TOKYO, JAPAN, 9 09, 2016
Lawson, Inc. approved two company splits at its Board meeting held on Thursday, September 6, 2016: company split No.1 with Lawson as the split company and fully owned subsidiary Lawson San’in Co., Ltd. as the succeeding company, and; company split No. 2 with Poplar Co., Ltd. as the split company and Lawson as the succeeding company. The Lawson San’in Board will approve two further company splits: company split No.3 with Poplar as the split company and Lawson San’in the succeeding company, and; company split No. 4 with Poplar’s fully owned subsidiary Poplar Project Co., Ltd. the split company and Lawson San’in the succeeding company. This release offers more details on the four company splits.
The four company splits will be only conducted once all necessary legal procedures and actions relating to the prohibition of private monopoly and assurance of fair trading have been satisfied.
1. Aim of company splits
As explained in its news release dated August 4, 2016 entitled “Lawson and Poplar agree joint convenience store operation in the San’in region,” Lawson signed a joint-operation contract for the San’in region with convenience store operator Poplar Co., Ltd. to promote the joint operation of Lawson-chain convenience stores in the area.
The San’in region has witnessed significant social change with an ageing population and increase in the number of nuclear families. Against that background, on December 8, 2014, Lawson and Poplar signed a capital and business alliance contract covering areas such as joint procurement of ingredients and products, and the sharing of distribution infrastructure. After signing a subsequent basic business alliance at the store level on September 18, 2015, Poplar Project began operating two LAWSON POPLAR double-brand stores in November 2015, which have proved a successful precursor for the development of a new brand in the region.
To further promote joint convenience store operations with Poplar and develop a full-fledged LAWSON POPLAR brand for the San’in region, Lawson has agreed to inherit a portion of the rights and obligations linked to the Poplar convenience store business, both directly and indirectly through its Lawson San’in subsidiary company.
Lawson San’in will start operations as a regional franchise from November 2016. The franchise operation will manage a total of 289 stores comprising 54 franchise and directly operated POPLAR stores that intend to switch to the LAWSON POPLAR brand, and 235 LAWSON stores currently operated by Lawson’s Tottori and Shimane branch offices. The new area franchise will draw on the inherent strengths of both companies to create community-focused stores that local people can rely on. More detail of the joint-operation contract is outlined below.
2. Overview of company splits
(1) Schedule
Board meeting to approve company split No.1, No.2 (Lawson) | September 6, 2016 |
Board meeting to approve company split No.2, No.3 (Poplar) | September 6, 2016 |
Board meeting to approve company split No.1, No.3, No.4 (Lawson San’in) | September 14, 2016 (tentative) |
Board meeting to approve company split No.4 (Poplar Project) | September 6, 2016 |
Signing of company split No.1, No.2, No.3, No.4 agreements | September 15, 2016 (tentative) |
Effective implementation of company split No.1, No.2, No.3, No.4 | November 1, 2016 (tentative) |
Payment delivery | November 1, 2016 (tentative) |
Note: The company splits are considered simple company splits under the Companies Act for both Lawson and Poplar and, as such, are expected to be executed without seeking prior approval from general shareholders’ meetings.
Split No.1: Item 2, Article 784 (Lawson)
Split No.2: Item 2, Article 796 (Lawson), Item 2, Article 784 (Poplar)
Split No.3: Item 2, Article 784 (Poplar)
(2) Type
Company split No.1
Simple absorption-type, with Lawson as the split company and Lawson San’in the succeeding company.
Company split No.2
Simple absorption-type, with Poplar as the split company and Lawson the succeeding company.
Company split No.3
Absorption-type, with Poplar as the split company and Lawson San’in the succeeding company.
Company split No.4
Absorption-type, with Poplar Project as the split company and Lawson San’in the succeeding company.
(3) Financial payments relating to the company splits
Company split No.1
No financial payment will be extended given that Lawson San’in is a fully owned subsidiary of Lawson.
Company split No.2
The succeeding company Lawson will pay the split company Poplar 676 million yen.
Company split No.3
The succeeding company Lawson San’in plans to transfer 4,183 Lawson San’in shares as payment to the split company Poplar, equivalent to 29.28% of outstanding shares post company splits.
Company split No.4
The succeeding company Lawson San’in plans to transfer 102 Lawson San’in shares as payment to the split company Poplar Project, equivalent to 0.71% of all outstanding shares post company splits.
(4) New equity and bond warrants generated by the company splits
None
(5) Increase in capital related to the company splits
None
(6) Rights and obligations to be inherited by succeeding companies
The succeeding companies will inherit all, or a portion, of the convenience store business segments designated for company splits No.1, No.2, No.3 and No.4. For details of specific segments refer to Section 5: Summary of inherited business segments.
(7) Execution of obligations
None of the succeeding companies are expected to have any problems executing obligations with respect to any debts acquired under company splits No.1, No.2, No.3 and No.4.
3. Value allocation for company splits
(1) Underlying basis and reasoning
To ensure a fair and appropriate allocation of value to the company splits, Lawson appointed certified public tax account corporation Natsume Office as an independent calculation agent. Natsume Office calculated the value of the underlying operations corresponding to corporate splits No.2, No.3 and No.4. Lawson and Poplar took into consideration the calculations performed by the independent calculation agent as well as the latest businesses performance and future business prospects of underlying operations. Having carefully discussed all details relating to the four company splits, both companies judged the content listed in Section 2 (Overview of company splits), item (3) (Financial payments relating to the company splits) to be fair and proper.
(2) Information pertaining to value calculations
① Name of calculation agent and relationship with Lawson and Poplar
As stated above, Lawson appointed certified public tax account corporation Natsume Office as an independent calculation agent to value company split No.2, No.3 and No.4. Natsume Office has no significant relationship with Lawson, Poplar or related parties, and no significant vested interested in the stated company splits.
② Calculations explained
Natsume Office used a discounted cash flow (DCF) method income approach when calculating the value of the underlying operations for company split No.3 and No.4, Natsume Office judged it appropriate to base its valuation on expected cash flow to be generated from the continued operation of underlying assets by the new owner Lawson San’in.
As a result of its calculations, Natsume Office suggested Poplar receive between 4,165 – 4,226 Lawson San’in shares as payment for company split No.3, and Poplar Project receive between 59 – 120 Lawson San’in shares as payment for company split No.4.
Under the DCF method, operations were valued using a fixed discount rate to calculate the present value of projected cash flow for Lawson San’in, based on long-term business projections compiled by Lawson and Poplar for February 2017 through February 2031. The forecasts incorporate an expected operating loss in the initial fiscal year to reflect the fact that the first-year calculation only includes four months of inherited-store operation, and that some investment will be required for store rebranding. The business is expected to report a larger operating profit in the following fiscal year, as the new joint branding helps boost daily sales at inherited stores. The projections do not include any further significant volatility in profitability beyond that point.
The DCF method income approach was also considered appropriate for the valuation of company split No.2, based on the expected cash flow to be received by Lawson from Lawson San’in going forward.
The assumed value range for company split No.2 was calculated between 669 – 891 million yen. Based on that valuation, Lawson judged a financial payment of 676 million to Poplar to be appropriate.
This valuation was calculated based on the same long-term financial projections for Lawson San’in mentioned above.
When calculating the value of underlying operations, Natsume Office 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. Natsume Office did not undertake any active checks of the accuracy or entirety of the information. In addition, Natsume Office 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.
(4) Delisting of Lawson, Inc.
The four company splits are not expected to result in the delisting of Lawson, Inc.
4. Overview of Lawson, Inc., Poplar Co., Ltd. and Lawson San’in Co., Ltd.
(1) Company split No.1
(1) | Company name | Lawson San’in Co., Ltd. | Lawson, Inc. | |
(2) | Business location | 2-141, Kamo, Yonago city, Tottori | East Tower, Gate City Osaki, 1-11-2 Osaki, Shinagawa-ku, Tokyo | |
(3) | Name and title of representative director |
Naoto Shibaori President and CEO |
Genichi Tamatsuka, Chairman and CEO, Representative Director |
|
(4) | Main areas of business operation | Convenience store operation | Development of the LAWSON convenience store franchise chain | |
(5) | Capital | 10 million yen | 58,506 million yen | |
(6) | Established | September 15, 2016 | April 15, 1975 | |
(7) | Shares issued | 10,000 | 100,300,000 | |
(8) | Fiscal year-end | End of February | End of February | |
(9) | Number of employees | - | 8,377 (Consolidated) | |
(10) | Major business partner | - | Mitsubishi Shokuhin Co., Ltd. | |
(11) | Major Bank | - | The Bank of Tokyo-Mitsubishi UFJ, Ltd . | |
(12) | Major shareholders and shareholdings (as of February 29, 2016) | Lawson, Inc.:100.00% | ||
(13) | Existing relationship with Lawson, Inc. | |||
Capital | Fully owned subsidiary | |||
Personal | No significant relationship | |||
Business | No significant relationship | |||
Pertinent connections with related parties | No significant relationship | |||
(14) | 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 |
Note: The succeeding company Lawson San’in is recently established, so does not display recent business results or financial data.
(2) Company split No.2
(1) | Company name | Lawson, Inc. | Poplar Co., Ltd. | |
(2) | Business location | East Tower, Gate City Osaki, 1-11-2 Osaki, Shinagawa-ku, Tokyo | 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima | |
(3) | Name and title of representative director |
Genichi Tamatsuka, Chairman and CEO, Representative Director |
Shinji Meguro, President & CEO | |
(4) | Main areas of business operation | Development of the LAWSON convenience store franchise chain | Convenience store operation | |
(5) | Capital | 58,506 million yen | 2,410 million yen | |
(6) | Established | April 15, 1975 | April 20, 1976 | |
(7) | Shares issued | 100,300,000 | 9,905,822 | |
(8) | Fiscal year-end | End of February | End of February | |
(9) | Number of employees | 8,377 (Consolidated) | 413 | |
(10) | Major business partner | Mitsubishi Shokuhin Co., Ltd. | Mitsubishi Shokuhin Co., Ltd. | |
(11) | Major Bank | The Bank of Tokyo-Mitsubishi UFJ, Ltd . | Hiroshima Bank, Ltd. | |
(12) | Major shareholders and shareholdings (as of February 29, 2016) | |||
(13) | Existing relationship with Poplar Co., Ltd. | |||
Capital | Lawson is Poplar’s third largest shareholder (495,300 shares, 5.0% voting rights) | |||
Personal | No significant relationship | |||
Business | No significant relationship | |||
Pertinent connections with related parties | No significant relationship | |||
(14) | Recent overview of corporate results and financial position for FY2015 (Consolidated) | |||
Millions of yen | ||||
Net assets | 272,997 | 2,893 | ||
Total assets | 803,212 | 12,628 | ||
Net assets per share (Yen) | 2,643.97 | 292.11 | ||
Gross operating revenue | 583,452 | 38,777 | ||
Operating profit | 72,541 | 82 | ||
Recurring profit | 69,622 | 129 | ||
Net profit | 31,381 | 60 | ||
Net earnings per share (Yen) | 313.81 | 6.08 |
(3) Company split No.3
(1) | Company name | Lawson San’in Co., Ltd. | Poplar Co., Ltd. | |
(2) | Business location | 2-141, Kamo, Yonago city, Tottori | 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima | |
(3) | Name and title of representative director |
Naoto Shibaori President and CEO | Shinji Meguro, President & CEO | |
(4) | Main areas of business operation | Convenience store operation | Convenience store operation | |
(5) | Capital | 10 million yen | 2,410 million yen | |
(6) | Established | September 15, 2016 | April 20, 1976 | |
(7) | Shares issued | 10,000 | 9,905,822 | |
(8) | Fiscal year-end | End of February | End of February | |
(9) | Number of employees | - | 413 | |
(10) | Major business partner | - | Mitsubishi Shokuhin Co., Ltd. | |
(11) | Major Bank | - | Hiroshima Bank, Ltd. | |
(12) | Major shareholders and shareholdings (as of February 29, 2016) | Lawson, Inc.:100.00% | ||
(13) | Existing relationship between the two companies | |||
Capital | No significant relationship | |||
Personal | No significant relationship | |||
Business | No significant relationship | |||
Pertinent connections with related parties | No significant relationship | |||
(14) | Recent overview of corporate results and financial position for FY2015 (Consolidated) | |||
Millions of yen | ||||
Net assets | - | 2,893 | ||
Total assets | - | 12,628 | ||
Net assets per share (Yen) | - | 292.11 | ||
Gross operating revenue | - | 38,777 | ||
Operating profit | - | 82 | ||
Recurring profit | - | 129 | ||
Net profit | - | 60 | ||
Net earnings per share (Yen) | - | 6.08 |
Note: The succeeding company Lawson San’in is recently established, so does not display recent business results or financial data.
(4) Company split No.4
(1) | Company name | Lawson San’in Co., Ltd. | Poplar Co., Ltd. | |
(2) | Business location | 2-141, Kamo, Yonago city, Tottori | 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima | |
(3) | Name and title of representative director |
Naoto Shibaori President and CEO | Shinji Meguro, President & CEO | |
(4) | Main areas of business operation | Convenience store operation | Convenience store operation | |
(5) | Capital | 10 million yen | 1 million yen | |
(6) | Established | September 15, 2016 | November 2, 2015 | |
(7) | Shares issued | 10,000 | 20 | |
(8) | Fiscal year-end | End of February | End of February | |
(9) | Number of employees | - | 2 | |
(10) | Major business partner | - | Lawson, Inc. | |
(11) | Major Bank | - | Hiroshima Bank, Ltd. | |
(12) | Major shareholders and shareholdings (as of February 29, 2016) | ・Lawson, Inc.:100.00% | ・Poplar Co., Ltd.:100.0% | |
(13) | Existing relationship between the two companies | |||
Capital | No significant relationship | |||
Personal | No significant relationship | |||
Business | No significant relationship | |||
Pertinent connections with related parties | No significant relationship | |||
(14) | Recent overview of corporate results and financial position for FY2015 (Consolidated) | |||
Millions of yen | ||||
Net assets | - | -4 | ||
Total assets | - | 46 | ||
Net assets per share (Yen) | - | 4,659.48 | ||
Gross operating revenue | - | 77 | ||
Operating profit | - | -5 | ||
Recurring profit | - | -5 | ||
Net profit | - | -5 | ||
Net earnings per share (Yen) | - | -5,859.48 | ||
Net assets | - | 0 |
Note: The succeeding company Lawson San’in is recently established, so does not display recent business results or financial data.
5. Summary of inherited business segments
(1) Business operations of inherited segments
Company split No.1
The assets, rights and obligations relating to convenience store operations of 235 stores inherited from Lawson.
Company split No.2
The land titles and lease contracts for 52 stores inherited from Poplar and two experimental double-brand stores, any rights to claim return of security deposit relating to those contracts (claims for return of security payments for cooperative building sinking funds, etc.), and the right to claim return of security deposit relating to rolling contracts for a portion of the stores inherited from Poplar.
Company split No.3
A portion of convenience store operations pertaining to 52 stores inherited from Poplar.
Company split No.4
Convenience store operations pertaining to the two experimental double-brand stores inherited from Poplar Project.
(2) Gross operating profit of inherited business segments (2015.3.1 - 2016.2.29)
Company split No.1 | 6,125 million yen |
Company split No.2 | None |
Company split No.3 | 2,145 million yen |
Company split No.4 | 77 million yen |
(3) Type and financial value of inherited assets, liabilities
Details of the assets, liabilities and other rights and obligations relating to the company splits will be disclosed upon confirmation after the absorption-type company split agreements come into effect on November 1, 2016 (tentative).
6. After the company splits
There will be no change to Lawson, Inc.’s trading name, business location, representative director status, busness operations, capital or financial year end as a result of the company splits.
7. Accounting methods
Company split No.1 is treated as an acquisition under Japan’s Accounting Standard for Business combination. As a result, Lawson San’in will measure the assets acquired and liabilities assumed from Lawson at their fair value on the date acquired.
Company split No.2 is treated as an acquisition under Japan’s Accounting Standard for Business combination. As a result, Lawson will measure the assets acquired and liabilities assumed from Poplar at their fair value on the date acquired.
Company split No.3 is treated as an acquisition under Japan’s Accounting Standard for Business combination. As a result, Lawson San’in will measure the assets acquired and liabilities assumed from Poplar at their fair value on the date acquired.
Company split No.4 is treated as an acquisition under Japan’s Accounting Standard for Business combination. As a result, Lawson San’in will measure the assets acquired and liabilities assumed from Poplar Project at their fair value on the date acquired.
8. Future business outlook
Any impact on Lawson’s consolidated business performance from company split No.1 No. 2, No.3 and No.4 is expected to be minimal.