TOKYO, JAPAN, 8 04, 2016
At its Board meeting held on Thursday, August 4, 2016, Lawson, Inc. decided to assume a portion of the rights and obligations, effective Wednesday, September 7, 2016, relating to the convenience store business of: i) 87 stores currently owned by Three F Co, Ltd. and operated through a joint venture between Three F and Lawson (company split No.1), and ii) 13 stores operated under partial concession (company split No.2).
This action does not require full disclosure owing to the fact that the increase in total Lawson assets generated by company splits No.1 and No.2 is less than 10% of net assets on the last day of the previous financial term, and less than 3% of total revenue generated in the previous financial term.
1.Aim of the company splits
2.Overview of company splits
(1) Schedule for company split No.1 and No.2
Board meeting to approve company splits (Three F) | August 4, 2016 |
Board meeting to approve company splits (Lawson) | August 4, 2016 |
Signing of company splits agreement | August 4, 2016 |
Implementation (Tentative effective date) | September 7, 2016 |
Tentative payment date | September 7, 2016 |
Note: Company split No.1 and No.2 are simple company splits as determined under Item 2, Article 796 of the Companies Act for Lawson, Inc, and Item 2, Article 784 for Three F Co., Ltd. For that reason, both company splits can be executed without seeking prior approval from the respective general shareholders’ meetings.
(2) Style of company splits
Company split No.1 and No.2 are both absorption-type company splits. Three F is the split company and Lawson is the succeeding company.
(3) Financial payments relating to the company splits
A cash payment of 2,954 million yen is scheduled to be transfered from Lawson to Three F in relation to company split No.1.
A cash payment of 406 million yen is scheduled to be transferred from Lawson to Three F in relation to company split No.2.
(4) New equity and bond warrants generated by the company splits
None
(5) Increase in capital related to the company splits
Neither company split No.1 nor company split No.2 will generate an increase in Lawson capital.
(6) Rights and obligations to be inherited by the succeeding company
Through company split No.1 and No.2, Lawson will inherit a portion of the assets, rights and obligations pertaining to specific Three F convenience store operations.
(7) Expected discharge of obligations
There is not expected to be any problem with the discharge of respective obligations by both Lawson and Three F with respect to Company split No.1 and No.2.
3.Basis for allocation under company splits No.1 and No.2
(1) Underlying basis and reason for allocation
To ensure a fair and appropriate allocation for company split No.1 and No.2, Lawson appointed Mizuho Bank as an independent calculation agent. Mizuho Bank calculated the value of the underlying operations for company split No.1 and No.2. Both Lawson and Three F took considered the calculations performed by independent calculation agents, and the latest businesses performance by the underlying operations linked to the company splits. Both companies also carefully discussed all details relating to the two company splits. Lawson and Three F then signed the company split agreement based on their judgement that the details written in the segment entitled (3) Financial payments relating to the company splits (under 2. Overview of company splits) were fair and proper.
(2) Items pertaining to the value calculation
Result of Mizuho Bank’s independent value calculation:
Assumed value (range) for company split No.1 using the DCF method: 2,472~3,373 million yen
Assumed value (range) for company split No.2 using the DCF method: 214~467 million yen
Please note, the value calculation for company split No.1 was based on the corporate franchise fee that Lawson would receive from the joint venture company. The corporate franchise fee is expected to reach approximately 138 million yen in fiscal 2016 (the business year ending February 2017) and rise significantly beyond that to approximately 351 million yen in fiscal 2017 (the business year ending February 2018). This is not because we expect sales per store to increase rapidly over this period, but because the fiscal 2016 portion spans only six months from September 2016 to February 2017, and, of that time, we plan to systematically open more stores between September and November 2016. As a result, the contribution period to the company franchise fee could be as low as 4 months in fiscal 2016. The value calculation for company split No.2 includes miscellaneous expenses of 67 million yen linked to a shift of stores to the LAWSON brand. That is expected to generate an operating loss in fiscal 2016. By contrast, we expect to generate an operating profit for fiscal 2017 in the absence of any further reported miscellaneous expenses and an increase in average daily sales. We would not expect to experience such sharp oscillations in profit in future financial periods.
When evaluating the value of the underlying operations, Mizuho Bank used information provided by Lawson, either through public disclosure or specifically for the purpose of the evaluation. All information and documentation provided was assumed to be accurate and comprehensive. Mizuho Bank did not undertake any active checks of the accuracy or entirety of the information. In addition, Mizuho Bank did not conduct its own evaluation, appraisal or measurement of the underlying assets and obligations, or any analysis or evaluation of each individual asset or obligation, nor did it commission a third-party appraisal or measurement of these assets.
Lawson judged the above company split prices to be fair after considering a comprehensive range of factors, including Mizuho Bank’s value calculation, and the latest performance and future prospects of the underlying business operations.
4.Overview of Lawson, Inc. and Three F Co., Ltd.
Succession company | |||
(1)Company name | Lawson, Inc. | ||
(2)Business location | East Tower, Gate City Osaki, 1-11-2 Osaki, Shinagawa-ku, Tokyo | ||
(3)Name and title of representative director |
Genichi Tamatsuka, Chairman and CEO, Representative Director |
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(4)Main areas of business operation | Development of the Lawson convenience store franchise chain | ||
(5)Capital | 58,506 millions of yen | ||
(6)Established | April 15, 1975 | ||
(7)Shares issued | 100,300,000 | ||
(8)fiscal year-end | End of February | ||
(9)Major shareholders and shareholdings (as of February 29, 2016) | ・Mitsubishi Corporation 33.5% ・Japan Trustee Services Bank, Ltd. (Trust account) 4.1% ・The Master Trust Bank of Japan, Ltd. (Trust account) 3.5% |
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(10)Recent overview of corporate results and financial position for FY2015 (Consolidated) | |||
(Millions of yen) | |||
Net assets | 272,997 | ||
Total assets | 803,212 | ||
Net assets per share (Yen) | 2,643.97 | ||
Gross operating revenue | 583,452 | ||
Operating profit | 72,541 | ||
Recurring profit | 69,622 | ||
Net profit | 31,381 | ||
Net earnings per share (Yen) | 313.81 | ||
Dividend per share (Yen) | 245 |
Demerged company | |||
(1)Company name | Three F Co.,Ltd. | ||
(2)Business location | 17 Nihon-odori, Naka-ku, Yokohama-city, Kanagawa | ||
(3)Name and title of representative director |
Hiroshi Yamaguchi, President, Representative Director | ||
(4)Main areas of business operation | Operation and support for franchisees of convenience stores | ||
(5)Capital | 1,396 millions of yen | ||
(6)Established | February 10, 1981 | ||
(7)Shares issued | 7,707,095 | ||
(8)fiscal year-end | End of February | ||
(9)Major shareholders and shareholdings (as of February 29, 2016) | ・JMK Mizuho Co., Ltd. 35.7% ・Junji Kikuchi 5.1% ・Kyoko Nakai 4.2% ・Mizue Usami 3.5% ・Katsutoshi Nakai 1.4% |
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(10)Recent overview of corporate results and financial position for FY2015 (Non-Consolidated) | |||
(Millions of yen) | |||
Net assets | 1,454 | ||
Total assets | 13,577 | ||
Net assets per share (Yen) | 178.14 | ||
Gross operating revenue | 19,036 | ||
Operating profit | ▲886 | ||
Recurring profit | ▲862 | ||
Net profit | ▲2,542 | ||
Net earnings per share (Yen) | ▲335.66 | ||
Dividend per share (Yen) | 0 |
5.Summary of inherited business segments
(1) Business operations of inherited segments
Company split No.1
A portion of rights and obligations relating to the convenience store operations of 87 stores
Company split No.2
A portion of rights and obligations relating to the convenience store operations of 13 stores
(2) Inherited assets, liabilities and any other rights and obligations
(3) Gross operating profit of approval division (2015.3.1-2016.2.29)
Company split No.1 | 2,224 million of yen |
Company split No.2 | 157 million of yen |
(4) Book value of share assets and liabilities
Company split No.1
(Millions of yen)
Current assets | 16 | Current liabilities | - |
Non-Current assets | 883 | Non-Current liabilities | 16 |
Total assets | 900 | Total liabilities | 16 |
Company split No.2
(Millions of yen)
Current assets | - | Current liabilities | - |
Non-Current assets | 133 | Non-Current liabilities | - |
Total assets | 133 | Total liabilities | - |
6.After the company splits
There will be no change to the succeeding company’s trading name, business location,
representative director status, busness operations, capital or financial year end.
7.Future business outlook
Any impact on Lawson’s consolidated business performance from company split No.1 and No.2 is
expected to be minimal.