KAWASAKI, Japan, TOKYO, Japan, September 16, 2009 -- NEC Electronics Corporation (NEC Electronics; TSE: 6723), Renesas Technology Corp. (Renesas), NEC Corporation (NEC; TSE: 6701), Hitachi, Ltd. (Hitachi; TSE: 6501 / NYSE: HIT), and Mitsubishi Electric Corporation (Mitsubishi Electric; TSE: 6503) today announced that they have signed a definitive agreement to integrate business operations at NEC Electronics and Renesas (the “Business Integration”). The Business Integration will become effective following the adoption of the resolutions at the Extraordinary General Meeting of Shareholders of NEC Electronics and Renesas and approval by authorities concerned.
As a condition to the Business Integration, Renesas will issue shares of Renesas common stock to Hitachi and Mitsubishi Electric, the sole shareholders of Renesas, in exchange for a total of 78 billion yen before the effective date of the Business Integration (the “Pre-merger Capital Injection”). In addition, on the effective date of the Business Integration (scheduled to be April 1, 2010), the integrated company after the Business Integration (the “Integrated Company”) will issue shares of its common stock to NEC, Hitachi, and Mitsubishi Electric in exchange for a total of approximately 122 billion yen (the “Post-merger Capital Injection”).
1. Goals of Business Integration
Both as leading semiconductor companies, NEC Electronics and Renesas provide a wide variety of semiconductor solutions, primarily specializing in microcontroller units (MCUs). In light of fierce global competition and structural changes triggered by the rapid expansion of emerging markets in the semiconductor market, NEC Electronics and Renesas have been exploring the possibility of the Business Integration after signing a basic agreement on April 27, 2009, in order to further strengthen their business foundations and technological assets, while increasing corporate value through enhanced customer satisfaction.
The Integrated Company will provide globally competitive products in its three major product groups, MCUs, SoCs, and discrete products, by concentrating its development resources to further strengthen the companies’ respective advantages. The Integrated Company aims to expand its business by offering complete solutions that extend the three major groups to best fit the requirement of customers of all kinds of industries.
In order to address the ongoing challenges of the current economic downturn, NEC Electronics and Renesas will each continue to execute structural reform plans in order to strengthen their business frameworks. The two companies will integrate their operations and generate synergies to establish a powerful new semiconductor company that is capable of consistently achieving high earnings in order to withstand changing semiconductor market conditions.
2. Outline of Business Integration
(1) Schedule of Business Integration
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Signing of basic agreement
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April 27, 2009
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Signing of definitive agreement
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September 16, 2009
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Signing of merger agreement
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By mid-January 2010
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Shareholders meetings for approval of merger agreement
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February 2010 (planned)
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Effective date of merger
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April 1, 2010 (planned)
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(2) Structure of Business Integration
The merger will be effective with NEC Electronics being the surviving entity.
(3) Integration Ratio (Ratio between equity value of NEC Electronics and that of Renesas after completion of the Pre-merger Capital Injection)
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NEC Electronics
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Renesas
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Integration Ratio
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1
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1.189
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Note 1: For the Business Integration, NEC Electronics will issue a total of approximately 146.84 million common shares to the Renesas common shareholders based on a merger ratio that will be calculated in accordance with the Integration Ratio set forth in 2-(3) above.
Note 2: The Integration Ratio represents the ratio between the total number of the NEC Electronics common shares outstanding (not including the potential shares) immediately before the Business Integration and the total number of the NEC Electronics common shares to be allocated to the Renesas shareholders as a result of the Business Integration, based on the assumption that the Pre-merger Capital Injection is funded before the Business Integration. The ratio of the number of the NEC Electronics common shares to be issued to the Renesas shareholders in exchange for a share of the Renesas common stock as a result of the Business Integration (i.e., merger ratio) will be determined at the time the merger agreement is signed.
Note 3: In accordance with Art. 124 §4 of the Corporation Law, Hitachi and Mitsubishi Electric, the new shareholders of the Integrated Company after the Business Integration, will be entitled to vote at the ordinary shareholders meeting of the Integrated Company which is scheduled to be held in June 2010.
(4) Reinforcement of capital
As a condition to the Business Integration, Renesas will issue shares of Renesas common stock to Hitachi and Mitsubishi Electric, the sole shareholders of Renesas, in exchange for an aggregate of 78 billion yen before the effective date of the Business Integration. In addition, on the effective date of the Business Integration (scheduled to be April 1, 2010), the Integrated Company will issue shares of its common stock to NEC, Hitachi, and Mitsubishi Electric in exchange for an aggregate of approximately 122 billion yen.
Note: Depending on the business result of NEC Electronics for the first half of the fiscal year ending March 31, 2010, the amount of the Pre-merger Capital Injection could be reduced and the amount of the Post-merger Capital Injection could be increased keeping the Integration Ratio as 1:1.189.
(5) Notes on share acquisition rights and bonds with share acquisition rights of Renesas
: None
3. Basis and Process of Calculation of Integration Ratio and Relationship with Financial Advisors
: Please refer to Exhibit 1 “Basis and Process of Calculation of the Integration Ratio” hereto.
4. Outline of NEC Electronics and Renesas
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(1)
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Company Name
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NEC Electronics Corporation
(Surviving entity)
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Renesas Technology Corp.
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(2)
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Major Operations
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R&D, manufacture, sale, and servicing of semiconductor devices mainly on system LSIs
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Development, design, manufacture, sale, and servicing of SoC products such as MCUs, logic devices, and analog devices; discrete semiconductor products; and memory products such as SRAM
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(3)
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Established
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November 1, 2002
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April 1, 2003
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(4)
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Headquarters
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Kawasaki City,
Kanagawa Prefecture, Japan
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Chiyoda-ku, Tokyo, Japan
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(5)
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Representative
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Junshi Yamaguchi,
President and CEO
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Katsuhiro Tsukamoto, Representative Director, Chairman
Yasushi Akao,
Representative Director, President
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(6)
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Capital
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¥85.955 billion
(As of March 31, 2009)
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¥77 billion
(As of March 31, 2009)
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(7)
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Number of Stocks Issued
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123.5 million
(As of March 31, 2009)
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5.54 million
(As of March 31, 2009)
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(8)
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Net Assets
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¥128.130 billion (As of March 31, 2009)
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¥176.888 billion (As of March 31, 2009)
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(9)
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Total Assets
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¥482.545 billion (As of March 31, 2009)
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¥682.937 billion (As of March 31, 2009)
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(10)
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End of FY
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March 31
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March 31
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(11)
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Employees
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22,476 (Consolidated,
As of March 31, 2009)
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25,000 (Consolidated,
As of March 31, 2009)
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(12)
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Major Customers
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Electronic equipment manufacturers,
Semiconductor production equipment manufacturers, Semiconductor materials manufacturers
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Electronic equipment manufacturers,
Semiconductor production equipment manufacturers,
Semiconductor materials manufacturers
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(13)
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Major Stockholders and Ownership Ratios
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NEC Corporation: 65.02%
Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account): 5.02%
(Note 1)
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Hitachi, Ltd.: 55%
Mitsubishi Electric Corporation: 45%
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(14)
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Main Banks
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Sumitomo Mitsui Banking Corporation
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The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd.
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(15)
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Present Relationship between Corporate Parties
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Capital Ties
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Renesas owns 100 shares of stock in NEC Electronics.
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Personal Ties
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No relevant items
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Business Relationship
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NEC Electronics outsources some production processes to Renesas Northern Japan Semiconductor, Inc., a consolidated subsidiary of Renesas.
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Relevant Circumstances of Related Parties
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No relevant items
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(16)
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Business Performance for the last three years
(Unit: ¥1 million except for otherwise expressly stated herein)
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NEC Electronics
(Consolidated, US-GAAP)
(Note 2)
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Renesas
(Consolidated, Japan-GAAP)
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Fiscal Year Ending
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March 31, 2007
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March 31, 2008
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March
31, 2009
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March
31, 2007
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March
31, 2008
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March
31, 2009
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Net Sales
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692,280
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687,745
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546,470
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952,590
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950,519
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702,739
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Semiconductor Sales
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659,733
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653,275
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521,735
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-
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-
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-
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Operating Income (Loss)
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-28,557
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5,094
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-68,355
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23,644
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43,480
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-96,573
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Ordinary Income (Loss)
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－
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－
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－
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15,931
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29,215
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-102,799
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Income (Loss) before Income Taxes
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-35,375
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-3,252
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-89,335
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13,275
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28,171
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-136,656
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Net Profit (Loss)
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-41,500
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-15,995
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-82,625
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8,738
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9,468
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-203,257
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Net Income (Loss) Per Share (¥)
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-336.04
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-129.52
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-669.04
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1,747.52
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1,893.64
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-40,627.31
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Dividend Per Share (¥)
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0
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0
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0
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0
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0
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0
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Net Assets Per Share (¥)
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2,146.32
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1,839.20
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1,037.51
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65,735.31
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66,623.71
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31,497.69
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Note 1: 5.02% of shares which are owned Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd. / NEC Corporation pension and severance payments Trust Account) were shares that were contributed by NEC as severance indemnities trusts. The voting rights of such shares will be exercised at the instruction of NEC.
Note 2: NEC Electronics’ consolidated financial information until FY 09/3 is in accordance with U.S. GAAP. However, the figure for operating income shown above represents net sales minus the cost of sales, research and development expenses, and selling, general and administrative expenses. The figure for net assets per share shown above represents shareholders’ equity per share.
5. Outline of the Integrated Company
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(1)
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Company Name
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Renesas Electronics Corporation (Tentative name)
Note: Please refer to the attached exhibit 2 for the corporate logo of the new company.
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(2)
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Headquarters
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Kawasaki City, Kanagawa Prefecture, Japan
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(3)
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Representative
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Junshi Yamaguchi, Chairman
Yasushi Akao, President
Note: Please refer to the attached exhibit 3 for the representative of the new company.
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(4)
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Major Operations
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Research, development, design, manufacture, sale, and servicing of semiconductor products
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(5)
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Capital
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To be determined
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(6)
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End of FY
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March 31
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(7)
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Net Assets
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To be determined
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(8)
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Total Assets
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To be determined
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(9)
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Accounting Method
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To be informed upon determination
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(10)
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Business Prospects
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To be informed upon determination
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6. Outline of the third-party allotment of new shares after Business Integration
(1) Outline of Post-merger Capital Injection
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(1)
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Issuer
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Renesas Electronics Corporation (Tentative name)
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(2)
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Date of issuance
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April 1, 2010 (Note 1)
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(3)
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Number of new shares to be issued
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133,042,532 of common shares
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(4)
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Issue price
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917 yen
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(5)
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Total proceeds
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122,000,001,884 yen
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(6)
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Purchaser
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Third-party allotment
（NEC: 54,525,628 shares,
Hitachi: 43,184,297 shares, Mitsubishi Electric: 35,332,607 shares）
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(7)
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Others
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None
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Note 1: The new shares will be issued at the same date as the effective date of Business Integration. The schedule is subject to change based upon the effective date of the Business Integration.
Note 2: The figures of number of shares issued, number of allotted shares, and total proceeds are subject to increase based on the business results of NEC Electronics for the first half of the fiscal year ending March 31, 2010.
Note 3: In accordance with Art. 124 §4 of the Corporation Law, on the day of the ordinary shareholders meeting of the Integrated Company which is scheduled to be held in June 2010, NEC, Hitachi and Mitsubishi Electric will acquire voting rights of the new Integrated Company.
(2) Major stockholders and ownership ratio of Renesas Electronics Corporation after the execution of the Business Integration and the third-party allotment
NEC Corporation 33.42％
Hitachi, Ltd. 30.73％
Mitsubishi Electric Corporation 25.14％
Japan Trustee Services Bank, Ltd. (Note) 1.54%
(Trust Account from The Sumitomo Trust and Banking Co., Ltd. for retirement benefit Trust Account of NEC Corporation)
Note: 1.54% of shares which are owned by Japan Trustee Services Bank, Ltd. (Re-trust of The Sumitomo Trust and Banking Co., Ltd./NEC Corporation pension and severance payments Trust Account) were shares that were contributed by NEC as severance indemnities trusts. The voting rights of such shares will be exercised at the instruction of NEC.
7. Changes in significant parent company and major stockholders at NEC Electronics and changes in significant subsidiaries at NEC
: Please refer to “6. Outline of the third-party allotment of new shares after Business Integration” for major stockholders and ownership ratio of NEC Electronics after the execution of the Business Integration (i.e. Renesas Electronics Corporation) and the third-party allotment of new shares. NEC will no longer be the parent company of NEC Electronics, as it is no longer the majority stockholder. NEC, Hitachi, and Mitsubishi Electric will become the major stockholders of NEC Electronics.
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