News ReleaseAnnouncement of Opinion Regarding Scheduled Commencement of Tender Offer for Our Company’s Shares by Mitsubishi Corporation and Amendment to the Business Alliance Agreement

NEWS RELEASE

TOKYO, JAPAN, 9 16, 2016

 

Our company (Lawson, Inc.; “Lawson”) hereby announces that at its board of directors meeting held today, Lawson adopted: (a) as an expression of Lawson’s opinion as of today in relation to a tender offer (the “Tender Offer”) for shares of Lawson’s common stock (“Lawson Shares”) by Mitsubishi Corporation (the “Offeror”), a resolution that, if the Tender Offer were commenced, Lawson would support the Tender Offer while leaving decisions regarding whether to tender shares for the Tender Offer to the discretion of Lawson’s shareholders because it is planned that the listing of Lawson Shares will be maintained even after the completion of the Tender Offer (with the details as stated below in “Section I. Opinion Regarding Tender Offer”); and (b) a resolution to amend the Business Alliance Agreement executed between Lawson and the Offeror in February 2000 (as amended; the “Original Business Alliance Agreement”) (with the details as stated below in “Section II. Business Alliance Agreement”).

According to the “Announcement of Scheduled Commencement of Tender Offer for Shares in Lawson, Inc. (Securities Code: 2651)” released by the Offeror today (the “Offeror’s Press Release”), commencement of the Tender Offer is subject to the satisfaction of certain conditions, including completion of procedures and actions required under domestic and foreign competition laws (for details, please refer to “(3) Material Agreements Regarding the Tender Offer” under “3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer” in “Section I. Opinion Regarding Tender Offer” below). If those conditions are satisfied, the Offeror will promptly commence the Tender Offer. While the Offeror currently aims to commence the Tender Offer around January 2017, it is difficult for the Offeror to accurately estimate the period needed for completing procedures involving domestic and foreign competition authorities and related matters. The Offeror plans to announce a detailed schedule of the Tender Offer once decided. Therefore, Lawson’s board of directors will once again conduct a resolution expressing its opinion in relation to the Tender Offer at the time of commencement of the Tender Offer.

Lawson and the Offeror have confirmed that the listing of Lawson Shares will be maintained even after Lawson becomes a consolidated subsidiary, and as stated above, it is intended that Lawson Shares will remain listed on the First Section of Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”) after the Tender Offer.


Section I.      Opinion Regarding Tender Offer

1.Outline of the Offeror

(1) Name Mitsubishi Corporation
(2) Address 3-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo, Japan
(3) Title and Name of Representative Takehiko Kakiuchi,
President and Chief Executive Officer
(4) Description of Business Development of multifaceted businesses whose business domains stretch over a wide range of industries, involving the Business Service Group in addition to the following seven groups: Global Environmental and Infrastructure Business Group, Industrial Finance, Logistics and Development Group, Energy Group, Metals Group, Machinery Group, Chemicals Group and Living Essentials Group.
(5) Capital 204,446 million yen
(6) Date of Establishment April 1, 1950
(7) Major Shareholders and Shareholding Ratios (as of March 31, 2016) Japan Trustee Services Bank, Ltd. (Trust Account) 8.28%
Tokio Marine & Nichido Fire Insurance Co., Ltd. 4.70%
The Master Trust Bank of Japan, Ltd. (Trust Account) 4.36%
Meiji Yasuda Life Insurance Company 4.09%
The Master Trust Bank of Japan, Ltd. (Account of Mitsubishi Heavy Industries, Ltd. and Employee Retirement Funds Trust Account) 2.03%
Ichigo Trust Pte. Ltd. 1.86%
The Nomura Trust and Banking Co., Ltd. (Employee Retirement Funds Trust Account and account of The Bank of Tokyo Mitsubishi UFJ, Ltd.) 1.39%
The Bank of New York Mellon SA/NV 10 1.27%
Japan Trustee Services Bank, Ltd. (Trust Account 9) 1.27%
Japan Trustee Services Bank, Ltd. (Trust Account 7) 1.19%
(8) Relationship between Lawson and the Offeror
Capital Relationship The Offeror owns 33,500,200 Lawson Shares (ownership ratio: 33.40%) as of today.
Personnel Relationship An executive vice president and a senior vice president of the Offeror concurrently serve as outside directors of Lawson.
29 employees have been seconded from the Offeror to Lawson as of August 31, 2016.
Business Relationship The Offeror and Lawson executed the Original Business Alliance Agreement pursuant to which the Offeror will conduct a business alliance with Lawson in fields related to Lawson’s E-business or electronic commerce business, Internet banking and other fields related to Lawson’s financial services, fields that strengthen Lawson’s existing business, and such other fields as the Offeror and Lawson may agree after consultation.
Mitsubishi Shokuhin Co., Ltd., which is a subsidiary of the Offeror, sells products to stores directly-managed by Lawson and to Lawson’s franchise chain stores.
Status as Related Party Lawson is an equity-method affiliate of the Offeror.

*Note: “Ownership ratio” means the percentage of the total number of issued shares (100,300,000 shares) as of May 31, 2016 stated in the quarterly report for the first quarter of the 42nd fiscal term submitted by Lawson on July 13, 2016. The ratio is rounded to two decimal places; hereinafter, the same applies for ratio calculations.


2. Price of Tender Offer

8,650 yen per share of common stock

3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer

(1) Details of Opinion Regarding Tender Offer

On the basis and for the reasons described in “(2) Basis of and Reasons for Opinion Regarding Tender Offer” below, Lawson’s board of directors meeting held today resolved, with unanimous approval by Lawson directors participating in deliberations and the resolution at the board of directors meeting, as an expression of Lawson’s opinion as of today to the effect that Lawson would support the Tender Offer if it were commenced, subject to satisfaction of the following conditions and other conditions stated in “(B)Lawson’s Support” in “(3) Material Agreements Regarding the Tender Offer” including: (i) with respect to procedures required under domestic and foreign competition laws in relation to the share acquisition through the Tender Offer, the statutory waiting period has passed, necessary permissions and approvals have been obtained from the relevant authorities, and the relevant authorities have not issued any cease and desist order or conducted any other similar procedure under those competition laws and have not required any remedial measures to be taken; (ii) the Tender Offer Price is reasonable in light of the contents of the valuation report or appraisal report for Lawson’s share value obtained by Lawson in relation to the Tender Offer; and (iii) it is reasonably considered that Lawson’s directors will not breach their statutory obligations by supporting the Tender Offer. In addition, at the same board of directors meeting, Lawson also adopted a resolution to the effect that it will leave decisions on whether to tender shares for the Tender Offer to the discretion of Lawson’s shareholders, because it is planned that the listing of Lawson Shares will be maintained even after the completion of the Tender Offer. For details of the decision-making process followed by the board of directors of Lawson, please refer to “(7)(C) Approval of All Disinterested Directors of Lawson and Non-dissenting Opinions of All Disinterested Company Auditors” below.


(2) Basis of and Reasons for Opinion Regarding Tender Offer

Statements regarding the Offeror described in “(2) Basis of and Reasons for Opinion Regarding Tender Offer” are based on explanations given by the Offeror.

(A) Outline of the Tender Offer

The number of Lawson Shares held by the Offeror as of today is 33,500,200 shares (ownership ratio: 33.40%), and Lawson is an equity-method affiliate of the Offeror. The Offeror resolved at its board of directors meeting held today to implement the Tender Offer for Lawson Shares for the purpose of making Lawson a consolidated subsidiary of the Offeror, subject to the satisfaction of certain conditions, including completion of procedures and actions required under domestic and foreign competition laws.
As of today, Lawson Shares are listed on the First Section of the Tokyo Stock Exchange. Since the Offeror intends to maintain the listing of Lawson Shares after the completion of the Tender Offer, the Offeror has set 16,649,900 shares as the maximum number of shares to be purchased through the Tender Offer (ownership ratio together with Lawson Shares held by the Offeror as of today: 50.00%), and if the total number of share certificates, etc. sold in response to the Tender Offer (“Tendered Share Certificates, Etc.”) exceeds the maximum number of shares to be purchased (16,649,900 shares), the Offeror will not purchase all or any part of that excess amount and will implement the delivery and other settlement for purchasing share certificates, etc. on a pro rata basis as provided for in Article 27-13, Paragraph 5 of the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended) and Article 32 of the Cabinet Office Ordinance on Disclosure Required for Tender Offer for Share Certificates, etc. by Person Other than the Issuer (Ordinance of the Ministry of Finance No. 38 of 1990). On the other hand, since a minimum number of shares to be purchased has not been set for the Tender Offer, all Tendered Share Certificates, Etc. will be purchased by the Offeror if the total number of Tendered Share Certificates, Etc. does not exceed the maximum number of shares to be purchased (16,649,900 shares). If Lawson does not become a consolidated subsidiary of the Offeror as a result of the Tender Offer, then the Offeror, in light of the market trends and other factors, intends to purchase additional shares in Lawson through market trading and other methods after the Tender Offer is completed in order to make Lawson a consolidated subsidiary of the Offeror. The maximum number of shares to be purchased (16,649,900 shares) has been decided by multiplying the number of shares per unit (100) by the number of voting rights (166,499) calculated by deducting the number of voting rights (335,002) represented by the number of shares held by the Offeror (33,500,200 shares) from the number equivalent to the majority (501,501) of voting rights (1,003,000) represented by the total number of issued shares (100,300,000 shares) as of May 31, 2016 stated in the quarterly report for the first quarter of the 42nd fiscal term submitted by Lawson on July 13, 2016.


(B) Purpose and Background of the Tender Offer and Management Policy after the Tender Offer

  • (i) Purpose and Background of the Tender Offer

    The Offeror group consists of the Offeror, 815 consolidated subsidiaries, and 427 equity-method affiliates, etc. (as of March 31, 2016). Through its domestic and overseas network, the Offeror has been engaging in various business activities in wide-ranging fields, such as trading and manufacturing of various products related to energy, metals, machinery, chemicals and living essentials, as well as natural resources development, infrastructure-related businesses, and financial businesses. The Offeror has also been engaged in commercialization of new business models and new technologies in areas including new energy and environmental fields, as well as the provision of various types of services leveraging its capabilities as a general trading company.
    Under new management, the Offeror formulated the “Midterm Corporate Strategy 2018 ― Evolving Our Business Model from Investing to Managing,” setting forth its management direction for the three years starting from FY 2016, such as “rebalancing of ‘resources’ and ‘non-resources’” and “further evolution from ‘investing’ to ‘managing.’”
    In the Living Essentials Group, which is regarded as an important area in the non-resources field, the Offeror possesses a broad value chain, ranging from procurement of raw materials and ingredients for food products to consumer markets (retailing), and is engaged in a wide variety of products and services, business development, and investment. In particular, within the retail business, which constitutes a direct point of contact with customers within the value chain, the Offeror pursues synergies with other value chains and endeavors to achieve sustainable growth and improvement of corporate value.
    On the other hand, the Lawson group consists of Lawson, 18 consolidated subsidiaries, and three equity-method affiliates (as of February 29, 2016) and has been engaging in the operation of a franchising system for and directly-managed stores of the convenience store “LAWSON” as its primary business.
    Since entering into the Original Business Alliance Agreement with Lawson in February 2000, the Offeror has positioned Lawson as the Offeror’s core business in the retail business, has aimed to maximize corporate value by pursuing business synergies, and has contributed to the establishment of Lawson’s position as one of the largest convenience store chains in Japan.
    In the convenience store industry in recent years, however, the competitive climate surrounding Lawson has intensified due to an increase in store openings by competition within the industry, as well as the development of new alliances among competitors and the intensified competition from other types of businesses such as pharmacies and e-commerce. Lawson has launched a “1000 Days Action Plan” and aims to change its presence from one that offers “convenience” to one that is “essential,” in order to establish a next-generation convenience store model. Lawson has also been engaged in improving its product offering and service functions and establishing systems to support such improvements, and has announced that it will take the direction of “strengthening its management systems” and “strengthening collaboration with Mitsubishi Corporation group.” At the same time, the Offeror considered that, in order to ensure that Lawson can soundly promote the aforementioned plan and maintain its growth in the face of an increasingly competitive climate, it is desirable to further strengthen its capital relationship with Lawson, thereby enabling the Offeror and Lawson to collaborate on a company-wide basis even more so than in the past and to further strengthen Lawson’s business foundation. Therefore, in late June 2016, the Offeror proposed to Lawson that Lawson become a consolidated subsidiary of the Offeror through the Tender Offer to strengthen collaboration between the companies.
    As a result of careful discussions in light of that proposal, the Offeror and Lawson concluded that, in order to maintain the sustainable growth of Lawson, it is necessary to further strengthen collaboration between the companies and engage in further bolstering Lawson’s business foundation by Lawson taking even greater advantage of the Offeror’s network and human resources for the benefit of Lawson’s domestic convenience store business, overseas convenience store business, and other peripheral businesses (collectively, the “Collaborative Fields”) through making Lawson a consolidated subsidiary of the Offeror.
    Taking into consideration the results of the discussions above, the Offeror and Lawson entered into an agreement regarding the Tender Offer (for details, please refer to “(3) Material Agreements Regarding the Tender Offer” below) as of today, under which they have agreed to implement the Tender Offer and to amend the Original Business Alliance Agreement on the settlement commencement date of the Tender Offer. Pursuant to this agreement, the Offeror and Lawson will mainly implement the following measures in the Collaborative Fields with strengthening collaboration between the companies and proceed with the rigorous execution of the Offeror’s “1000 Days Action Plan”:
  • (a) Domestic convenience store business field
  • ●Strengthening collaboration in the domestic convenience store business
  • ●Strengthening collaboration with value chains of the Offeror, such as raw material procurement, manufacturing, and intermediate distribution
  • ●Strengthening the corporate alliance with other partners
  • (b) Overseas convenience store business field
  • ●Strengthening of the existing business areas of Lawson
  • ●Strengthening of new business areas of Lawson
  • (c) Other peripheral business fields
  • ●Promoting collaboration with business fields of Lawson other than convenience store business
  • As stated above, since it was considered desirable for the Offeror and Lawson to further strengthen their capital relationship in order to further realize synergistic effects and to improve both companies’ corporate value, the Offeror resolved at its board of directors meeting held today to implement the Tender Offer for the purpose of making Lawson a consolidated subsidiary of the Offeror.
  • (ii) Management Policy after the Tender Offer

    After the completion of the Tender Offer, the Offeror intends to strengthen collaboration with Lawson while continuing to maintain the listing and management autonomy of Lawson. With respect to the management framework and the composition of the board of directors after the Tender Offer, the Offeror and Lawson will consult with each other after completion of the Tender Offer in order to establish a framework that (a) enables conduct of appropriate governance that respects the independence of Lawson as a listed company and (b) maximizes synergetic effects for the Offeror group through making Lawson a consolidated subsidiary.

(C) Decision-Making Process and Reasons for Lawson’s Support for the Tender Offer

  • After receiving in late June 2016 a proposal from the Offeror aimed at expanding Lawson’s business and improving Lawson’s corporate value, Lawson has held discussions with the Offeror several times up until today.
    Over the past fifteen years, the Offeror has promoted collaborative businesses with Lawson as Lawson’s shareholder and strategy partner by providing support not only for Lawson’s convenience store business, but also in many other ways, such as in the development and expansion of peripheral businesses and new businesses. The Offeror and Lawson concluded that, to further develop Lawson’s businesses and improve corporate value in an increasingly testing business environment, it is necessary to collaborate on a company-wide basis and engage in further bolstering Lawson’s business foundation, and in order to do so, there are major benefits to be derived from further strengthening the capital relationship between Lawson and the Offeror and taking even greater advantage of the overall strength of the Offeror (such as the Offeror’s network and human resources) in the Collaborative Fields. Lawson has engaged K.K. Plutus Consulting (“Plutus”), which is an independent third-party appraiser, and obtained a share price valuation report from that company (please refer to “(4) Matters Related to Calculation” below), and appointed Nagashima Ohno & Tsunematsu as Lawson’s external legal adviser and received legal advice (please refer to “(7) Lawson’s Measures to Ensure Fairness of the Tender Offer and to Avoid Conflicts of Interest” in “(F) Advice from a Law Firm Outside Lawson”) from that law firm.
    For these reasons, Lawson’s board of directors meeting held today resolved, with unanimous approval by Lawson directors participating in deliberations and the resolution at the board of directors meeting, as an expression of Lawson’s opinion as of today, to the effect that Lawson would support the Tender Offer if it were commenced. In addition, while it is believed the share price valuation report obtained from Plutus and the most recent market price of Lawson Shares indicate to a certain extent that the Tender Offer Price is reasonable, a resolution was also adopted at the same board of directors meeting of Lawson to the effect that decisions by Lawson shareholders regarding whether to tender shares for the Tender Offer would be left to the discretion of Lawson’s shareholders, considering that it can be considered a sufficiently reasonable choice for Lawson shareholders to hold Lawson Shares even after the Tender Offer because (a) Lawson and the Offeror have confirmed that the listing of Lawson Shares will be maintained even after Lawson becomes a consolidated subsidiary, and it is intended that Lawson Shares will remain listed after the Tender Offer and (b) a maximum number of shares to be purchased through the Tender Offer has been set. For details of the decision-making process followed by the board of directors of Lawson, please refer to “(7)(C) Approval of All Disinterested Directors of Lawson and Non-dissenting Opinions of All Disinterested Company Auditors” below.

(3) Material Agreements Regarding the Tender Offer

The Offeror and Lawson have entered into an agreement regarding a tender offer (the “Tender Offer Agreement”) as of today. An outline of the Tender Offer Agreement is as follows:

  • (A) Implementation of the Tender Offer by the Offeror

    Subject to the satisfaction of all the conditions summarized below, the Offeror will implement the Tender Offer:

    • (i) with respect to procedures required under domestic and foreign competition laws in relation to the share acquisition through the Tender Offer, the statutory waiting period has passed, necessary permissions and approvals have been obtained from the relevant authorities, and the relevant authorities have not issued any cease and desist order or conducted any other similar procedure under those competition laws and have not required any remedial measures to be taken;
    • (ii) Lawson’s board of directors has duly and validly resolved to express its opinion supporting the Tender Offer and has made a public announcement to that effect;
    • (iii) Lawson’s representations and warranties under the Tender Offer Agreement are true and correct;
    • (iv) Lawson has performed and complied with its obligations under the Tender Offer Agreement in all material respects;
    • (v) since the execution date of the Tender Offer Agreement, no material adverse effect, or any event or development that will have a material adverse effect, on the businesses, financial position, management, or cash flow, or on the prospects for any of the foregoing, has occurred in relation to Lawson or its subsidiaries, and no material change in general stock market conditions or other market conditions, the financial climate, or the economic climate (whether in Japan or overseas) has occurred; and
    • (vi) there are no procedures pending in a judicial or administrative body seeking to restrict or prohibit the Tender Offer or tendering in the Tender Offer, and there are no laws or ordinances or decisions by a judicial or administrative body that restrict or prohibit the Tender Offer or tendering in the Tender Offer.
  • (B) Lawson’s Support

    Subject to the satisfaction of all the conditions summarized below, Lawson will express its opinion to the effect that it will support the Tender Offer, and Lawson will maintain and will not amend or revoke such opinion; however, if it is reasonably considered that Lawson’s directors will breach their statutory obligations as a result of Lawson maintaining its opinion to support the Tender Offer, Lawson may amend or revoke that expression of opinion:

    • (i) with respect to procedures required under domestic and foreign competition laws in relation to the share acquisition through the Tender Offer, the statutory waiting period has passed, necessary permissions and approvals have been obtained from the relevant authorities, and the relevant authorities have not issued any cease and desist order or conducted any other similar procedure under those competition laws and have not required any remedial measures to be taken;
    • (ii) the Offeror’s representations and warranties under the Tender Offer Agreement are true and correct;
    • (iii) the Offeror has performed and complied with its obligations under the Tender Offer Agreement in all material respects;
    • (iv) the Tender Offer Price is reasonable in light of the contents of the valuation report or appraisal report for Lawson’s share value obtained by Lawson in relation to the Tender Offer; and
    • (v) it is reasonably considered that Lawson’s directors will not breach their statutory obligations by supporting the Tender Offer.
  • (C) Agreement on Competing Transactions

    Lawson will not, whether directly or indirectly, induce offers from, solicit, provide information to, or consult with, any third party for transactions that compete, or could compete, with the Tender Offer. However, if (a) either (i) a third party other than the Offeror makes a specific proposal to Lawson for purchasing of shares or (ii) a tender offer by a third party other than the Offeror for Lawson’s shares commences, and (b) it is objectively and reasonably considered that a failure by Lawson’s board of directors to provide information to or consult or negotiate with that third party would result in a breach by Lawson’s directors of their statutory obligations, then Lawson may provide information to and consult and negotiate with that third party.

  • (D) Amendment to the Business Alliance Agreement

    When the Tender Offer ends, the terms of the Original Business Alliance Agreement will be amended on the settlement commencement date of the Tender Offer as summarized below:

    • (i) the fields of business alliance will be as follows:
      • (a) domestic convenience store business;
      • (b) overseas convenience store business;
      • (c) peripheral businesses; and
      • (d) other businesses separately agreed on by the companies;
    • (ii) the Offeror will implement the business alliance while respecting Lawson’s management independence and identity, as well as respecting the interests of the franchise stores, which constitute the essence of the franchise business;
    • (iii) in order to effectively and substantially promote the business alliance, the Offeror will dispatch personnel as necessary upon mutual consultation, and Lawson will accept that dispatched personnel; and
    • (iv) the amended business alliance agreement will become effective on the settlement commencement date of the Tender Offer and will remain effective until a time separately agreed to in writing by the Offeror and Lawson.
  • (E) Termination of Tender Offer Agreement

    If any of the following events occurs, the Offeror or Lawson may terminate the Tender Offer Agreement by giving written notice to the other party before, and only before, the commencement of the Tender Offer:

  • (i) if the other party breaches in any material respect any of its obligations or representations and warranties under the Tender Offer Agreement;
  • (ii) if the other party is subject to the commencement of bankruptcy proceedings, civil rehabilitation proceedings, corporate reorganization proceedings, special liquidation, or any other similar legal proceedings; or
  • (iii) if the Tender Offer has not commenced at the lapse of a period of eight months after the execution date of the Tender Offer Agreement (except when the Tender Offer has not commenced for any reason attributable to the party terminating the Tender Offer Agreement).

(4) Matters Related to Valuation

  • (A) Name of Appraiser and its Relationship with Lawson and the Offeror
  • Lawson has, in relation to expressing an opinion on the Tender Offer, engaged Plutus, which is a third-party appraiser that is independent from Lawson and the Offeror and does not have any interest in relation to Lawson or the Offeror. Plutus is not a related party of the Offeror or Lawson and does not have any material interest in relation to the Tender Offer that must be stated.
  • (B) Outline of Valuation
  • As a result of its consideration of the valuation methods used in the Tender Offer, Plutus evaluated Lawson’s share value using the following methods: (a) the discounted cash flow method (the “DCF Method”), adopted based on the premise that Lawson is a going concern and in order to directly evaluate the future revenue earning capability of Lawson and to reflect Lawson’s unique nature in the evaluation results; and (b) the market price method, adopted from the perspectives of using multiple evaluation approaches to ascertain corporate value from different angles and improving the fairness and validity of the evaluation, which is the most objective evaluation method for listed shares. Lawson obtained a share price valuation report dated September 15, 2016 in relation to Lawson Shares. Lawson has not obtained from Plutus an opinion on the fairness of the Tender Offer Price (a fairness opinion).
    The methods used by Plutus for evaluating the value of Lawson Shares and the ranges of values per Lawson Share evaluated by those methods are as follows:
DCF Method: From 7,665 yen to 11,102 yen
Market price method: From 7,410 yen to 8,352 yen

For the DCF Method, the value range of 7,665 yen to 11,102 yen per Lawson Share was derived by analyzing Lawson’s corporate value and share value, calculated by discounting to the present value at a certain discount rate the free cash flow that Lawson is expected to generate from June 2016 based on Lawson’s estimated future earnings and investment plan in its business plan (from the fiscal term ending February 2017 to the fiscal term ending February 2021), recent business performance trends, publicly disclosed information, and the like.
No significant fluctuations in earnings are anticipated in the business plan used as a base for calculations in the aforementioned DCF Method.
For the market price method, the share value range per Lawson Share of 7,410 yen to 8,352 yen was derived based on the following figures for Lawson Shares quoted on the First Section of the Tokyo Stock Exchange as of the evaluation reference date of September 14, 2016, the business day immediately before the possible influence by certain media coverage regarding the Tender Offer on September 15, 2016 (the “Media Coverage”), which date was chosen in order to eliminate any influence of the Media Coverage on the share price: 7,410 yen, which was the closing share price on the evaluation reference date; 7,516 yen, which was the simple average closing share price over the preceding one-month period (rounded to the nearest whole yen; the same applies for all calculations of simple average closing prices); 7,840 yen, which was the simple average closing share price over the preceding three–month period; and 8,352 yen, which was the simple average closing share price over the preceding six-month period.


(5) Prospects and Reasons for Delisting

Lawson Shares are listed on the First Section of the Tokyo Stock Exchange as of today. It is not intended that Lawson Shares will be delisted through the Tender Offer, and the Offeror will conduct the Tender Offer setting a maximum number of shares to be purchased at 16,649,900 shares (ownership ratio together with Lawson Shares held by the Offeror as of today: 50.00%). Therefore, the listing of Lawson Shares on the Tokyo Stock Exchange will be maintained even after the completion of the Tender Offer.


(6) Policy on Reorganization, etc. After the Tender Offer (Matters Related to So-Called Two-Tiered Acquisition)

The Offeror does not intend to conduct so-called two-tiered acquisition in the Tender Offer.


(7) Lawson’s Measures to Ensure Fairness of the Tender Offer and to Avoid Conflicts of Interest

Although Lawson is not a subsidiary of the Offeror as of today and the Tender Offer is not a tender offer by a controlling shareholder, the Offeror and Lawson took the measures set out in (A) through (D) below as measures to ensure the fairness of the Tender Offer and to avoid conflicts of interest, in light of the fact that (i) the Offeror holds 33,500,200 Lawson Shares (ownership ratio: 33.40%), and Lawson is an equity-method affiliate of the Offeror and (ii) two outside directors have been dispatched to Lawson from the Offeror. Statements regarding the measures taken by the Offeror are based on the explanation given by the Offeror.


  • (A) Obtainment of a Share Price Valuation Report from a Third-Party Appraiser Independent from Lawson
  • Please refer to “(A) Name of Appraiser and its Relationship with Lawson and the Offeror” and “(B) Outline of Valuation” in “(4) Matters Related to Valuation” above.
  • (B) Advice from a Law Firm Outside Lawson
  • Lawson appointed Nagashima Ohno & Tsunematsu as Lawson’s external legal adviser in order to ensure the transparency and fairness of decision-making processes and the like of Lawson’s board of directors in relation to the Tender Offer and received legal advice from that law firm on decision-making processes and methods and other similar matters of Lawson’s board of directors in relation to the Tender Offer.
  • (C) Approval of All Disinterested Directors of Lawson and Non-dissenting Opinions of All Disinterested Company Auditors
  • Lawson has carefully deliberated the Offeror’s proposal, held discussions with the Offeror, and also carefully discussed and deliberated the terms and conditions of the Tender Offer, while obtaining from Plutus a share price valuation report related to the valuation of Lawson Shares and obtaining legal advice from Nagashima Ohno & Tsunematsu as stated in “(A) Obtainment of a Share Price Valuation Report from a Third-Party Appraiser Independent from Lawson and “(B) Advice from a Law Firm Outside Lawson” above, in addition to receiving an explanation from the Offeror regarding the Tender Offer.
    Consequently, considering that, as stated in “(C) Decision-making Process and Reasons for Lawson to Support the Tender Offer” in “(2) Basis of and Reasons for Opinion Regarding Tender Offer,” to further develop Lawson’s businesses and improve corporate value in an increasingly testing business environment, it is necessary to collaborate on a company-wide basis and engage in further bolstering Lawson’s business foundation, and in order to do so, there are major benefits to be derived from further strengthening the capital relationship between Lawson and the Offeror and taking even greater advantage of the overall strength of the Offeror (such as the Offeror’s network and human resources) in the Collaborative Fields, Lawson’s board of directors meeting held today resolved, with unanimous approval by Lawson directors participating in deliberations and the resolution at the board of directors meeting, as an expression of Lawson’s opinion as of today, to the effect that Lawson would support the Tender Offer if it were commenced, subject to satisfaction of the following conditions and other conditions stated in “(B) Lawson’s Support” in “(3) Material Agreements Regarding the Tender Offer” above, including: (i) with respect to procedures required under domestic and foreign competition laws in relation to the share acquisition through the Tender Offer, the statutory waiting period has passed, necessary permissions and approvals have been obtained from the relevant authorities, and the relevant authorities have not issued any cease and desist order or conducted any other similar procedure under those competition laws and have not required any remedial measures to be taken; (ii) the Tender Offer Price is reasonable in light of the contents of the valuation report or appraisal report for Lawson’s share value obtained by Lawson in relation to the Tender Offer; and (iii) it is reasonably considered that Lawson’s directors will not breach their statutory obligations by supporting the Tender Offer. In addition, while it is believed the share price valuation report obtained from Plutus and the most recent market price of the Lawson Shares indicates to a certain extent that the Tender Offer Price is reasonable, a resolution was also adopted at the same board of directors meeting of Lawson to the effect that decisions by Lawson shareholders regarding whether to tender shares for the Tender Offer would be left to the discretion of Lawson’s shareholders, considering that it can be considered a sufficiently reasonable choice for Lawson shareholders to hold Lawson Shares even after the Tender Offer because (a) Lawson and the Offeror have confirmed that the listing of Lawson Shares will be maintained even after Lawson becomes a consolidated subsidiary, and it is intended that Lawson Shares will remain listed after the Tender Offer and (b) a maximum number of shares to be purchased through the Tender Offer has been set. In addition, considering that it is planned that the Tender Offer will commence subject to the satisfaction of certain conditions as stated above, and it is anticipated that it will take some time to actually commence the Tender Offer, Lawson’s board of directors will, at the time of commencement of the Tender Offer, once again adopt a resolution expressing its opinion in relation to the Tender Offer after confirming whether the conditions necessary for the board of directors to support the Tender Offer have been satisfied. Of Lawson’s directors, Yutaka Kyoya, who serves concurrently as an executive vice president of the Offeror, and Kazunori Nishio, who serves concurrently as a senior vice president of the Offeror, did not participate in the aforementioned resolution at the aforementioned board of directors meeting held today and have not participated in discussions with the Offeror in relation to the Tender Offer in their roles at Lawson, from the perspective of avoiding the suspicion of a conflict of interest and ensuring fairness and neutrality in decision-making processes at Lawson.
    All of Lawson’s company auditors participated in the aforementioned board of directors meeting held today and stated their opinion to the effect that they did not object to Lawson expressing the aforementioned opinion
  • (D) Obtainment of a Share Price Valuation Report from a Third-Party Appraiser Independent from the Offeror
  • In deciding the Tender Offer Price, the Offeror has requested its financial adviser SMBC Nikko Securities to evaluate Lawson’s share value as a third-party appraiser independent from the Offeror and Lawson.
    SMBC Nikko Securities considered it appropriate to evaluate Lawson’s share value from multiple perspectives after taking into account Lawson’s financial status and trends in the market price of Lawson Shares and the like. Accordingly, SMBC Nikko Securities has, as a result of its consideration of the evaluation methods that should be used among the various share value evaluation methods available, evaluated Lawson’s share value using the market price method and the DCF Method based on the assumption that Lawson is a going concern, and on September 15, 2016, the Offeror obtained a share price valuation report from SMBC Nikko Securities. SMBC Nikko Securities is not a related party of the Offeror or Lawson and does not have any material interest in relation to the Tender Offer required to be disclosed under Japanese laws and regulations. In addition, the Offeror has not obtained from SMBC Nikko Securities an opinion on the fairness of the Tender Offer Price (a fairness opinion).
    According to the share price valuation report, the methods used for the evaluation and the ranges of values per Lawson Share evaluated by those methods are as follows:
    Market price method: From 7,516 yen to 7,840 yen
    DCF Method: From 7,942 yen to 10,690 yen
    For the market price method, the share value range per share of 7,516 yen to 7,840 yen was derived based on the following figures quoted for Lawson Shares on the First Section of the Tokyo Stock Exchange as of the evaluation reference date of September 14, 2016, the business day immediately before the possible influence by certain media coverage regarding the Tender Offer on September 15, 2016, which date was chosen in order to eliminate any influence of the Media Coverage on the share price: 7,516 yen, which was the simple average closing price over the preceding one-month period; and 7,840 yen, which was the simple average closing price over the preceding three-month period.
    For the DCF Method, the value range of 7,942 yen to 10,690 yen per Lawson Share was derived by analyzing Lawson’s corporate value and share value, calculated by discounting to the present value at a certain discount rate the free cash flow that Lawson is expected to generate from the second quarter of the fiscal year ending February, 2017 based on Lawson’s estimated future earnings and investment plan in the business plan for the period from the fiscal term ending February, 2017 to the fiscal term ending February, 2022, publicly disclosed information, and the like.
    While taking into account the evaluation details and results reported in the share price valuation report obtained from SMBC Nikko Securities, the Offeror decided on the Tender Offer Price of 8,650 yen today after comprehensively considering the results of due diligence on Lawson, the support for the Tender Offer by Lawson’s board of directors, trends in the market price of Lawson Shares, examples of premiums paid in tender offers conducted in the past for shares certificates, etc. by a party other than an issuer, the estimated number of shares to be tendered in the Tender Offer, and other factors.
    The Tender Offer Price of 8,650 yen represents a premium of 16.73% on 7,410 yen, which was the closing price for Lawson Shares quoted on the First Section of the Tokyo Stock Exchange on September 14, 2016 (which was the business day immediately preceding the appearance of the Media Coverage on September 15, 2016); a premium of 15.09% on 7,516 yen, which was the simple average closing price for Lawson Shares over the one-month period ending on September 14, 2016; a premium of 10.33% on 7,840 yen, which was the simple average closing price for Lawson Shares over the three-month period ending on September 14, 2016; and a premium of 3.57% on 8,352 yen, which was the simple average closing price over the six-month period ending on September 14, 2016.
    In addition, the Tender Offer Price represents a premium of 9.08% on 7,930 yen, which was the closing price for the Target Company Shares quoted on the First Section of the Tokyo Stock Exchange on September 15, 2016, the business day immediately preceding the announcement date of the Tender Offer.

4. Matters Related to Material Agreements Between the Offeror and Lawson’s Shareholders in Relation to Tendering Shares for the Tender Offer

Not applicable.

5. Details of Provision of Benefits from the Offeror or a Special Related Party of the Offeror

Not applicable.

6. Basic Policies Related to Corporate Control of Lawson

Not applicable.

7. Questions for the Offeror

Not applicable.

8. Request for Postponement of Tender Offer Period

Not applicable.

9. Future Outlook

(1) Policies After the Tender Offer

Please refer to the following under “Section I. Opinion Regarding Tender Offer” in relation to policies implemented after the Tender Offer: “(ii) Management Policy after the Tender Offer” of “(B) Purpose and Background of the Tender Offer and Management Policy after the Tender Offer” under “(2) Basis of and Reasons for Opinion Regarding Tender Offer” in “3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer”; and “3. (5) Prospects and Reasons for Delisting.”

(2) Future Outlook for Business

If it becomes clear that the Tender Offer will have a material impact on the business performance of Lawson, Lawson will disclose that information as required.


Section II. Business Alliance Agreement

1. Reason for Amendment to Original Business Alliance Agreement

Please refer to “(2) Basis of and Reasons for Opinion Regarding Tender Offer” of “3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer” under “Section I. Opinion Regarding Tender Offer” above.

2. Details of Amendment to the Original Business Alliance Agreement

When the Tender Offer ends, the terms of the Original Business Alliance Agreement will be amended on the settlement commencement date of the Tender Offer as summarized below:

(i) the fields of business alliance will be as follows:

(a) domestic convenience store business;
(b) overseas convenience store business;
(c) peripheral businesses; and
(d) other businesses separately agreed on by the companies;

(ii) the Offeror will implement the business alliance while respecting Lawson’s management independence and identity, as well as respecting the interests of the franchise stores, which constitute the essence of the franchise business;

(iii) in order to effectively and substantially promote the business alliance, the Offeror will dispatch personnel as necessary upon mutual consultation, and Lawson will accept that dispatched personnel; and

(iv) the amended business alliance agreement will become effective on the settlement commencement date of the Tender Offer and will remain effective until a time separately agreed to in writing by the Offeror and the Lawson.

3. Acquisition Value of Newly Acquired Stock or Equity of the Other Party

Not applicable.

4. Number of Shares Acquired by the Other Party and Ratio of Issued Shares

Please refer to “(A) Outline of the Tender Offer” of “(2) Basis of and Reasons for Opinion Regarding Tender Offer” under “3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer” in “Section I. Opinion Regarding Tender Offer” above.

5. Outline of Other Party in Business Alliance

Please refer to “1. Outline of the Offeror” in “Section I. Opinion Regarding Tender Offer” above.

6. Schedule

Lawson’s board of directors adopted today a resolution to amend the Original Business Alliance Agreement, and it is planned that when the Tender Offer ends, the terms of the Original Business Alliance Agreement will be amended on the settlement commencement date of the Tender Offer.
Commencement of the Tender Offer is subject to the satisfaction of certain conditions, including completion of procedures and actions required under domestic and foreign competition laws (for details, please refer to “(3) Material Agreements Regarding the Tender Offer” under “3. Details and Basis of, and Reasons for, Opinion Regarding Tender Offer” in “Section I. Opinion Regarding Tender Offer”). If those conditions are satisfied, the Offeror will promptly commence the Tender Offer. While the Offeror currently aims to commence the Tender Offer around January 2017, it is difficult for the Offeror to accurately estimate the period needed for completing procedures involving domestic and foreign competition authorities The Offeror plans to announce a detailed schedule of the Tender Offer once decided.

7. Future Outlook

Please refer to “9. Future Outlook” of “Section I. Opinion Regarding Tender Offer” above.

 

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