kuraray


News Releases 2007

Introduction of Countermeasures (Takeover Defense)
in Response to a Large-scale Purchase of Kuraray Shares (Summary)

April 26, 2007
Kuraray Co., Ltd.

Kuraray Co., Ltd. (the "Company") is pleased to announce that the Company has decided, at the meeting of its board of directors (the "Board of Directors") held today, to introduce the below-described measures (the "Plan"), in response to large-scale purchases of the Company's shares, which is the Company's effort to protect and enhance its corporate value and the common interests of its shareholders. The Plan will be introduced effective as of the date of the Company's ordinary shareholders' meeting to be held in June, 2007) on condition that the Plan is approved by a majority of voting rights of shareholders present at the said ordinary shareholders' meeting.

1. Outline of the Company's Basic Policy and Purpose of the Introduction of the Plan

Recently, it has become obvious that a large-scale purchase of shares will be enforced suddenly without benefiting from sufficient discussions or a process of agreement with the management of the target company. It cannot be denied that some of such unilateral large-scale purchases of shares may materially damage the Company's corporate value and the shareholders' common interests if; for example, (i) the shareholders do not receive sufficient information regarding such purchase and will effectively be forced to sell their shares; (ii) the shareholders are not be given enough time to consider the conditions, manner and other substance of such purchase and the Board of Directors is not be given enough time to present alternative proposals; or (iii) the large-scale purchaser does not intend to manage the Company in a reasonable and serious manner.

The Company believes that the person controlling the Company's financial and business policy decisions should be someone who fully understands the various resources contributing to the Company's corporate value and the relationship of trust between the Company and each stakeholder supporting the Company. Moreover, such person should sincerely intend to ensure and improve upon the Company's corporate value and the shareholders' common interests for both the medium and long-term. Therefore, the Company has decided that any person who commences a large-scale purchase of shares which may materially damage the Company's corporate value or the shareholders' common interests as described above will be deemed to be inappropriate as a person controlling the Company's financial and business policy decisions.

The Plan sets out the procedures for the Large-scale Share Purchase 1) (the "Large-scale Share Purchase Rules"), as the effort which prevents a person who is deemed to be inappropriate in light of the above-mentioned basic policy from controlling the Company's financial and business policy decisions, which demand Large-scale Share Purchaser to provide necessary information for the shareholders' determination and to secure adequate period of time required for the shareholders to evaluate and examine the substance of the proposed Large-scale Share Purchase, for the purpose of enhancing the Company's corporate value and the shareholders' common interests.

2. Effective Date and Effective Term of the Plan

  • The Plan will become effective as of the date of the Company's ordinary shareholders' meeting to be held in June, 2007 on condition that the Plan is approved by a majority of voting rights of shareholders present at the said ordinary shareholders' meeting.
  • The effective term of the Plan will expire on the closure of the Board of Directors' meeting to be held immediately following the closure of the Company's ordinary shareholders' meeting to be held in 2009.

3. Outline of Large-scale Share Purchase Rule

  • Prior to initiating a Large-scale Share Purchase, a Large-scale Share Purchaser will be required to submit a statement of intention (the "Statement of Intention") to the Company containing a pledge by the Large-scale Share Purchaser to comply with the Large-scale Share Purchase Rules in implementing the Large-scale Share Purchase and other specified matters.
  • Within ten (10) business days from (excluding the first day) the receipt of the Statement of Intention, the Board of Directors will send a list specifying the information to be provided by the Large-scale Share Purchaser. The Large-scale Share Purchaser will provide the Board of Directors with such information as is necessary and sufficient for the shareholders' determination and for the Board of Directors' evaluation and examination (the "Large-scale Share Purchase Information") in accordance with this list.
  • If the Board of Directors objectively and reasonably determines that the Large-scale Share Purchaser has provided all of the Large-scale Share Purchase Information requested, the Board of Directors will give notice to the Large-scale Share Purchaser thereof and promptly disclose such fact to the shareholders. After that, the Board of Directors will fix the period of (i) sixty (60) days (in the case of a purchase of all of the Company's shares via a tender offer that limits the purchase price to cash (Japanese Yen)) or (ii) ninety (90) days (in the case of Large-scale Share Purchases other than that mentioned in item (i) above), as the period necessary for the Board of Directors' evaluation and examination of the Large-scale Purchase Information and other activities (the "Board of Directors Evaluation Period"). The Large-scale Share Purchaser may initiate a Large-scale Share Purchase only after the expiration of the Board of Directors Evaluation Period.
  • During the Board of Directors Evaluation Period, the Board of Directors will draw up its opinion concerning the Large-scale Share Purchase in question, seeking, as necessary, advice from external experts, from the perspective of protecting and enhancing the Company's corporate value and the shareholders' common interests, and provide the substance of such opinion to the Large-scale Share Purchaser and, at the same time, disclose this information to the shareholders in a timely and appropriate manner. The Board of Directors will, as necessary, consult and negotiate with the Large-scale Share Purchaser with respect to the conditions and manner of the Large-scale Share Purchase or present an alternative proposal to the shareholders.

4. Response to the Commencement of a Large-scale Share Purchase

(1) Conditions for Implementing Countermeasures

  • (i)
    Cases where the Large-scale Share Purchaser commences the Large-scale Share Purchase without complying with the Large-scale Share Purchase Rules
    In this case, the Board of Directors may, regardless of the actual conditions and manner, etc. of such Large-scale Share Purchase, deem such Large-scale Share Purchase a hostile takeover which might materially damage the Company's corporate value and shareholders' common interests and take the appropriate and necessary countermeasures.
  • (ii)
    Cases where the Large-scale Share Purchaser commences the Large-scale Share Purchase in compliance with the Large-scale Share Purchase Rules
    In this case, even if the Board of Directors objects to such Large-scale Share Purchase, the Board of Directors will not, in principle, take countermeasures against such Large-scale Share Purchase. However, if the Board of Directors determines such Large-scale Share Purchase materially damages the Company's corporate value and shareholders' common interests, the Board of Directors may take the necessary and appropriate countermeasures to protect and enhance the Company's corporate value and shareholders' common interests.

(2) Substance of Countermeasure

The Board of Directors will issue a free-of-charge-allotment of share purchase warrants (shinkabu-yoyakuken) (the "Share Purchase Warrants"), having discriminatory condition and acquisition provision, to all its shareholders as a countermeasure to be taken in accordance with Paragraph (1), Item (i) or (ii) above.

5. Establishment of the Special Committee and the Inquiry Procedures etc.

(1) Establishment of the Special Committee

In order to ensure the reasonableness and fairness of the Board of Directors' decision on whether or not to implement the countermeasure against the Large-scale Share Purchaser, the Company will establish a special committee (the "Special Committee") that is independent from the Board of Directors. The members of the Special Committee will consist of three (3) or more people and be appointed from outside corporate auditors and external knowledgeable persons.

(2) Procedures for Implementing the Countermeasures

  • The Board of Directors must make an inquiry to the Special Committee, in advance of implementing the countermeasure, about the appropriateness of implementing such countermeasure.
  • Upon such inquiry, the Special Committee will make recommendations to the Board of Directors with respect to the appropriateness of implementing the countermeasure, seeking, as necessary, advice from external experts, etc.
  • The Board of Directors must respect the Special Committee's recommendation to the greatest extent possible in making a decision on whether or not to implement the countermeasure.
  • 1) For the purpose of the Plan, Large-scale Share Purchase shall mean (a) any purchase of share certificates, etc. issued by the Company by a holder that will cause such holder's holding ratio of share certificates, etc. to become 20% or greater or; (b) any tender offer for share certificates, etc. issued by the Company that will cause the total of an offeror's holding ratio of share certificates, etc. subject to the tender offer and the aggregate holding ratio of share certificates of party(ies) having a special relationship to become 20% or greater.

This document (along with the attached flowchart) is a summary of the press release with the same title issued on April 26, 2007, which is prepared for your quick review of its substance. Please refer to the original press release for details.