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Tokyo, May 23, 2008 - CSK HOLDINGS CORPORATION ("CSK Holdings") and Cosmo Securities Co., Ltd. ("Cosmo Securities") today announced that at meetings of their respective boards of directors it was resolved that CSK Holdings would make Cosmo Securities a wholly owned subsidiary through an exchange of shares as outlined below, and that the two companies have concluded a share exchange agreement.
Ahead of the effective date of the share exchange agreement, the last trading date for shares of Cosmo Securities will be July 25, 2008, with Cosmo Securities to be delisted from the Tokyo Stock Exchange, the Osaka Securities Exchange and the Nagoya Stock Exchange.
1. Objective
CSK Group is aiming to transform into a service provider group that creates new services that society needs, as a Group that contributes to society and supports the sustainable development of industry and society as a whole. To date CSK Group has had two core earnings pillars: IT Services Business, which the Group has been conducting since its foundation; and Financial Services Business, comprising real estate securitization business that has generated stable revenues over the past several years. Now, as CSK Holdings has been steadily developing its resources for pursuing securities-related business in the Group, it has begun initiatives for establishing Securities-related Business as a full-fledged core Group business. Consequently it has decided to make Cosmo Securities, the Group's core company in the securities-related business, a wholly owned subsidiary, and that the Group as a whole will work together to pursue Securities-related Business.
CSK Group is involved in a broad range of securities-related business other than securities business conducted by Cosmo Securities. Activities of other Group companies include consultancy about the establishment and operation of securities companies, securities systems development and management services, securities systems ASP services, securities business BPO services, compliance support, telemarketing, financial information feed services, investment trust business, investment advisory business, product planning and development, venture capital business, buyout fund business, and securities intermediation business.
Cosmo Securities has an abundance of high-quality assets, including a large customer base, a large amount of assets under management, and excellent human resources, and has developed a robust operating base particularly in the Kansai region of west Japan. However, it has been substantially impacted by global financial and credit instabilities triggered by the sub-prime loan problem, and its costs have increased rapidly due to making active business investments to secure human resources and strengthen corporate business. As a result, and in light of present and projected future market conditions, Cosmo Securities faces a severe earnings environment. In order to turn this situation around and ensure stable and strong profitability, Cosmo Securities must develop a variety of new management policies.
The objective for making Cosmo Securities a wholly owned subsidiary is to ensure that Cosmo Securities realizes the potential noted above and improves its current business situation. This will be done by effectively and flexibly implementing new management policies, such as making focused allocation of business resources and personnel to strengthen retail business by moving forward with the channel strategy being implemented since last fiscal year. Cosmo Securities has until now been expected to play the role of supplying business expertise and market access to other companies within the CSK Group. In the future, however, Cosmo Securities will pursue the Group's overall securities-related business strategy together with the rest of the Group, by actively exchanging business resources and personnel with other Group companies. Through this, the intention is to increase the corporate value of CSK Group and Cosmo Securities.
By combining the capabilities, resources and business expertise of Cosmo Securities and the experience and resources in IT services business and securities business that CSK Group has gained to date, CSK Group and Cosmo Securities will work to provide a comprehensive securities platform, as part of delivering new services to meet the emerging needs of society, so that securities companies and other companies entering the securities business can feel confident in mandating CSK Group to take care of all their related business needs. The companies will also provide services for individual investors.
2. Overview of share exchange
(1) Schedule of share exchange
Shareholders' meeting record date
(Cosmo Securities) | March 31, 2008 |
Board resolution on share exchange
(both companies) | May 23, 2008 |
Conclusion of share exchange agreement
(both companies) | May 23, 2008 |
Approval of share exchange at
shareholders' meeting (Cosmo Securities) | June 25, 2008 (planned) |
Last date of trading on exchanges
(Cosmo Securities) | July 25, 2008 (planned) |
Delisting date (Cosmo Securities:
Osaka Securities Exchange) | July 26, 2008 (planned) |
Date of delisting (Cosmo Securities:
Tokyo Securities Exchange
and Nagoya Stock Exchange) | July 28, 2008 (planned) |
Scheduled date (effective date)
of share exchange | August 1, 2008 (planned) |
| Delivery date of share certificates | Mid-September 2008 (planned) |
Notes:
| 1. | CSK Holdings plans to carry out the share exchange without seeking approval at its shareholders' meeting, in line with the provisions of Article 796-3 of Japan's Companies Act (summary share exchange). |
| 2. | The above schedule is subject to change if both parties agree that it is necessary to make changes from a procedural perspective or for other reasons. |
(2) Details of share allotment ratio, etc.
| Company name |
CSK Holdings
(wholly owning parent company) |
Cosmo Securities
(wholly owned subsidiary) |
| Share allotment ratio |
1 |
0.046 |
| No. of new shares to be delivered through the share exchange |
Not decided |
Notes:
| 1. |
Share allotment ratio |
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0.046 ordinary shares of CSK Holdings will be delivered for every 1 ordinary share of Cosmo Securities.
CSK Holdings holds 210,900,000 ordinary shares of Cosmo Securities at present. CSK Holdings will not allocate shares through the share exchange with respect to ordinary shares in Cosmo Securities held by CSK Holdings on the date of the share exchange. In the period from May 26, 2008 to July 25, 2008, based on compliance with related laws and regulations CSK Holdings plans to acquire a maximum of 4,236,000 shares in Cosmo Securities (approximately 1% of the total outstanding shares in Cosmo Securities). The acquisition by CSK Holdings of shares on the open market before the effective date of the share exchange will result in increased liquidity in the market for shares of Cosmo Securities. |
| 2. |
Number of shares to be delivered through the share exchange, etc. |
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In this share exchange, CSK Holdings will allocate and deliver ordinary shares in CSK Holdings to each shareholder of Cosmo Securities (including beneficial shareholders but excluding CSK Holdings; same hereafter). The number of shares delivered will be the total number of ordinary shares held by each shareholder in Cosmo Securities, as recorded and registered in the final register of shareholders of Cosmo Securities (including the register of beneficial shareholders) on the day before the effective date of the share exchange (August 1, 2008), multiplied by 0.046.
CSK Holdings currently holds 8,121,892 shares of treasury stock. Of the shares in CSK Holdings to be delivered in the share exchange, a number of shares equivalent to number of shares of treasury stock held by CSK Holdings on the effective date of the share exchange will be allocated and delivered from the treasury stock of CSK Holdings. If the total number of shares to be delivered in the share exchange exceeds the number of shares of treasury stock held, the remaining shares to be delivered will be allocated and delivered by the issuance of new shares. The number of new shares to be delivered will be announced when it is determined. |
3. Overview of companies participating in share exchange (as of March 31, 2008)
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| (1) |
Name |
CSK HOLDINGS CORPORATION
(wholly owning parent) |
Cosmo Securities Co., Ltd.
(wholly owned subsidiary) |
| (2) |
Business overview |
Management and administration of CSK Group and CSK Group companies, and accompanying business operations |
Financial instruments trading business (Type 1 and Type 2)
Asset management business
Investment advisory and agency business |
| (3) |
Date of establishment |
October 1968 |
December 1917 |
| (4) |
Address of head office |
2-26-1, Minami-Aoyama, Shibuya-ku, Tokyo |
1-8-12 Imabashi, Chuo-ku, Osaka |
| (5) |
Name and title of representative |
Yoshito Fukuyama, President and Chief Executive Officer |
Masahiro Aozono, President and Chief Executive Officer
(as of April 1, 2008) |
| (6) |
Paid-in capital |
¥73,225 million |
¥32,366 million |
| (7) |
No. of outstanding shares |
78,670,524 shares |
423,601,993 shares |
| (8) |
Consolidated net assets |
¥185,495 million |
¥33,040 million |
| (9) |
Consolidated total assets |
¥550,054 million |
¥137,040 million |
| (10) |
Settlement date |
March 31 |
March 31 |
| (11) |
No. of employees |
152 |
1,079 |
| (12) |
Main clients (consolidated) |
Nissay Information Technology Co., Ltd., Sompo Japan System Solutions Inc., and others |
Individual investors, etc. |
| (13) |
Major shareholders and ownership ratios |
CSK HOLDINGS CORPORATION 10.32%
The Master Trust Bank of Japan, Ltd. (trust account) 8.34%
Japan Trustee Services Bank, Ltd. (trust account) 6.40%
Deutsche Securities (Japan), Ltd. 4.87%
O.E. Corporation 4.52% |
CSK HOLDINGS CORPORATION 49.79%
Resona Bank, Ltd. 4.91%
Morgan Stanley & Co. International plc 2.22%
Nippon Life Insurance Company 1.09%
Mizuho Employee Pension Trust (trust account for Kubota) 0.73% |
| (14) |
Main banks |
Sumitomo Trust and Banking Company, Limited; and others |
Resona Bank, Ltd.; and others |
| (15) |
Relationships between the companies in question |
(1) |
Capital relationship |
CSK Holdings owns 49.79% of the total outstanding shares of Cosmo Securities |
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(2) |
Personnel relationships |
One director of CSK Holdings serves concurrently as a representative director of Cosmo Securities. Furthermore, two employees of CSK Holdings serve concurrently as corporate auditors of Cosmo Securities |
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(3) |
Business relationship |
There is no material business between CSK Holdings and Cosmo Securities |
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(4) |
Relationship in terms of falling under category of "related party" |
Cosmo Securities is a consolidated subsidiary of CSK Holdings, and as such falls under the category of "related party" |
(16) Consolidated results for past three years
(¥ million)
| |
CSK Holdings |
Cosmo Securities |
| FY06/3 |
FY07/3 |
FY08/3 |
FY06/3 |
FY07/3 |
FY08/3 |
| Sales/Operating revenue |
241,154 |
245,981 |
239,695 |
26,650 |
24,705 |
22,182 |
| Operating income |
25,137 |
29,904 |
19,256 |
5,723 |
1,750 |
(3,467) |
| Ordinary income |
26,981 |
30,810 |
20,634 |
5,876 |
1,843 |
(3,295) |
| Net income |
30,874 |
8,679 |
1,272 |
5,052 |
1,535 |
(4,869) |
| Net income per share |
410.52 |
117.35 |
17.34 |
11.67 |
3.63 |
(11.51) |
| Dividend per share |
40.00 |
40.00 |
40.00 |
3.00 |
3.00 |
- |
| Net assets per share |
2,437.08 |
2,479.33 |
2,317.18 |
92.72 |
93.39 |
77.40 |
4. Situation of wholly owning parent company after share exchange
| (1) |
Name |
CSK HOLDINGS CORPORATION |
| (2) |
Business overview |
Management and administration of CSK Group and CSK Group companies, and accompanying business operations |
| (3) |
Head office address |
2-26-1, Minami-Aoyama, Shibuya-ku, Tokyo |
| (4) |
Name and title of representative |
Yoshito Fukuyama, President and Chief Executive Officer |
| (5) |
Paid-in capital |
Not determined as of present time |
| (6) |
Consolidated net assets |
Not determined as of present time |
| (7) |
Consolidated total assets |
Not determined as of present time |
| (8) |
Settlement date |
March 31 |
(9) Overview of accounting procedure
The share exchange is expected to fall under the category of transaction with minority shareholder among the accounting procedures for transactions conducted under shared control, etc. in the accounting standards for business combinations. At CSK Holdings, the difference between the acquisition cost of the treasury stock used in the share exchange and the cost of conducting the share exchange will be recorded as a loss on disposal of treasury stock in additional paid-in capital, and is projected to be around ¥11.4 billion. Furthermore, the amount of goodwill arising from the difference in the minority interest in the net assets of Cosmo Securities is expected to be about ¥7.3 billion, based on calculations as of the most recent financial period (fiscal year ended March 31, 2008). This goodwill will be amortized over five years using the straight-line method. As it is difficult at the present stage to estimate the changes to net assets in the current fiscal year at Cosmo Securities up to the day before the share exchange, the amount of goodwill noted above is not included.
(10) Outlook
Since Cosmo Securities is already a consolidated subsidiary of CSK Holdings, the share exchange will have no impact on the consolidated sales of CSK Holdings. Consolidated operating income and ordinary income, however, will be impacted by the occurrence of goodwill as noted above. Furthermore, with respect to net income for the current fiscal year, impacts such as minority interests in net income (¥2.4 billion in the fiscal year ended March 31, 2008) will no longer be present.
CSK Group aims to increase its earnings by providing a comprehensive securities platform for financial institutions such as securities companies by combining the capabilities and expertise of Cosmo Securities with the expertise and resources CSK Group has gained to date, and also by strengthening its position in retail services.
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