KDD and Teleway Finalize the Merger Agreement
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KDD and Teleway Finalize the Merger Agreement |
| [Notification] | July 29, 1998
Kokusai Denshin Denwa Co., Ltd. |
KDD (Kokusai Denshin Denwa Co., Ltd., main office: Shinjuku- ku, Tokyo, president: Tadashi Nishimoto) and Teleway (Teleway Corporation, main office: Taito-ku, Tokyo, president: Kan Higashi) signed the merger agreement today.
1. Purpose of the Merger
Since it was established in 1953, Kokusai Denshin Denwa Co., Ltd. has made large progress by providing the world's latest technologies and high-quality service for 45 years as Japan's premier international telecommunications carrier. Now that the Kokusai Denshin Denwa Co., Ltd. Law is to be abrogated on July 30, much more nimble and dynamic management can be expected from KDD as a pure private company.
Since Teleway Corporation was founded in 1984, the company has formed a high-quality, large-capacity national network using only optical fiber cables laid along expressways across Japan. In addition, with a view to further solidifying its basis for management, Teleway increased its capital from 49.8 billion yen to 99.6 billion yen through a third party allotment capital increase in January 1998, and in March of the same year, it implemented a capital decrease without compensation by consolidating five shares into one share, thus achieving the improvement of its capital as well as the write-off of its cumulated deficit.
Functioning as the nervous system of society, telecommunications have become an essential part of life. Even more, telecommunications are now a growth business that plays a leading role in Japanese industry. At the same time, due to deregulation and economic globalization, the following changes are taking place in Japan's telecommunications market:
(1) As exemplified by the maturity of the fixed telephone market, a rapid growth of mobile communications and multimedia services, and the globalization of communications needs, the demand structure has been undergoing dynamic changes.
(2) Because the restructuring of NTT did not sever the financial ties among the companies in the NTT group, it is urgent for other carriers to boost competitiveness. At the same time, due to the lowering of restrictions on mergers between domestic and international carriers and on entry by foreign-capital companies, the competition is expected to increase in the telecommunications market.
Against such a backdrop, KDD and Teleway, through a merger on an equal basis, will converge business resources to achieve the maximum amount of synergy and establish a scale of business and level of efficiency that would make the new company competitive against domestic and foreign megacarriers in the age of global megacompetition. The companies have reached a consensus that it would be in their best interest to aim for the following:
(a) Form a high-quality, low-cost network infrastructure based on the global optical fiber cable network that connects Japan and the rest of the world.
(b) Provide inexpensive, seamless domestic-international services to further improve both customer convenience and competitiveness.
(c) Increase involvement in such growth fields as mobile communications and multimedia services.
(d) Aggressively develop operations abroad and further raise the international competitiveness of the Japanese telecommunications industry.
KDD and Teleway are confident that the new company, as a general telecommunications carrier in the global market, will meet the expectations of the Japanese people and society and that it will make substantial contributions to the development of the Japanese economy and society as a whole.
2. Gist of the Merger
(1) Tentative merger schedule
| Meeting of board of directors for approval of merger agreement | ||
| KDD | July 29, 1998 | |
| Teleway | August 7, 1998 (scheduled) | |
| General meeting for approval of merger agreement | ||
| KDD | September 30, 1998 (scheduled) | |
| Teleway | September 30, 1998 (scheduled) | |
| Merger date | ||
| December 1, 1998 (scheduled) | ||
(2) Merger method
Kokusai Denshin Denwa Co., Ltd. And Teleway Corporation will merge on equal terms. However, for the purpose of the merger procedure, while Kokusai Denshin Denwa Co., Ltd. will continue to exist, Teleway Corporation will be dissolved.
(3) Merger ratio
| Company | KDD (Face value per share:500 yen) | Teleway (Face value per share:50,000 yen) |
| Merger Ratio | approx. 3.33 | 1 |
Thirty (30) shares of the stock of Kokusai Denshin Denwa Co.,Ltd.(Face value: 500 yen) will be allotted against one (1) share of the stock of Teleway Corporation(Face value: 50,000yen).
(Notes)
1.Grounds for the merger ratio calculated
The merger ratio of 30 shares of KDD's stock to 1 share of TelewayÕs stock was adopted as an approximately mean value derived from the result of assessment made by a third party consulting firm, Chuo Coopers & Lybrand Advisers Co., Ltd. that the value of TelewayÕs stock equals that of KDDÕs stock by a ratio of 28 to 33. In calculating the merger ratio, adopting the KDD's stock price (average of the closing prices for six months from January to June, 1998) and the TelewayÕs estimated stock price obtained by comprehensively taking account of the net asset value and the value appraised in accordance with the DCF method, a kind of earnings reduction method, these two stock prices were compared. Teleway separately has obtained the same estimation assessed by Goldman Sachs Securities Tokyo Branch.
2. Number of new shares issued as a result of the merger
| Par value stock | 11,952 thousands shares (500 yen per share) |
3. Profiles of the Merging Companies
| (1) | Name | Kokusai Denshin Denwa Co., Ltd. | Teleway Corporation | ||
| (2) | Business type | Type 1 Telecommunications carrier |
Type 1 Telecommunications carrier |
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| (3) | Date established | March 24, 1953 | November 16, 1984 | ||
| (4) | Address of main office | 3-2 Nishi-Shinjuku 2-chome, Shinjuku-ku, Tokyo |
20-8 Asakusabashi 5-chome, Taito-ku, Tokyo |
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| (5) | Representative | Tadashi Nishimoto | Kan Higashi | ||
| (6) | Capital | 34,526 million yen | 19,920 million yen | ||
| (7) | Outstanding stock (face value) |
64,272,823 (500 yen) |
398,400 (50,000 yen) |
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| (8) | Stockholders equity | 358,237 million yen | 31,306 million yen | ||
| (9) | Total assets | 674,391 million yen | 169,955 million yen | ||
| (10) | Date of settlement |
March 31 | March 31 | ||
| (11) | Number of employees |
5,003 | 1,240 | ||
| (12) | Major stockholders and percentage of ownership | 1.Ministry of Posts and Telecommunications Mutual Aid Association | 10.98% | 1.Toyota Motor Corporation | 53.76% |
| 2.Nippon Telegraph and Telephone Corporation | 9.99% | 2. Mitsubishi Corporation | 3.10% | ||
| 3.Nippon Life Insurance Company | 6.00% | 3. Mitsui & Co., Ltd. | 2.14% | ||
| 4.The Dai-Ichi Mutual Life Insurance Company | 4.14% | 4. Sumitomo Corporation | 1.90% | ||
| (13) | Principal banks | Industrial Bank of Japan | Japan Development Bank | ||
| Dai-Ichi Kangyo Bank | Sakura Bank | ||||
| Sakura Bank | Tokyo Mitsubishi Bank | ||||
(14) Financial results in the last three years
| Kokusai Denshin Denwa Co., Ltd. | Teleway Corporation | |||||
| Fiscal year | FY ending in March 1996 | FY ending in March 1997 | FY ending in March 1998 | FY ending in March 1996 | FY ending in March 1997 | FY ending in March 1998 |
| Revenues (in millions of yen) |
248,333 | 322,458 | 316,413 | 103,976 | 111,930 | 108,492 |
| Ordinary income (in millions of yen) |
31,248 | 20,807 | 16,761 |  5,730 |
809 | 3,587 |
| Net income (in millions of yen) |
13,859 | 10,165 | 8,451 | 5,818 |
734 | 3,658 |
| Earnings per share (yen) | 215.63 | 158.16 | 131.50 | 5,842.24 |
737.12 | 3,100.46 |
| Dividend per share (yen) | 50 | 50 | 50 | - | - | - |
| Stockholders' equity per share (yen) | 5,387.92 | 5,493.98 | 5,573.70 | 15,632.12 |
14,894.99 |
78,580.06 |
4. Profile of the New Company
| (1) | Name | KDD Corporation | |
| (2) | Operations | Type 1 Telecommunications carrier | |
| (3) | Address of main office | 3-2 Nishi-Shinjuku 2-chome, Shinjuku-ku, Tokyo | |
| (4) | Representative |
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| (5) | Capital | 40,502 million yen (sum of the capital 34,526 million yen as of March 31, 1998 and increase of the capital 5,976 million yen as a result of merger) |
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| (6) | Total assets | 844,346 million yen (sum of the total assets of the two companies as of March 31, 1998) |
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| (7) | Settlement Date | March 31 | |
| (8) | Two-year forecast of financial performance after merger | ||
| FY ending in March 1999 | FY ending in March 2000 | ||
| Revenues (in millions of yen) |
354,000 | 445,000 | |
| Ordinary income (in millions of yen) |
10,000 | 20,000 | |
| Net income (in millions of yen) |
6,000 | 11,000 | |
| Note: The forecast for FY ending in March 1999 does not include the forecast for Teleway for the period between April and November. | |||