Showa Denko K.K. (hereinafter referred to as the “Company”) hereby announces that Showa Denko Materials Co., Ltd. (hereinafter referred to as “SDMC”), the Company’s consolidated subsidiary, has determined by its board of directors today that (i) SDMC shall have a newly established, wholly owned subsidiary of it named Energy Storage Devices Spin-Off Preparation Co., Ltd. (hereinafter referred to as “NewCo”; its company name shall be hereafter changed upon discussion) succeed the energy storage devices and systems business in which SDMC is engaged at its Saitama Works and Nabari Works (hereinafter referred to as the “Business”) through an absorption-type company split (hereinafter referred to as the “Company Split”), thereafter, (ii) SDMC shall transfer all shares of NewCo and the directly or indirectly owned shares of Energy System Service Japan Co., Ltd., CSB Energy Technology Co., Ltd., Siam Magi Co., Ltd., Thai Energy Storage Technology Public Company Limited, Thai Nonferrous Metal Co., Ltd., 3K Products Company Limited, and Power Plas Company Limited to Sustainable Battery Solutions, Inc. (hereinafter referred to as “SBS”), operated by Sustainable Battery Holdings, Inc. whose largest shareholders are the funds (hereinafter collectively referred to as the “AP Funds”) served by Advantage Partners Inc. (hereinafter referred to as “AP”) (such transfer hereinafter referred to as the “Share Transfer” and, collectively with the Company Split, the “Transaction”).
The Transaction will be concluded on the condition that SBS obtains the clearances and licenses necessary under the domestic and international competition laws and other laws and regulations.
Because the Company Split spins off a wholly owned subsidiary of SDMC (the Company’s consolidated subsidiary), some disclosure items and details have been omitted from this press release.
1. Purpose of the Transaction
The Business of the Company Group (collectively meaning the Company, its subsidiaries, and affiliates; the same shall apply hereinafter) originates in the manufacture and sale of storage batteries initiated in 1916 by Nippon Storage Battery MFG. Co., Ltd., the predecessor of Shin-Kobe Electric Machinery Co., Ltd. In 1972, following SDMC’s acquisition of a majority of the shares of Shin-Kobe Electric Machinery Co., Ltd., the Company Group made a full-scale entry into the Business. Since this entry, the Company Group has continued in research and development for the Business, focusing on trends in the battery market. As a result, we have gained a particular advantage in product performance driven by our unique technology and established a track record of delivering high-quality batteries for vehicles and industrial use based on such technology to excellent clients, including major automobile companies and major telecommunications carriers both in Japan and abroad. Further, backed up by such advanced technological capabilities and the product appeal of high-quality batteries, we have recently expanded our business overseas such as Thailand and Taiwan and have gradually developed a global system for the Business.
On the other hand, as announced in the “Long-Term Vision for Newly Integrated Company (2021-2030)” published by the Company on December 10, 2020, the Company Group aims to realize a Group-wide breakthrough by integrating the midstream materials technology of the Company, the downstream application technology of SDMC, and the evaluation and analysis technology of both companies to provide customers with one-stop solutions and new functions as a globally top-level, functional chemical manufacturer and to contribute a sustainable society. In addition, with an aim to realize this vision, the Company Group has developed a highly complementary business portfolio consisting of “Core Growth,” “Next-Generation,” “Stable Earnings,” and “Fundamental Technologies/Materials” businesses. With each of these four business categories demonstrating a high level of competitiveness commensurate with their respective roles, we will continue to provide new functions to the market and realize sustainable growth. In particular, we are ready to aggressively invest in the “Core Growth” and “Next-Generation” businesses, focusing on electronics, mobility, and life science that can lead to the future growth of the Company Group.
In examining the optimal allocation of resource and business portfolio management to realize sustainable growth based on this long-term vision, the Company Group carefully considered all available options for operation of the Business of SDMC, our consolidated subsidiary. As a result, we reached the conclusion that the best option for stakeholders, including clients of the Business, daily end-users of the Company Group’s Business products, and employees engaged in the Business, is to promote the expansion of the Business through business partners that possess or have access to specialized knowledge and management resources for renewable energy and automobile industry etc. that are relevant to the Business. We decided that the best business partner for this endeavor would be SBS, one of the leading investment companies in Japan, with experience in a considerable number of projects similar to the Transaction, and with a variety of expertise. We therefore determined to promote the Business with SBS.
The Company is confident that the realization of the Transaction will enable the NewCo etc. which shall operate the Business subject to the Transaction to (i) gain the support of SBS and its shareholders for the Business operations and utilize their abundant management resources in an aggressive and strategic manner, (ii) execute its flexible and bold business strategies as an independent company, and (iii) thereby achieve further growth and enhanced competitiveness.
2. Outline of the Company Split
*Please see www.sdk.co.jp/assets/files/english/news/2021/20210708_sdknewsrelease1_e.pdf
3. Outline of the Share Transfer
*Please see www.sdk.co.jp/assets/files/english/news/2021/20210708_sdknewsrelease1_e.pdf
4. Future Prospects
Regarding the impact of the Transaction on the consolidated operations results, please refer to the “Showa Denko to Record Extraordinary Loss, and Revises Forecast of Consolidated Performance” disclosed today simultaneously.
Note: Overview of Advantage Partners
Advantage Partners is an independent Japanese service provider committed to developing Japan’s private equity investment market since its earliest stage, when it first started providing services for Japan’s first buyout focused fund in 1997. The Advantage Partners group provides services to buyout funds focusing on medium-sized Japanese companies, a buyout fund focusing on medium-sized companies throughout Asia, and a private solutions fund supporting the growth of listed companies through minority investments. Advantage Partners affiliated funds possess a rich track record of successful turnaround projects built on investments in over 100 companies through the past 24 years, accumulated investment knowledge and management support expertise, and a large team of high-caliber investment professionals. They engage in investment activities based on the philosophy of “nurturing our portfolio companies into firms that remain resolutely competitive, even after they have left our funds,” and “supporting a management process that provides value not only to our funds and the investors that backed them, but that also allows other shareholders, employees, business partners and financial institutions to enjoy economic value even after we have completed our investment.” For more information, please visit their website (https://www.advantagepartners.com/en/).
Note: Overview of Tokyo Century Corporation
Tokyo Century has developed a business model based on the concept of “Finance x Services x Business Expertise” in collaboration with partner companies within and outside Japan and based on a largely unrestricted management environment free from regulatory constraints. Tokyo Century is developing their business in four (4) areas: “Equipment Leasing” with a broad base of customers; “Mobility & Fleet Management,” which covers automobile leasing for individuals/corporations and car rental businesses; “Specialty Financing” for accelerating businesses, such as aviation, real estate, and renewable energy; 11 and “International Business” with locations in over thirty countries and regions, thereby enabling unique financial services that contribute to solving social issues in wide-ranging business areas. Further, they have invested in Advantage Partners (H.K.) Limited, the managing company of the Advantage Partners group, based on a strategic alliance entered into in 2019, and are cooperatively promoting the principal investment business as a partner. For more information, please visit their website (https://www.tokyocentury.co.jp/en/).
About Showa Denko K.K.
Showa Denko K.K. (SDK; TSE:4004, ADR:SHWDY) is a major manufacturer of chemical products serving from heavy industry to computers and electronics. The Petrochemicals Sector provides cracker products such as ethylene and propylene, the Chemicals Sector provides industrial, high-performance and high-purity gases and chemicals for semicon and other industries, the Inorganics Sector provides ceramic products, such as alumina, abrasives, refractory/graphite electrodes and fine carbon products. The Aluminum Sector provides aluminum materials and high-value-added fabricated aluminum, the Electronics Sector provides HD media, compound semiconductors such as ultra high bright LEDs, and rare earth magnetic alloys, and the Advanced Battery Materials Department (ABM) provides lithium-ion battery components. For more information, please visit www.sdk.co.jp/english/.