper," dated July 23, 2006. In
addition, the enterprise value of Hokuetsu calculated on the basis
of the Unadjusted Tender Offer Price amounts to 9.9 times
Hokuetsu's EBITDA of 20,594 million yen (for the fiscal year ending
March 2006). The equity value of Hokuetsu calculated on the basis
of the Unadjusted Tender Offer Price amounts to 28.1 times the
estimated net income (for the fiscal year ending March 2007), and
24.4 times the estimated adjusted net income (for the fiscal year
ending March 2007) (both on a consolidated basis). (Note 1) EBITDA
= operating profit + depreciation expense + amortization of
consolidated account adjustment. The financial data is based on the
Securities Report for the 168th Term filed by Hokuetsu on June 28,
2006. (Note 2) Adjusted net income = ordinary income x (1 -
effective tax rate) (Note 3) The estimated net income (for the
fiscal year ending March 2007) and the estimated adjusted net
income (for the fiscal year ending March 2007) are based on average
analyst estimates in the Institutional Brokers Estimate System
(I/B/E/S) from May 19, 2006 (the day after Hokuetsu's press release
in Japanese entitled "Expansion of Coated Paper Production
Facilities," dated May 18, 2006) to June 30, 2006. (2) Tender Offer
Price after the Placement According to Hokuetsu's press release in
Japanese entitled "Notice Relating to Third-Party Allotment, Change
in Major Shareholders, and Business Alliance with Major
Shareholder," dated July 21, 2006, the Placement will involve a
purchase of 50,000,000 Common Shares by Mitsubishi at a purchase
price of 607 yen per share, for a total purchase price of 30.35
billion yen (the "Mitsubishi Purchase Price"). The equity value of
Hokuetsu based on the Unadjusted Tender Offer Price is
approximately 140 billion yen (the "Equity Value"). The Tender
Offer Price of 800 yen per share is based on the sum of the
Mitsubishi Purchase Price and the Equity Value, or approximately
170 billion yen, divided by the total number of issued Common
Shares following the Placement. (3) Premium of Tender Offer Price
The Tender Offer Price of 800 yen per share represents an
approximately 24% premium over the average closing price of the
Common Shares on the TSE for June 1, 2006 to June 30, 2006 and an
approximately 23% premium over the average closing price of the
Common Shares on the TSE for the most recent one-month period (June
22, 2006 to July 21, 2006) prior to the date of Oji's press release
entitled "Proposal of Business Integration with Hokuetsu Paper,"
dated July 23, 2006. The Tender Offer Price of 800 yen per share
represents an approximately 26% premium over the closing price of
635 yen of the Common Shares on the TSE as of July 21, 2006, one
business day immediately preceding the date of the press release
relating to the Proposal. F. Number of Common Shares to be Acquired
100,818,239 shares (Note 1) The number of Common Shares to be
acquired (the "Tender Offer Minimum") is calculated by subtracting
5,614,000 Common Shares held by Japan Trustee Services Bank, Ltd.
(the portion re-trusted with The Sumitomo Trust and Banking Company
for the Oji Pension Trust Accounts) from 50% of 212,864,478 Common
Shares, which is derived by adding 50,000,000 Common Shares to the
total issued Common Shares (164,052,054 Common Shares) as of June
28, 2006 as stated in the Securities Report for the 168th Term
filed by Hokuetsu on June 28, 2006 to reflect the increase in
issued Common Shares as a result of the Placement (as described in
Hokuetsu's press release in Japanese entitled "Notice Relating to
Third-Party Allotment, Change in Major Shareholders, and the
Business Alliance with Major Shareholder," dated July 21, 2006) and
subtracting the 1,187,576 Common Shares that Hokuetsu itself owns
(as of June 28, 2006). (Note 2) Oji will not acquire any Common
Shares if the number of Common Shares tendered is less than the
Tender Offer Minimum. Oji will acquire all of the Common Shares
tendered if the number of Common Shares tendered is not less than
the Tender Offer Minimum. (Note 3) If Hokuetsu withdraws the
Placement and the Business Alliance, absent special circumstance
that would adversely impact the terms of the Tender Offer, Oji
plans to recalculate and lower the Tender Offer Minimum with the
assumption that the Placement will not be made. In such case, the
Tender Offer Minimum will be determined by subtracting 5,614,000
Common Shares held by Japan Trustee Services Bank, Ltd. (the
portion re-trusted with The Sumitomo Trust and Banking Company for
the Oji Pension Trust Accounts) from 50% of Hokuetsu's total issued
Common Shares minus the number of Common Shares that Hokuetsu
itself owns. G. Change in the Number of Common Shares held by Oji
as a Result of Tender Offer Before the Tender Offer: 5,615,045
shares (ownership percentage of 3.45%) After the Tender Offer:
106,433,284 shares (ownership percentage of 50.0004%) (Note 1) The
number of the Common Shares held by Oji after the Tender Offer is
based on the Tender Offer Minimum being equal to 100,818,239 Common
Shares. Since Oji will purchase all the tendered Common Shares when
the number of such tendered Common Shares exceeds the Tender Offer
Minimum, the ownership percentage of voting rights represented by
the Common Shares held by Oji after the Tender Offer will be
greater than 50.0004% and may be as high as 100%. (Note 2) The
ownership percentage is calculated based on the number of the
voting rights held by all the shareholders of Hokuetsu as stated in
the Securities Report for the 168th Term filed by Hokuetsu on June
28, 2006 (including the number of voting rights represented by
Common Shares constituting less than one unit and those held under
a cross-shareholding arrangement: 162,864). However, the ownership
percentage after the Tender Offer is calculated by adding the
number of voting rights represented by the 50,000,000 Common Shares
proposed to be issued pursuant to the Placement to the total number
of voting rights held by all the shareholders. H. Public Notice of
Commencement of Tender Offer August 2, 2006 (Wednesday) (Note)
Public announcement will be made electronically at
http://info.edinet.go.jp/EdiHtml/main.htm and this will be
separately announced in Nihon Keizai Shimbun. The public
announcement in English will be made available at
http://www.ojipaper.co.jp/english/ on August 3, 2006 (EDT). I.
Tender Offer Agent Nomura Securities Co., Ltd. J. Funds Required
for Tender Offer 80,654,591,200 yen (Note) The above amount is
calculated by multiplying the Tender Offer Minimum (100,818,239
Common Shares) and the Tender Offer Price. Because all of the
tendered Common Shares will be purchased if the total number of
tendered Common Shares exceeds the Tender Offer Minimum, the
estimated amount of funds required for the Tender Offer will be as
much as approximately 165,800 million yen. K. Proposed Date of
Commencement of Settlement of Tender Offer September 8, 2006
(Friday) 4. Agreement with Hokuetsu Regarding Tender Offer Hokuetsu
announced in its press releases in Japanese entitled "Regarding
Press Release by Oji Paper Co., Ltd" dated July 24, 2006 and
"Certain Media Reports Regarding Tender Offer" dated July 29, 2006
that it has no intention to withdraw the Placement and the Business
Alliance, and as of August 1, 2006, Oji does not have Hokuetsu's
endorsement for the Tender Offer and the Business Integration. Oji
will continue its efforts to obtain the understanding and support
of Hokuetsu to consummate the Business Integration. 5. After the
Tender Offer Oji intends to achieve a complete business integration
with Hokuetsu. If Oji is not able to acquire all the Common Shares
(excluding the Common Shares, etc. held by Hokuetsu) through the
Tender Offer, Oji will acquire any remaining Common Shares
following the Tender Offer through a second step transaction, such
as a statutory share exchange. The Common Shares are listed on the
First Section of each of the TSE and Osaka Securities Exchange (the
"OSE"), and pursuant to the listing rules of the TSE and the OSE,
they will be delisted if Oji acquires all the Common Shares.
Because the Tender Offer does not set a maximum number of Common
Shares to be acquired, if Mitsubishi becomes a large shareholder by
holding 24.44% (based on voting rights) upon the consummation of
the Placement, the Common Shares may also be delisted, depending on
the outcome of the Tender Offer. Provided that there will be no new
issuance of Common Shares other than that by the Placement or any
other analogous event, Oji plans to calculate the share exchange
ratio assuming that each Common Share has a value equal to the
price per share offered in the Tender Offer. The same pricing
approach will also be used if another acquisition method is used.
Oji will consider the final structure of the new group by
considering Hokuetsu's corporate culture and its value as an
integrated organization, taking into account the opinions of the
management of Hokuetsu. Oji will report the effect that the Tender
Offer may have on its consolidated business results for the fiscal
year ending March 2007 after the completion of the Tender Offer. 6.
Other On July 19, 2006, Hokuetsu adopted a takeover defense plan
(the "Defense Plan"). However, Oji made the Proposal to Hokuetsu on
July 3, 2006, which predates the announcement of the Defense Plan.
Further, Oji has been providing relevant information and sufficient
time for Hokuetsu's management to consider the Proposal, including
promptly responding to verbal and written questions from Hokuetsu
regarding the Proposal. These questions have not been presented to
Oji pursuant to the process provided for in the Defense Plan. As
such, the Business Integration described in the Proposal does not
fall within the scope of the process required by the Defense Plan,
and Oji believes that there is no legal basis for Oji to be
required to comply with the Defense Plan, which was unilaterally
adopted by Hokuetsu's board of directors. Except as otherwise
indicated, all references as to time and date are to those in
Japan. DATASOURCE: Oji Paper Co., Ltd. CONTACT: Tomoo Edagawa,
Corporate Officer, General Manager of Corporate Planning Division,
Oji Paper Co., Ltd., +81-3-3563-4383 Web site:
http://www.ojipaper.co.jp/
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