Sony Computer Entertainment Inc. Becomes a Wholly-Owned Subsidiary of Sony Corporation
November 28 2003 - 4:53AM
UK Regulatory
Sony Corporation
At the Board of Directors' Meeting held today, Sony Corporation
("Sony") decided to make Sony Computer Entertainment Inc. ("SCE") a wholly-owned
subsidiary through a stock for stock exchange on April 1, 2004. This stock for
stock exchange will be implemented under Article 358 of the Commercial Code and
does not require the approval of Sony's General Meeting of Shareholders.
1. Purpose of making SCE a wholly-owned subsidiary
Sony's Corporate Strategy Meeting held on October 28, 2003 included measures to
promote growth through the convergence of group resources and technology. By
making SCE a wholly-owned subsidiary, Sony aims to accelerate this growth
strategy by creating new markets through the convergence of electronics and game
technology and by strengthening Sony's semiconductor development.
2. Conditions of the stock for stock exchange, etc.
(1) Stock for stock exchange schedule
November 27, 2003 Board meeting to approve the stock for stock exchange
agreement (SCE)
November 28, 2003 Board meeting to approve the stock for stock exchange
agreement (Sony)
November 28, 2003 Conclusion of the stock for stock exchange agreement
December 25, 2003 Shareholders meeting to approve the stock for stock exchange
agreement (SCE)
March 31, 2004 Last day of the share certificate submission period (SCE)
April 1, 2004 Effective date of the stock for stock exchange
*Pursuant to the provisions of Clause 1 of Article 358 of the Commercial Code,
Sony shall perform the stock for stock exchange with SCE without approval of the
stock for stock exchange agreement by its shareholders.
(2) Stock for stock exchange ratio
Sony retained Morgan Stanley Japan Limited ("Morgan Stanley") and SCE retained
Merrill Lynch Japan Securities Co., Ltd. ("Merrill Lynch"), respectively, for
advice on the analysis of the stock for stock exchange ratio and other relevant
matters. Based on such advice and other considerations, Sony and SCE negotiated
and came to an agreement on the stock for stock exchange ratio as follows.
The stock for stock exchange ratio shown below may be changed through
discussions between Sony and SCE, if there are any material changes in any of
the various conditions based on which the ratio has been determined.
Sony SCE
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Stock for stock exchange
ratio 1 10,000
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(Each share of SCE common stock shall be exchanged for 10,000 shares of the
common stock of Sony)
(Notes) 1. Sony has received an opinion letter from Morgan Stanley that states
that the aforementioned Exchange Ratio is fair to Sony from a financial point of
view based on and subject to certain assumptions and conditions. A copy of the
opinion letter will be attached to the Statement of the Reasons for Setting the
Ratio for Exchange of Shares to be furnished at the head office of Sony pursuant
to Clauses 1 and 9 of Article 358 of the Commercial Code. The assumptions and
conditions made or used by Morgan Stanley in the preparation of the opinion are
set forth in such opinion letter. In the preparation of its opinion, Morgan
Stanley has performed a DCF (Discounted Cash Flow) analysis, a comparable
companies analysis and other analyses it deemed appropriate to estimate the
equity values of Sony and SCE on a consolidated basis, estimated the incremental
value of synergies expected as the result of the transaction, and analyzed the
trading performance of Sony's common stock. Morgan Stanley holds the view that
focusing exclusively on any particular valuation method or giving specific
weights to different methods to make a mechanical calculation is inappropriate
and, accordingly, considered all of its analyses as a whole in arriving its
opinion.
2. Merrill Lynch has performed the exchange ratio analysis for this transaction
based on the estimated equity values of SCE and Sony on a consolidated basis
through the following valuation methodologies: DCF analysis incorporating value
to be created in the converging business domain of SCE and Sony, which is
realized in Sony through the contribution of SCE; publicly traded comparable
companies analysis; acquisition comparables analysis; and backward- and
forward-looking contribution analysis.
3. Number of shares to be provided in the stock for stock exchange:
1,000,000 shares of common stock of Sony will be provided.
No new shares will be issued.
3. Summary of parties (as of September 30, 2003)
(1) Trade name Sony Corporation Sony Computer Entertainment Inc.
--------------------- ----------------------------------- ------------------------------------------
(2) Field of Manufacture and sale of electronic Develop, manufacture and sell electronic
business and electrical machines and equipment using computer systems for
equipment entertainment and education and their
peripheral devices and parts
--------------------- ----------------------------------- ------------------------------------------
(3) Date of May 7, 1946 November 16, 1993
incorporation
--------------------- ----------------------------------- ------------------------------------------
(4) Location of 7-35, Kitashinagawa 6-chome, 6-21, Minamiaoyama 2-chome,
head office Shinagawa-ku, Tokyo Minato-ku, Tokyo
--------------------- ----------------------------------- ------------------------------------------
(5) Representative Nobuyuki Idei, Ken Kutaragi,
Representative Corporate Executive Representative Director
Officer
--------------------- ----------------------------------- ------------------------------------------
(6) Share capital 480,261 million yen 1,933 million yen
--------------------- ----------------------------------- ------------------------------------------
(7) Total number of
shares issued and 929,488,030 shares 38,500 shares
outstanding
--------------------- ----------------------------------- ------------------------------------------
(8) Shareholders' 1,849,256 million yen 156,413 million yen
equity
--------------------- ----------------------------------- ------------------------------------------
(9) Total assets 3,663,008 million yen 495,609 million yen
--------------------- ----------------------------------- ------------------------------------------
(10) Date of March 31 March 31
settlement
--------------------- ----------------------------------- ------------------------------------------
(11) Number of
employees 17,730 2,000
--------------------- ----------------------------------- ------------------------------------------
(12) Major Affiliated manufacturing and sales Affiliated manufacturing and sales
customers companies inside and outside Japan companies inside and outside Japan
--------------------- ----------------------------------- ------------------------------------------
(13) Major 1 Moxley & 1 Sony Corporation 99.74%
shareholders and Co. 12.8% 2 Ken Kutaragi 0.26%
voting rights ratios 2 Japan Trustee Services Bank,Ltd.
(Trust
Account) 5.0%
3 The Chase Manhattan Bank,
N. A.
London 3.4%
4 The Master Trust Bank of Japan,
Ltd. (Trust
Account) 2.9%
5 Sumitomo Mitsui Banking
Corporation 1.3%
--------------------- ----------------------------------- ------------------------------------------
(14) Main banks Sumitomo Mitsui Banking Sumitomo Mitsui Banking Corporation and
Corporation, others
The Bank of Tokyo-Mitsubishi, Ltd.
and others
--------------------- ----------------------------------- ------------------------------------------
(15) Business results for the three most recent years (unit: millions of yen)
Sony SCE
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Fiscal year ended on 2001/3/31 2002/3/31 2003/3/31 2001/3/31 2002/3/31 2003/3/31
----------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net sales 3,007,584 2,644,195 2,526,264 625,880 788,207 735,701
----------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) 50,458 (52,994) (136,644) 9,259 47,337 41,683
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Ordinary
income (loss) 81,502 (6,122) (29,525) 4,643 46,781 43,012
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Net income (loss) 45,002 29,635 (4,868) 3,339 28,686 24,215
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Net income (loss) per share (yen) 49.18 32.22 (5.46) 86,736 745,100 622,391
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Dividends per share (yen) 25 25 25 0 343,000 0
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Shareholders' equity per share (yen) 2,021.33 2,024.10 1,968.62 2,792,768 3,705,947 3,798,807
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4. Circumstances after the stock for stock exchange
(1) Trade name Sony Corporation
(2) Field of business
Manufacture and sale of electronic and electrical machines and equipment
(3) Location of head office
7-35, Kitashinagawa 6-chome, Shinagawa-ku, Tokyo
(4) Representative Nobuyuki Idei
Representative Corporate Executive Officer
(5) Share capital
This stock for stock exchange will not effect the amount of Sony 's share
capital.
(6) Effect on business result
This stock for stock exchange will not have a material effect on Sony's business
results.
Contact:
Sony Corporation
Corporate Communications
TEL: 03-5448-2200