NISSUi Letter

Back to Press Release IndexFebruary 20, 2009

Notification of Commencement of Tender Offer for Common Shares of Daisui Co., Ltd.

Nippon Suisan Kaisha, Ltd. (hereinafter referred to as "the Company" or "the Tender Offeror"), hereby, announces that, at the Board of Directors Meeting held on February 20, 2009, a resolution was passed to launch a tender offer for common shares of Daisui Co., Ltd. (hereinafter "the Target Company"), as outlined below.

1. Purpose of the tender offer

(1) Summary of the tender offer

The Company as of today holds 1,218,059 shares of the issued shares of the Target Company (approximately 7.94% of the total issued shares of 15,324,819 shares as of February 16, 2009, as stated in the 3rd Quarter Report for Fiscal Year 2008, submitted by the Target Company on February 17, 2009).  The Company, as announced in the notice on Commencement of talks towards the capital tie-up and business alliance consisting of Nippon Suisan Kaisha, Ltd. providing management assistance to Daisui Co., Ltd. (hereinafter "Notice of commencement of talks") and based on the request from the Target Company, has reached an agreement with the Target Company to commence talks towards increasing the Company's stake in the Target Company and forming a capital tie-up and business alliance in order to assist in turning around the Target Company's business, which includes providing assistance in the Target Company's funding.

The Company, following the talks, which were held with the Target Company pursuant to said agreement, has resolved at its Board of Directors Meeting held on February 20, 2009 to launch a tender offer (hereinafter "this Tender Offer") for the issued common shares of the Target Company.  As noted in (2) The decision-making process leading to the launch of this Tender Offer below, the Company, in view of various factors including the current situation of the Target Company, has not set maximum or minimum limits on the number of shares certificates, etc. to be purchased through this Tender Offer and thus all subscribed share certificates, etc. will be bought.  However, it is not the intention of this Tender Offer to acquire all issued shares of the Target Company or to delist its shares.

(2)The decision-making process leading to the launch of this Tender Offer

(a)Outline of the Company and the Target Company

The Company is made up of the Company, its 72 subsidiaries and 31 affiliates and is engaged mainly in the marine products, processed food, general distribution and fine chemicals businesses.  Additionally, the Company is involved in research and services relating to each of the businesses.  Currently the entire Group is making a concerted effort to promote the Medium Term Management Plan named the TGL (Toward Global Links) Plan, and striving to reinforce the Group's manufacturing function in the area where its greatest strengths lie, namely the area of creating customer-oriented value from marine resources.

The Target Company is made up of the Target Company, its three subsidiaries and three affiliates; its primary business is the wholesale of marine products, pursuant to the Wholesale Market Act, on the central wholesale markets of Osaka prefecture, Osaka City, Kyoto City and Kobe City.  The Target Company's subsidiaries and affiliates are also involved in the sales, processing and refrigerated storage of various marine products.  According to publicly disclosed information, the Target Company, in order to deal with the drastic changes in the business environment, has reinforced its ties with its group companies, focused on its cargo booking/sales business, while at the same time made efforts to streamline its business and cut back on costs to the end of strengthening its management base.

(b)Disclosure of inappropriate transactions by the Target Company and summary of subsequent developments

On November 13, 2008, the Target Company announced the discovery of inappropriate transactions including circular transactions, which had been conducted by its employees at the Target Company (hereinafter "illicit transactions"), and that in this connection, 1.1 billion yen has been posted as extraordinary loss in the 2nd quarter of fiscal year 2008; and on November 14, 2008, it announced the possibility of revisions to the previous year's financial statements.  In a later development, the Osaka Securities Exchange Co., Ltd. (hereinafter "Osaka Securities Exchange"), in response to the announcement by the Target Company on November 28, 2008, that it would be unable to submit its 2nd Quarter Report for Fiscal Year 2008, by the submission deadline (November 29, 2008), as provided in paragraph 1 of Article 24-4-7 of the Financial Instruments and Exchange Act (Act No. 25 of 1948. Including subsequent amendments.  Hereinafter referred to as "the Act"), designated the shares of the Target Company as "securities on alert (under examination)," as of the same date (November 28, 2008).

On December 26, 2008, the Target Company submitted its 2nd Quarter Report for Fiscal Year 2008 (hereinafter "Unrevised 2nd Quarter Report") to the Kinki Finance Bureau and consequently the designation of its shares as "shares on alert" was cancelled.  However, as the Independent Auditor's Review of the Quarterly Financial Statements, prepared by Deloite Touche Tohmatsu on December 26, 2008, which was attached to the Unrevised 2nd Quarter Financial Report, contained a statement of "no opinion" on the quarterly financial statements for the 2nd quarter and the cumulative 2nd quarter period for fiscal year 2008, the shares of the Target Company were once again designated as "shares on alert (under examination)."

Subsequently, the Target Company, judging that the full-scale probe and detailed examinations by the investigation committee and the in-house investigation team, which had been ongoing, had yielded the full picture of the incident, announced the investigation results on February 17, 2009 and at the same time submitted to the Kinki Finance Bureau the revised reports of the Annual Securities Report for the past five years, the revised reports of the Interim Reports for the past two years, and the revised report of the Quarterly Report for the recent two quarters.  In the 3rd Quarter Report for Fiscal Year 2008 (74th fiscal term) (hereinafter "3rd Quarter Report for Fiscal Year 2008"), submitted by the Target Company on the same date, it stated that (1) in October 2008, a series of inappropriate transactions had come to light, which were entered into by a former general manager of the Target Company since the previous fiscal year; and the investigations by the external investigation committee and the in-house investigation team found that the Target Company would need to recognize a total of 1,674 million yen in estimated loss; (2) since the amount of estimated loss included amounts corresponding to the previous fiscal year, the consolidated financial statements, etc. of the previous year had been revised; and (3) in order to prevent the recurrence of such incidents, the Target Company intended to enhance the company's awareness of compliance, conduct employee education and training, reinforce the audit functions of the internal audit office, build a system of mutual checks, and review the management of the internal reporting system, in an effort to strengthen its internal management structure.  Although the reports for Fiscal Years 2003 through 2006 of the revised reports mentioned above do not contain auditor's reports, the Target Company has issued an explanation on February 17, 2009 to the effect that as ChuoAoyama PricewaterhouseCoopers, which had audited its reports from fiscal year 2003 to 2005 and Misuzu, which had audited its report for fiscal year 2006, had been dissolved, undergoing audits had become impossible and the Target Company had no choice but to submit its reports unaudited.  However, the Target Company has also added that it intended to cooperate with the related parties, select an appropriate auditor for the period covered by the revised reports and resubmit the reports with the auditor's opinion attached.  Furthermore, in terms of (i) the revised reports for fiscal years 2007 and 2008 and (ii) the 3rd Quarter Report for Fiscal Year 2008, mentioned above, each contain an Audit Report or the Auditor's Review of the Quarterly Financial Statements prepared by Deloite Touche Tohmatsu, the Target Company's independent auditors; and "unqualified opinions" have been issued by Deloite Touche Tohmatsu in terms of the consolidated and non-consolidated financial statements stated in (i) and (ii) mentioned above.

As the Target Company continues to record losses in its 3rd Quarter Report for Fiscal Year 2008 and as its shares are still under the designation of "shares on alert (under examination)" by the Osaka Securities Exchange, the Target Company has been described as running the risk of being refused refinancing of its short-term debts from financial institutions and serious doubts have been raised in terms of the going-concern assumption of the entity.  Moreover, despite its shares already being put on "alert" on December 26, 2008, according to information released on February 17, 2009 by the Osaka Securities Exchange, in light of the seriousness of the revision details of the Target Company's securities reports, the Exchange has decided that, depending on further developments and the outcome of the ongoing examinations, said shares could qualify under the delisting criteria, and has thus added additional reasons for the "shares on alert" designation, while the investigation by the Exchange continues.

(c)The purpose of this Tender Offer

The Company, in light of the circumstances surrounding the Target Company, as described above, and taking into account the fact that the Target Company has for many years been a major business partner in the Company's marine products business, in addition to the fact that the Company has always held its shares and became its top shareholder as of the end of September 2008, has determined that, in order for the Target Company to improve its management structure, stabilize its business foundations, and continue to play its role as the primary wholesaler on the central wholesale markets, credit enhancement through the reinforced partnership between the Company and the Target Company and human resources assistance would become indispensable.  The Company, therefore, upon the request of the Target Company, has resolved at its Board of Directors meeting held on February 5, 2009 to commence talks on the assistance to be provided in order to turnaround the Target Company's business, as detailed below, and has commenced talks with the Target Company.

(i)The Company will provide the Target Company with vigorous assistance in all aspects of management.

(ii)The Company will dispatch leading members of management to the Target Company and the Target Company will accept them.

(iii)The Target Company will receive assistance from the Company, draw up specific improvement measures to thoroughly enforce corporate governance and compliance, and implement these measures.

(iv)The Company will increase its holdings of the Target Company's shares and provide funding assistance to the Target Company.

As a result of repeated talks with the Target Company in accordance with the above agreement, the Company has decided at the Board of Directors meeting held on February 20, 2009 to launch this Tender Offer for the shares of the Target Company as a part of its business turnaround assistance.

The Company also believes that undertaking this assistance will not only enhance the enterprise value and shareholder value of the two companies, but will also prove profitable to all the stakeholders of society, including the customers of the two companies and their employees.

(3) Management assistance subsequent to this Tender Offer

Both companies share the common understanding that in order to avoid impairment of the Target Company's value, prompt action must be taken to realize the capital tie-up and business alliance between the two parties.  Therefore, the Company intends to form a joint project team comprising members of both companies to discuss specific details including the number of directors to be dispatched from the Company to the Target Company, for the purpose of shaking up the latter's corporate climate and restore society's trust and business performance at the earliest possible date.  However, nothing has been decided at the present time.  Details will be released promptly as soon as specific measures are agreed upon by the two companies.

(4) Measures to ensure the fairness of the purchase price and measures to avoid conflict of interest

The Company, in order to ensure the fairness of the purchase price of the Target Company's shares in this Tender Offer, referred to the share valuation report submitted on February 19, 2009 (hereinafter "the Share Valuation Report") by Nikko Cordial Securities Inc. (hereinafter "Nikko Cordial Securities"), a financial advisor and a third-party appraiser independent of both the Company and the Target Company, in determining the tender offer price of this Tender Offer of 185 yen per share (hereinafter "the Tender Offer Price").

While referring to the various calculation methods presented in the Share Valuation Report, the Company also comprehensively took into account factors such as the effects of the Target Company's illicit transactions on future performance, the Target Company's willingness to accept this Tender Offer, and the prospects of this Tender Offer, in addition to the results of the discussions and negotiations with the Target Company.  Upon consideration of all of the above, the Company resolved at the Board of Directors' meeting held on February 20, 2009 to set the Tender Offer Price at 185 yen per share.

The Tender Offer Price represents a premium of 28.47%(rounded to two decimal places) on the simple arithmetic average of 144 yen (rounded to the nearest yen) of the closing share price of the Target Company for the past month through February 19, 2009, on the Osaka Securities Exchange.  It also represents a premium of 22.52% (rounded to two decimal places) on the simple arithmetic average of 151 yen (rounded to the nearest yen) of the closing share price of the Target Company for the past three months through February 19, 2009 and a premium of 51.64% (rounded to two decimal places) on the closing share price of the Target Company of 122 yen (rounded to the nearest yen) on February 19, 2009, on the Osaka Securities Exchange.

On the other hand, according to the Target Company, it has carefully considered this Tender Offer during the talks and negotiations relating to the capital tie-up and business alliance with the Company.  And although the Target Company has not consulted a third-party appraiser on the Tender Offer Price, in light of the designation of "shares on alert (under examination)" of its shares by the Osaka Securities Exchange, the inclusion of the statement expressing serious doubt on the going-concern assumptions of the Target Company by Deloite Touche Tohmatsu in the review report on the 3rd Quarter Report for Fiscal Year 2008 and the current level of share prices of the Target Company stemming from the above factors, it has concluded that the terms and conditions of this Tender Offer and the Tender Offer Price proposed by the Company would provide its shareholders an opportunity to sell the Target Company's share under reasonable conditions.  Moreover, upon concluding that the success of this Tender Offer would not only enhance the enterprise value and shareholder value of the two companies, but would also prove profitable to all the stakeholders of society, including the customers of the two companies and their employees, the Target Company has resolved at its Board of Directors meeting held on February 20, 2009 to express acceptance of this Tender Offer.

Also according to the Target Company, Mr. Seiji Manabe, the Company's Board Member who serves concurrently as the Statutory Auditor of the Target Company refrained from expressing an opinion on this Tender Offer in order to avoid conflict of interest.  However, all of the Statutory Auditors excluding Mr. Manabe, expressed opinions in favor of this Tender Offer.

(5) Possibility of delisting of the Target Company's shares

Currently the shares of the Target Company are listed on the Second Section of the Osaka Securities Exchange.  Because the maximum limit for the number of share certificates, etc. to be purchased in this Tender Offer has not been set, the shares may qualify under the delisting criteria of the Osaka Securities Exchange and delisted through the prescribed procedures, in the event that a large number of share certificates, etc. are subscribed.  However, as it is the intent of the Company to maintain listing of the Target Company's shares on the Osaka Securities Exchange even after the conclusion of this Tender Offer and as such is not an attempt to delist said shares, in the event that the outcome of this Tender Offer causes said shares to infringe on the delisting criteria of the Osaka Securities Exchange, measures to maintain listing will be considered upon discussion with the Target Company.  However, specific policies concerning this matter have not been determined at the present time.

Additionally, notwithstanding either (i) the case in which the outcome of this Tender Offer does not infringe on delisting criteria or (ii) the case in which, despite the outcome of this Tender Offer infringing on delisting criteria, delisting is averted as a result of measures implemented to maintain listing of shares, since said shares have already been designated "shares on alert (under examination)" by the Osaka Securities Exchange, the shares of the Target Company may become delisted in accordance with delisting criteria of the Osaka Securities Exchange, following prescribed procedures.

After delisting, the shares of the Target Company will no longer be traded on the Osaka Securities Exchange and future sales of said shares are expected to become difficult.

It should also be noted that the Company has no intention of withdrawing this Tender Offer even in the event that the Osaka Securities Exchange hands the decision to delist said shares to the Target Company during the purchase period of this Tender Offer (hereinafter "Tender Offer Period,") as a result of the outcome of the examination of the "shares on alert (under examination)" pursuant to item 1a (k), Article 7 of the Rules on Shares on Alert and Shares to be Delisted (in cases where the listed company is deemed to satisfy the former clause of item 11a, paragraph 1 of Article 2 of the Delisting Criteria of Share Certificates or the former clause of item 11b of the same [including cases where the (Osaka Securities Exchange) deems that there are circumstances that qualify as reasons for this clause to become applicable]).

(Note)  "Share certificates," mentioned in this text, refer to book-entry shares as defined in the Act Concerning Book-entry Transfer of Corporate Bonds, Stocks, etc. (Act No. 75 of 2001).

2. Outline of the Offer

(1)Outline of the Target Company


1) Company name Daisui Co., Ltd.
2) Description of business 1. Wholesale of marine products pursuant to the Wholesale Market Act
2. Sales, processing and refrigerated storage of various marine products
3) Date of establishment April 7, 1939
4) Principal place of business Osaka Central Wholesale Market1-86, Noda 1-chome, Fukushima-ku, Osaka-shi
5) Name and title of representative Motokazu Shimizu, President and Representative Director
6) Amount of paid-in capital 2,352,240,950 yen (as of February 20, 2009)
7) Major shareholders and their shareholding ratio (as of September 30, 2008)
Nippon Suisan Kaisha, Ltd. 7.94%
Kyokuyo Co., Ltd. 6.59%
Daisui Employee Stock Ownership 6.37%
Norinchukin Bank 4.52%
Bank of Tokyo-Mitsubishi UFJ 4.39%
Japan Trustee Services Bank, Ltd. (Re-trusted by Mitsui Asset Trust and Banking Co., Ltd. / CMTB Equity Investment, Ltd. trust account) 4.37%
Benirei Corporation 3.24%
The Eighteenth Bank 2.73%
Hokuriku Bank 2.61%
Motokazu Shimizu 2.40%
8) Relation, etc. between the Company and the Target Company Capital relationship As of February 20, 2009, the Company holds 7.94% of the issued shares of the Target Company; the Target Company holds 0.12 % of the issued shares of the Company.
Personnel relationship 1 Board Member of the Company has been appointed Statutory Auditor of the Target Company.
Business relationship The Company conducts transactions of marine products with the Target Company. Talks on capital tie-up and business alliance between the two parties have commenced, as of February 5, 2009.
Applicability to related parties N/A

(2) Period of the offer, etc.

(i) Period of the offer at the time of filing
Monday, February 23, 2009 to Monday, March 23, 2009 (20 business days)

(ii)Possibility for extension at the request of the Target Company

In accordance with Article 27-10(3) of the Act, in the event the Target Company submits a statement of opinion report requesting an extension of the Tender Offer Period, the Tender Offer Period shall be extended 30 days until Monday, April 6, 2009.

(3)Purchase price in the tender offer: 185 yen per share

(4)Basis of calculating the purchase price:

(i) Basis of calculation

The Company, in order to ensure the fairness of the Tender Offer Price of the Target Company's shares, received a Share Valuation Report from Nikko Cordial Securities, a financial advisor and a third-party appraiser independent of both the Company and the Target Company, and referred to it in determining the Tender Offer Price

According to the Share Valuation Report, the ranges of the value per share calculated using the various methods are as follows:

(a) Average share price method: 125 yen to 147 yen

(b) Similar companies analysis method: 0 yen to 237 yen

Under (a) average share price method, the record date of the Target Company was set at February 18, 2009 and (i) the simple arithmetic average of the closing share price on the Osaka Securities Exchange for the latest one month from January 19, 2009 through the record date, (ii) the simple arithmetic average of the closing share price on the Osaka Securities Exchange for the period from December 29, 2008, the business day following the day (December 26, 2008) on which the Notice of "No Opinion" on the Independent Auditor's Review of the Quarterly Financial Statements of the 2nd Quarter of Fiscal Year 2008 was disclosed and the shares were designated as "shares on alert (under examination)" through the record date, and (iii) the closing share price on the Osaka Securities Exchange on the record dated were analyzed and the resulting range of the value per share was calculated to be 125 yen to 147 yen.

Under (b) similar companies analysis method, the Target Company's share prices were analyzed in comparison with the financial indices indicative of the share prices and profitability of listed companies engaged in similar businesses as the Target Company and the resulting range of the value per share was calculated to be 0 yen to 237 yen.

While referring to said Share Valuation Report prepared by Nikko Cordial Securities, the Company also comprehensively took into account factors such as the effects of the Target Company's illicit transactions, which were disclosed in the Notice on the occurrence of incidents that may impact future performance (dated November 13, 2008), on future performance, the Target Company's willingness to accept this Tender Offer, and the prospects of this Tender Offer, in addition to the results of the discussions and negotiations with the Target Company.  Upon consideration of all of the above, it was resolved at the Board of Directors' meeting held on February 20, 2009 to set the Tender Offer Price at 185 yen per share.

The Tender Offer Price represents a premium of 28.47%(rounded to two decimal places) on the simple arithmetic average of 144 yen (rounded to the nearest yen) of the closing share price of the Target Company for the past month through February 19, 2009, on the Osaka Securities Exchange.  It also represents a premium of 22.52% (rounded to two decimal places) on the simple arithmetic average of 151 yen (rounded to the nearest yen) of the closing share price of the Target Company for the past three months through February 19, 2009 and a premium of 51.64% (rounded to two decimal places) on the closing share price of the Target Company of 122 yen (rounded to the nearest yen) on February 19, 2009, on the Osaka Securities Exchange.  

(ii)Process of the calculation

On November 13, 2008, the Target Company announced the discovery of inappropriate transactions including circular transactions, which had been conducted by its employees at the Target Company, and that in this connection, 1.1 billion yen had been posted as extraordinary loss in the 2nd Quarter Report for Fiscal Year 2008; and on November 14, 2008, it announced the possibility of revisions to the previous year's financial statements.  In a later development, the Osaka Securities Exchange, in response to the announcement by the Target Company on November 28, 2008, that it would be unable to submit its 2nd Quarter Report for Fiscal Year 2008, by the submission deadline (November 29, 2008), as provided in paragraph 1, Article 24-4-7 of the Act, designated the shares of the Target Company as "securities on alert (under examination,") as of the same date (November 28, 2008).

On December 26, 2008, the Target Company submitted its Unrevised 2nd Quarter Report for Fiscal Year 2008 to the Kinki Finance Bureau and consequently the designation of its shares as "shares on alert" was cancelled.  However, as the Independent Auditor's Review of the Quarterly Financial Statements, prepared by Deloite Touche Tohmatsu on December 26, 2008, which was attached to the Unrevised 2nd Quarter Financial Report, contained a statement of "no opinion" on the quarterly financial statements for the 2nd quarter and the cumulative 2nd quarter period for fiscal year 2008, the shares of the Target Company were once again designated as "shares on alert (under examination)."

Subsequently, the Target Company, judging that the full-scale probe and detailed examinations by the investigation committee and the in-house investigation team, which had been ongoing, had yielded the full picture of the incident, announced the investigation results on February 17, 2009 and at the same time submitted to the Kinki Finance Bureau the revised reports of the Annual Securities Report for the past five years, the revised reports of the Interim Reports for the past two years, and the revised report of the Quarterly Financial Report for the recent two quarters.  In the 3rd Quarter Report for Fiscal Year 2008, submitted by the Target Company on the same date, it stated that (1) in October 2008, a series of inappropriate transactions had come to light, which were entered into by a former general manager of the Target Company since the previous fiscal year; and the investigations by the external investigation committee and the in-house investigation team found that the Target Company would need to recognize a total of 1,674 million yen in estimated loss; (2) since the amount of estimated loss included amounts corresponding to the previous fiscal year, the consolidated financial statements of the previous year had been revised;  and (3) in order to prevent the recurrence of such incidents, the Target Company intended to enhance the company's awareness of compliance, conduct employee education and training, reinforce the audit functions of the internal audit office, build a system of mutual checks, and review the management of the internal reporting system, in an effort to strengthen its internal management structure.  Although the reports for Fiscal Years 2003 through 2006 of the revised reports mentioned above do not contain auditor's reports, the Target Company has issued an explanation on February 17, 2009 to the effect that as ChuoAoyama PricewaterhouseCoopers, which had audited its reports from fiscal year 2003 to 2005 and Misuzu, which audited its report for fiscal year 2006, had been dissolved, undergoing audits had become impossible and the Target Company had no choice but to submit its reports unaudited.  However, the Target Company has also added that it intended to cooperate with the related parties, select an appropriate auditor to audit the period covered by the revised report and resubmit the reports with the auditor's opinion attached.

As the Target Company continues to record losses in its 3rd Quarter Report for Fiscal Year 2008 and as its shares are still under the designation of "shares on alert (under examination)" by the Osaka Securities Exchange, the Target Company has been described as running the risk of being refused refinancing of its short-term debts from financial institutions and serious doubts have been raised on the going-concern assumptions of the entity.  Moreover, despite its shares already being put on "alert" on December 26, 2008, according to information released on February 17, 2009 by the Osaka Securities Exchange, in light of the seriousness of the revision details of the Target Company's securities reports, it has decided that, depending on further developments and the outcome of the ongoing examinations, said shares could qualify under the delisting criteria, and has thus added further reasons for the "shares on alert" designation; while the investigation by the Exchange continues.

Since the Target Company has for many years been a major business partner in the Company's marine products business, in addition to the fact that the Company has always held it shares and became its top shareholder as of the end of September 2008, the Company has determined that, in order for the Target Company to improve its management structure, stabilize its business foundations, and continue to play its role as the primary wholesaler on the central wholesale markets, credit enhancement through the reinforced partnership between the Company and the Target Company and human resources assistance would become indispensable.  Therefore, based on the repeated talks with the Target Company, the Company has decided at the Board of Directors meeting held on February 20, 2009 to launch this Tender Offer for the shares of the Target Company as a part of its business turnaround assistance.

Based on the results of the discussions and negotiations with the Target Company, the Tender Offer Price was determined following the process outlined below.

I.On the acquisition of the Share Valuation Report from the third-party appraiser

The Company, in determining the purchase price, requested Nikko Cordial Securities a financial advisor and a third-party appraiser, to prepare a report of the valuation of shares and obtained the Share Valuation Report on the shares of the Target Company on February 19, 2009.

II.Outline of the Share Valuation Report

Nikko Cordial Securities used the average share price method and the similar companies analysis method to make the valuations per share.

i.Under the average share price method, the record date of the Target Company was set at February 18, 2009 and (i) the simple arithmetic average of the closing share price on the Osaka Securities Exchange for the latest one month from January 19, 2009 through the record date, (ii) the simple arithmetic average of the closing share price on the Osaka Securities Exchange for the period from December 29, 2008, the business day following the day (December 26, 2008) on which the Notice of "No Opinion" on the Independent Auditor's Review of the Quarterly Financial Statements of the 2nd Quarter of Fiscal Year 2008 was disclosed and the shares were designated as "shares on alert (under examination)" through the record date, and (iii) the closing share price on the Osaka Securities Exchange on the record dated were analyzed and the resulting range of the value per share was calculated to be 125 yen to 147 yen.

ii.Under the similar companies analysis method, the Target Company's share prices were analyzed in comparison with the financial indices indicative of the share prices and profitability of listed companies engaged in similar businesses as the Target Company and the resulting range of the value per share was calculated to be 0 yen to 237 yen.

III. Process for determining the purchase price

While referring to said Share Valuation Report prepared by Nikko Cordial Securities, the Company also comprehensively took into account factors such as the effects of the Target Company's illicit transactions, which were disclosed in the Notice on the occurrence of incidents that may impact future performance (dated November 13, 2008), on future performance, the Target Company's willingness to accept this Tender Offer, and the prospects of this Tender Offer, in addition to the results of the discussions and negotiations with the Target Company.  Upon consideration of all of the above, it was resolved at the Board of Directors' meeting held on February 20, 2009 to set the Tender Offer Price at 185 yen per share.

IV. Measures to ensure the fairness of the purchase price and measures to avoid conflict of interest

According to the Target Company, it carefully considered this Tender Offer during the talks and negotiations relating to the capital tie-up and business alliance with the company.  And although the Target Company has not consulted a third-party appraiser on the Tender Offer Price, in light of the designation of "shares on alert (under examination)" of its shares by the Osaka Securities Exchange, the inclusion of the statement expressing serious doubt on the going-concern assumptions of the Target Company by Deloite Touche Tohmatsu in the review report on the 3rd Quarter Report for Fiscal Year 2008 and the current level of share prices of the Target Company stemming from the above factors, it has concluded that the terms and conditions of this Tender Offer and the Tender Offer Price proposed by the Company would provide its shareholders an opportunity to sale the Target Company's share under reasonable conditions.  Moreover, upon concluding that the success of this Tender Offer would not only enhance the enterprise value and shareholder value of the two companies, but would also prove profitable to all the stakeholders of society, including the customers of the two companies and their employees, the Target Company has resolved at its Board of Directors meeting held on February 20, 2009 to express acceptance of this Tender Offer.

Also according to the Target Company, Mr. Seiji Manabe, a Director of the Company who serves concurrently as the Statutory Auditor of the Target Company refrained from expressing an opinion on this Tender Offer in order to avoid conflict of interest.  However, all the Statutory Auditors excluding Mr. Manabe, expressed opinions in favor of this Tender Offer.

(iii) Relation to the valuation organization

Nikko Cordial Securities does not fall under the definition of related parties of the Company or the Target Company.

(5) Number of share certificates, etc. to be purchased

Expected number to be purchased Expected minimum number to be purchased Expected maximum number to be purchased
1,559,000 (shares) - (shares) - (shares)

(Note 1) In this Tender Offer, neither of conditions in Article 27-13(4) of the Act apply and the Company shall purchase all of the tendered share certificates, etc.

(Note 2) Odd lot shares are also covered in this Tender Offer.

(Note 3) The treasury shares held by the Target Company are not to be purchased in this Tender Offer.  Therefore the maximum number of share certificates, etc. of the Target Company to be purchased by the Tender Offeror in this Tender Offer is 12,664,914 shares.  This is the total number of shares issued of the Target Company (15,324,819 shares) as of February 16, 2009, as stated in the 3rd Quarter Report for Fiscal Year 2008 (74th Fiscal Term) (submitted February 17, 2009) minus the number of treasury shares of the Target Company (1,441,846 shares) as of December 31, 2008, as stated in the 3rd Quarter Financial Report for Fiscal Year 2008, released by the Target Company on February 17, 2009 (since the 3rd Quarter Report stated number of treasury shares of the Target Company in units of 1,000 shares), and the shares held by the Tender Offeror (1,218,059 shares) as of today.

(6) Changes in holding ratio of share certificates, etc. after the tender offer

Number of voting rights of the share certificates, etc. owned by the Company before the Tender Offer 1,218 units (Holding ratio of share certificates, etc. before the Tender Offer
8.77%)
Number of voting rights of the share certificates, etc. owned by specially related parties before the Tender Offer 2 units (Holding ratio of share certificates, etc. before the Tender Offer
0.01%)
Number of voting rights of the share certificates, etc. to be purchased 1,559 units (Holding ratio of share certificates, etc. after the Tender Offer
20.00%)
Total number of voting rights of all shareholders of the Target Company 13,517 units  

(Note 1) Number of voting rights of the share certificates, etc. to be purchased denotes the number of voting rights of the shares to be purchased in this Tender Offer (1,559,000 shares).

(Note 2) Number of voting rights of the share certificates, etc. owned by specially related parties before the Tender Offer denotes the total number of voting rights of the share certificates, etc. owned by specially related parties.

(Note 3) Total number of voting rights of all shareholders of the Target Company denotes the number of voting rights of all shareholders in the Target Company as of September 30, 2008, as stated in the 3rd Quarter Report for Fiscal Year 2008 (74th Fiscal Term) (submitted February 17, 2009).  However, as the odd lot shares and the shares of the Target Company held by Murakami Food, an affiliate of the Target Company, are also covered by this Tender Offer, when calculating the Holding ratio of share certificates, etc. before the Tender Offer and the Holding ratio of share certificates, etc. after the Tender Offer, the total number of voting rights of the Target Company of the 13,882,973 shares shall be 13,882 units, which is the total number of shares issued of the Target Company (15,324,819 shares) as of February 16, 2009, as stated in the above-mentioned Report minus the number of treasury shares held by the Target Company (1,441,846 shares), stated in the 3rd Quarter Financial Report for Fiscal Year 2008, released by the Target Company on February 17, 2009 (since the 3rd Quarter Report stated number of treasury shares of the Target Company in units of 1,000 shares).

(Note 4) As neither of the conditions in Article 27-13(4) of the Act apply in this Tender Offer and the Company shall purchase all of the tendered share certificates, etc., the Holding ratio of share certificates, etc. after the Tender Offer could exceed 20.00% (maximum 100.00%).

(Note 5) The ratios are rounded off to the second decimal place.

(7) Total purchase price: 288 million yen

(Note 1) The purchase price above is the price determined by multiplying the Expected number to be purchased (1,559,000 shares) by the offer price.  In the event that the Tender Offeror purchases the maximum number of share certificates, etc. (12,664,914 shares) which might be purchased in this Tender Offer, the purchase price will be 2,343 million yen.

(Note 2) The total purchase price noted above does not include the estimated amount of fees to be paid to the Agent for the Tender Offer, various expenses including ads for this Tender Offer to be placed in newspapers, the cost of preparing explanatory documents and other documents necessary to this Tender Offer, and other expenses to be paid to the Agent for the Tender Offer, and legal expenses.

(8) Method of settlement

(i) Name and address of head office of the financial instruments dealer, banks or other institutions in charge of the settlement of the tender offer:

Nikko Cordial Securities, Inc. 3-3-1 Marunouchi, Chiyoda-ku, Tokyo, Japan

(ii) Commencement date of the settlement

Friday, March 27, 2009

According to Article 27-10(3) of the Act, in the event the Tender Offer Period is extended, the date will be Monday, April 6, 2009.

(iii) Settlement method

After the expiration of the Tender Offer Period, notification regarding the purchase in this Tender Offer shall be mailed to the address or place of business of subscribed shareholders (in the case of a foreign shareholder, their standing agent) without delay.

The purchase price shall be paid in cash.  The agent of the Tender Offer shall remit the purchase price of the purchased share certificates, etc. without delay, on or after the commencement date of the settlement, to the places designated by the tendered shareholders (in the case of a foreign shareholder, their standing agent) in accordance with the instruction of the tendered shareholders.

(9) Other conditions and methods of the Tender Offer

(i) The existence and contents of the terms set forth in Article 27-13(4) of the Act

In this Tender Offer, neither of conditions in Article 27-13(4) of the Act apply and the Company shall purchase all of the tendered share certificates, etc.

(ii) The existence and contents of terms of withdrawal of the Tender Offer and the method of disclosure of the withdrawal

In the event of any of the items indicated in Article 14, paragraph 1, items 1.1 through 1.9 and 1.12 through 1.18, item 2, items 3.1 through 3.7, and item 5, and paragraph 2, items 3 through 6 of the Enforcement Order of the Financial Instruments and Exchange Act (Cabinet Order 321, of 1965.  Including its amendments, hereinafter "the Order") arises, this Tender Offer may be withdrawn.

In the event of withdrawal, an electronic public notice shall be made and a public notice shall also be made in the Nihon Keizai Shimbun that such electronic public notice has been made.  Provided that, in the event that it is difficult to make a public notice before the end of the Tender Offer Period, a public announcement shall be made by the method stated in Article 20 of the Cabinet Office Ordinance regulating the disclosure of the tender offer of the share certificates, etc. by non-issuers (1990 Ministry of Finance Order 38, including its later revisions, hereinafter "the Ordinance") and a public notice shall be made immediately thereafter.

(iii) Existence and contents of conditions for reduction in the purchase price and the method of disclosure

In the event the Target Company takes any action indicated in Article 13 (1) of the Order pursuant to Article 27-6(1.1) of the Act, the purchase price may be reduced in accordance with the criteria in Article 19(1) of the Ordinance.  In the event the purchase price is reduced, an electronic public notice shall be made and a public notice shall also be made in the Nihon Keizai Shimbun that such electronic public notice has been made.  Provided that, in the event that it is difficult to make a public notice before the end of the Tender Offer Period, a public announcement shall be made by the method stated in Article 20 of the Ordinance and a public notice shall be made immediately thereafter.

In the event that a reduction in the purchase price is made, the share certificates, etc. tendered prior to the day of such public notice shall be purchased in accordance with the terms after the change.

(iv) Matters regarding the right of cancellation for shareholders tendered in the tender offer

Tendered shareholders may cancel the agreements regarding the tender offer at anytime during the Tender Offer Period.

In case of such cancellation of agreements, the shareholder shall deliver or send the notice stating the cancellation of the agreements (hereinafter "Cancellation Notice") to the Agent for the Tender Offer by 15:30 on the last day of the Tender Offer Period (Office hours or securities transactions hours may differ from branch to branch.  It is advisable to confirm the hours in advance.)  Note that the Cancellation Notice, if sent by mail, shall be received by no later than 15:30 of the last day of the Tender Offer Period (Office hours or securities transactions hours may differ from branch to branch.  It is advisable to confirm the hours in advance.)

The Tender Offeror shall no claim for damages or penalty against the tendered shareholder in case the shareholder cancels the agreements.

(v) Method of disclosure in the event of an amendment to the terms of the tender offer

The Tender Offeror may change the terms of purchase during the Tender Offer Period except in the cases prohibited by Article 27-6 of the Act and Article 13 of the Order.  In the event the purchasing terms are changed, the Tender Offeror shall make an electronic public notice regarding the contents of the changes and also make a public notice in the Nihon Keizai Shimbun that such electronic public notice has been made.  However, in the case it is difficult to make a public notice prior to the last day of the Tender Offer Period, the Tender Offeror may make the public announcement according to the method prescribed by Article 20 of the Ordinance and make a public notice immediately thereafter.  In case the purchasing conditions are changed, the Tender Offeror shall purchase the share certificates, etc. tendered prior to the day of such notice under the new purchasing conditions after the change.

(vi) Method of disclosure in case an amendment statement is filed

In the event the Tender Offeror files an amendment statement to the head of the Director of the Kanto Local Finance Bureau, the Tender Offeror shall immediately release a public announcement regarding the changes described in the amendment statement relevant to the contents of the notice concerning commencement of the tender offer in accordance with the method as prescribed in Article 20 of the Ordinance.  The Tender Offeror shall immediately amend the tender offer explanatory documents and deliver the amended documents to the tendered shareholders who had already received them.  However, in case that the change is within a small portion, the Tender Offeror may make the amendment by preparing and delivering to the tendered shareholders a paper specifying the reason for the amendment, the amended items and the contents after amendment.

(vii) Method of disclosing the results of the Tender Offer

The Tender Offeror shall make a public announcement of the results of this Tender Offer on the day after the last day of the Tender Offer Period by the method prescribed in Article 9-4of the Order and Article 30-2 of the Ordinance.

(viii) Others

This Tender Offer will not, directly or indirectly, be carried out in or for the U.S., nor will it be conducted using the U.S. mail service or other methods or means of inter-state trade or international trade, including but not limited to telephone, telex, facsimile, e-mail, internet communications, or via securities exchange facilities in the U.S. Applying for this Tender Offer by the above methods, means, or securities exchange facilities, or from the U.S., is not permitted.

This document or other documents related to this Tender Offer may not be sent or distributed in, to or from the U.S., by mail or other methods, and such mail or distribution is not authorized.  Application for this Tender Offer in breach of the above restrictions directly or indirectly shall not be accepted.

The tendering shareholder (or the standing agent in case of a foreign shareholder) in this Tender Offer shall respectively be required to represent and warrant the following items; they are residing in the U.S. neither at the time of application nor the time of sending the application form for the tender offer; no information regarding this Tender Offer or other documents related to this Tender Offer has been received or sent in, of from the U.S.; mail services in the U.S. or any other method or means of inter-state trade or international trade (including but not limited to the telephone, telex, facsimile, e-mail, internet communications), or securities exchange facilities in the U.S. have not been used in regard to the Tender Offer or signing or delivering of application form for this Tender Offer, either directly or indirectly;  they are not acting as agents, a trustee or a mandatory for others without discretion (except for the cases where such others are giving instructions related to the Tender Offer from outside the U.S.).

(10)The date of public notice of commencement of the Tender Offer

Monday, February 23, 2009

(11)Agent for the tender offer

Nikko Cordial Securities, Inc. 3-3-1 Marunouchi, Chiyoda-ku, Tokyo Japan

3. Policy after the tender offer and future outlook

(1)Policy after the tender offer

For the policy after the tender offer, refer to 1. Purpose of the tender offer.

(2)Outlook for future business performance after the tender offer

The expected impact of this Tender Offer is being closely examined; and in the event changes need to be made to the Company's performance forecast or other incidents occur that require disclosure, announcements will be made without delay in accordance with the rules for timely disclosures prescribed by the securities exchanges.

4. Others

(1)Existence and contents of an agreement between the Tender Offeror and the Target Company or its Directors

i.The Company has resolved at its Board of Directors meeting held on February 5, 2009 to commence talks toward the capital tiee to be implement-up and business allianced in order to turnaround the Target Company's business; and has reached an agreement on the following with the Target Company.

(i)The Company will provide the Target Company with vigorous assistance in all aspects of management.

(ii)The Company will dispatch leading members of management to the Target Company and the Target Company will accept them.

(iii)The Target Company will receive assistance from the Company, draw up specific improvement measures to thoroughly enforce corporate governance and compliance and implement these measures.

(iv)The Company will increase its holdings of the Target Company's shares and provide funding assistance to the Target Company.

Both companies share the common understanding that in order to avoid impairment of the Target Company's value prompt action must be taken to realize the capital tie-up and business alliance between the two parties.  Therefore, the Company intends to form a joint project team comprising members of both companies to discuss specific details including the number of directors to be dispatched from the Company to the Target Company, for the purpose of shaking up the latter's corporate climate and restore society's trust and business performance at the earliest possible date.  However, nothing has been decided at the present time.

ii.According to the Target Company, it carefully considered this Tender Offer during the talks and negotiations relating to the capital tie-up and business alliance with the company.  And although the Target Company has not consulted a third-party appraiser on the Tender Offer Price, in light of the designation of "shares on alert (under examination)" of its shares by the Osaka Securities Exchange, the inclusion of the statement expressing serious doubt on the going-concern assumptions of the Target Company by Deloite Touche Tohmatsu in the review report on the 3rd Quarter Report for Fiscal Year 2008 and the current level of share prices of the Target Company stemming from the above factors, it has concluded that the terms and conditions of this Tender Offer and the Tender Offer Price proposed by the Company would provide its shareholders an opportunity to sale the Target Company's share under reasonable conditions.  Moreover, upon concluding that the success of this Tender Offer would not only enhance the enterprise value and shareholder value of the two companies, but would also prove profitable to all the stakeholders of society, including the customers of the two companies and their employees, the Target Company has resolved at its Board of Directors meeting held on February 20, 2009 to express acceptance of this Tender Offer.

Also according to the Target Company, Mr. Seiji Manabe, a Director of the Company who serves concurrently as the Statutory Auditor of the Target Company refrained from expressing an opinion on this Tender Offer in order to avoid conflict of interest.  However, all the Statutory Auditors excluding Mr. Manabe, expressed opinions in favor of this Tender Offer.

(2)Other information necessary for shareholders to determine whether to tender or not

(i)As the Target Company prepares quarterly consolidated financial statements, it has submitted the following; 1st Quarter Report (August 14, 2008) for Fiscal Year 2008 (74th Fiscal Term), Revision Report of the 1st Quarter Report (February 17, 2009) for Fiscal Year 2008 (74th Fiscal Term), 2nd Quarter Report (December 26, 2008) for Fiscal Year 2008 (74th Fiscal Term), Revision Report of 2nd Quarter Report (February 17, 2009) for Fiscal Year 2008 (74th Fiscal Term), and the 3rd Quarter Report (February 17, 2009) for Fiscal Year 2008 (74th Fiscal Term).  The quarterly financial statements of the Target Company based on the above reports are as follows:

Period 1st Q of FY 2008
(74th fiscal term)
2nd Q of FY 2008
(74th fiscal term)
3rd Q of FY 2008
(74th fiscal term)
Net sales (million yen) 41,378 39,587 46,967
Cost of sales (million yen) 39,566 38,012 45,086
Selling, general and administrative expenses (million yen) 1,724 1,905 1,853
Non-operating income (million yen) 108 68 77
Non-operating expenses (million yen) 58 64 66
Quarterly Net income (million yen) 25 ▲183 ▲283
Period 1st Q of FY 2008
(74th fiscal term)
2nd Q of FY 2008
(74th fiscal term)
3rd Q of FY 2008
(74th fiscal term)
Quarterly net income (loss) per share (yen) 1.83 ▲13.18 ▲20.40
Dividend per share (yen)
Net assets per share (yen) 453.68 427.27 389.69

(ii) On February 17, 2009, the Target Company released the Announcement on loss on valuation of investment securities as of the end of the 3rd quarter of fiscal year 2008, the Announcement of revised performance forecast, and the Announcement of revised dividend forecast for fiscal year 2008 (74th fiscal term).  The outlines of the above announcements are as follows.  The following represents excerpts of the details announced by the Target Company.

i. Total loss on valuation of investment securities as of the end of the 3rd quarter of fiscal year 2008

(Consolidated)

(A) Total loss on valuation of investment securities as of the end of the 3rd quarter of fiscal year 2008 (million yen) 392
(B) Net assets for fiscal year 2007 (million yen)
(A/B x 100)
6,308(6.2%)
(C) Average amount of ordinary income for fiscal years 2003 through 2007 (million yen)
(A/C x 100)
997(39.3%)
(D) Average amount of net income for fiscal years 2003 through 2007 (million yen)
(A/D x 100)
275(142.5%)

(Non-consolidated)

(A) Total loss on valuation of investment securities as of the end of the 3rd quarter of fiscal year 2008 (million yen) 346
(B) Net assets for fiscal year 2007 (million yen)
(A/B x 100)
5,964(5.8%)
(C) Average amount of ordinary income for fiscal years 2003 through 2007 (million yen)
(A/C x 100)
928(37.2%)
(D) Average amount of net income for fiscal years 2003 through 2007 (million yen)
(A/D x 100)
248(139.5%)

ii. Revision to the consolidated performance forecast for fiscal year 2008 (April 1, 2008 to March 31, 2009)

  Net sales Operating income Ordinary income Net income Net income per share
Previously announced forecast (A) (million yen) 176,000 750 850 50 3.60
Revised forecast (B) (million yen) 164,000 ▲230 ▲170 ▲500 ▲32.63
Difference (B – A) (million yen) ▲12,000 ▲980 ▲1,020 ▲550
Percentage difference (%) ▲9.4
Results for the previous year (FY 2007) 175,392 491 616 ▲1,514 ▲108.84

iii.Revision to the non-consolidated performance forecast for fiscal year 2008 (April 1, 2008 to March 31, 2009)

Net sales Operating income Ordinary income Net income Net income per share
Previously announced forecast (A) (million yen) 170,000 700 800 0 0.00
Revised forecast (B) (million yen) 153,000 ▲350 ▲300 ▲550 ▲39.54
Difference (B – A) (million yen) ▲17,000 ▲1,050 ▲1,100 ▲550
Percentage difference (%) ▲10.0
Results for the previous year (FY 2007) 168,435 373 488 ▲2,023 ▲145.43

iv.Details of revised dividend forecast

  Interim Year-end Full year
Previous forecast (June 26, 2008) (yen) 15.00 15.00
Revised forecast (yen) 10.00 10.00
(Reference) Actual dividend per share for the previous year (yen) 15.00 15.00

(3) As a result of the Target Company’s business partners filing for the commencement of bankruptcy procedures as of January 27, 2009, the Target Company has submitted to the Kinki Finance Bureau on February 27, 2009, a provisional report stating potential inability to collect or potential delays in collecting claims from these business partners. The outline of said report is as follows.

iThe types and amounts of claims to business partners

Daicho Shoten: Accounts receivable 11 million yen
Loans 898 million yen
Kaihou Co., Ltd.: Accounts receivable 288 million yen

iiThe effect of these events on the business of the Target Company

An allowance for doubtful accounts has been recorded in regard to 1,139 million yen of the amount of claims to these companies in the previous year and the remaining amount has been treated in the closing of accounts for fiscal year 2008.

(4)After the commencement of this Tender Offer, on March 6, 2009, the Target Company announced that although it prepared and submitted to the Kinki Finance Bureau on February 17, 2009 revised reports of the Annual Securities Reports and other reports for each term from fiscal year 2003 to the 2nd Quarter of fiscal year 2008, it resubmitted to the Kinki Finance Bureau on March 6, 2009 the revised reports dated March 6, 2009, since the entries stating the reasons for submitting these revised reports were unsatisfactory for each term from fiscal year 2003 to fiscal year 2007 (the revised report for the first half of the year in terms of fiscal year 2007). According to the revised report dated March 6, 2009, the revisions in the revised reports dated March 6, 2009 had been submitted without the attachment of an audit report, as Misuzu Audit Corporation (known as ChuoAoyama PricewaterhouseCoopers prior to September 1, 2006) had been dissolved as of July 31, 2007 and had ceased to perform audit operations; and the Target Company had not undergone an audit as it had been unable to select an independent auditor in a timely manner, and thus had to resort to submitting these reports without the attachment of audit reports. However, the Target Company has announced that it intended to select an independent auditor and submit a revised report including an audit report by April 30, 2009.