[SG Holdings] Announcement of Strategic Capital and Business Alliance among SG Holdings, Sagawa Express, and Hitachi Transport System (3/30/2016)
In relation to the above, Hitachi Ltd. (headquarters: Chiyoda-ku, Tokyo, President & COO: Toshiaki Higashihara; "Hitachi"), which is the parent company of Hitachi Transport System, has agreed to transfer part of its shares in Hitachi Transport System to SG Holdings.
Moreover, SG Holdings has agreed to transfer part of its shares in Sagawa Express to Hitachi Transport System, and hereby provides notice thereof.
1. Reasons for the Capital and Business AllianceSG Holdings Group, a corporate group of which main business entity isSagawa Express, engages in delivery business, logistics business, real estate business and other businesses. SG Holdings Group vision is "Create new values by utilizing internal management resources as well as further collaborate with external resources, to strengthen management foundation and realize sustainable growth." SG Holdings Group will develop sustainable infrastructure growth, by improving comprehensive logistics solutions and develop productivity growth.SG Holdings Group will also establish global logistics network by strengthening international infrastructure, and collaborate with domestic operation. Under these policies, Sagawa Express is promoting business activities to meet diversified customer needs by introducing Smart Delivery(Note 1) and other strategic products, and promotes advanced logistics project team "GOAL (Go Advanced Logistics)" involving multiple SG Holdings group entities.
Founded in 1950 as a logistics subsidiary handling transport operations for Hitachi, Hitachi Transport System has broadened its operations through comprehensive contract including in-factory work and transport of ultra-heavy goods in Japan and abroad. Moreover, Hitachi Transport System started building logistics information system at an early stage, using enhanced services to provide comprehensive logistics services to companies (3PL(Note 2)) to serve customers within as well as outside the Hitachi Group. Today, under the business concept of Smart Logistics(Note 3), Hitachi Transport System is utilizing not only "logistics solutions" but also "IT-LT(Note 4) solutions" to become a "Global Supply Chain Solutions Provider co-working with customers to create new value, and become world-class player," striving to compete in the global market.
While logistics industry, in which the Companies do business, plays a crucial role in supporting the foundation of Japan's social infrastructure, the Companies continue to face a tough business environment, in particular limited growth in freight demand in Japan and rising cost including personnel cost due to worker shortage. On the other hand, customer needs have grown more demanding and diverse, such as the need for seamless one-stop distribution connecting domestic & international network, in conjunction with increased globalization, requiring designated-time deliveries for rapidly-growing online and catalog sales, and expectations for logistics companies are higher than ever.
The Companies share common understanding that in order to fulfill their social mission it is necessary to build a stronger business foundation and step up to become one of the most competitive corporations in Japan, and have engaged in various discussions under this philosophy. As a result, the Companies have reached to agree to enter into the Capital and Business Alliance, with the aim of carrying out strategic measures for integrating their strengths and contribute to improve competitiveness of Japanese companies which are operating globally.
- Note1:Services to cut down on work processes in customers' warehouses and reduce the workload of customers by providing delivery services designated by each time zone, including late night and early morning, and sorting into separate categories different types of goods and locations at large-scale facilities such as distribution centers and operation branches of Sagawa Express, before delivery.
- Note2:Abbreviation for "Third-party logistics." A business that provides comprehensive logistics services on behalf of customers, by utilising information system to collaborate material management, parts procurement, factory production and sales, to achieve efficient operations at reduced cost.
- Note3:A safe, secure, green, global and one-stop logistics service, using advanced logistics technology and logistics knowhow accumulated on operation sites, and a broad service menu; a comprehensive logistics service providing a combination of system logistics (3PL), heavy machinery and forwarding expertise which Hitachi Transport System Group has accumulated.
- Note4:Abbreviation of Logistics Technology
2. Particulars of the Capital and Business AllianceThe Companies have business which mutually complements each other. Under the concept of "integration of the delivery business and the logistics business," the Companies will make the best use of Sagawa Express's transport and delivery expertise, Hitachi Transport System's logistics technology, their respective strengths in the 3PL business, and their abundant knowhow and sizeable customer bases. Consequently, the Companies will be able to provide comprehensive logistics where delivery and 3PL are seamlessly integrated, and not only maximize corporate value as logistics companies challenging themselves to become world-class players, but also fulfill the logistics industry's social mission.
To realize this "vision", the Companies have agreed to the following Capital and Business Alliance measures.
1. Particulars of the Business AllianceThe Companies plan to carry out a business alliance involving the following measures. Concrete policies and details will continue to be discussed.
- (i) Strengthen customer solution proposal-ability and expand business through marketing alliance making use of mutual customer base
- (ii) Promote central fleet management and share logistics center to improve utilization rates and efficiency
- (iii) Work on advanced logistics using the Companies' IT and LT expertise
- (iv) Reinforce and enhance global business, with a focus on Asia (alliance of forwarding business and cross-border transport, etc.)
- (v) Reinforce and enhance peripheral businesses through mutual utilization of resources (real estate business and system business, etc.) and collaboration
2. Particulars of the Capital AllianceSG Holdings will acquire from Hitachi 32,349,700 shares of Hitachi Transport System (acquisition price 2,707 yen per share, 29.0% of outstanding shares (excluding treasury shares), 29.0% of voting rights) through off-market trading. Hitachi Transport System will acquire from SG Holdings 10,655,240 shares in Sagawa Express (acquisition price 6,224 yen per share, 20.0% of outstanding shares (excluding treasury shares), 20.0% of voting rights).
To move forward smoothly and promptly with discussions concerning the business alliance and to achieve synergy at an early date, the Companies will form a project team for promotion of the business alliance. Based on the outcome of the Capital and Business Alliance, the parties may discuss and consider a possible management integration of the Companies.
3. Profiles of the Companies for Capital and Business Alliance
|(i) Name||Hitachi Transport System, Ltd.|
|(ii) Address||7-2-18, Toyo, Koto-ku, Tokyo|
|(iii) Representative title, name||President and Chief Executive Officer Yasuo Nakatani|
|(iv) Business description||Integrated logistics service industry|
|(v) Capital||16,802 million yen|
|(vi) Founded||August 7, 1959|
|(vii) Major shareholders and their stakes|
(as of September 30, 2015)
|Hitachi Urban Investment, Ltd.||5.70%|
|Japan Trustee Services Bank, Ltd.|
|National Mutual Insurance Federation of Agricultural Cooperatives||2.50%|
|Master Trust Bank of Japan, Ltd.|
|JPMorgan Chase Bank 385093||1.77%|
|Japan Trustee Services Bank, Ltd.|
|Hitachi Transport System Employees' Shareholding Association||1.31%|
|State Street Bank and Trust Company 505223||1.12%|
|Fukuyama Transporting Co., Ltd.||0.93%|
|(viii) Relationship between|
SG Holdings/Sagawa Express
and Hitachi Transport System
|Capital relationship||Sagawa Express holds 100 shares of Hitachi Transport System shares.|
(as of Wednesday, March 30, 2016)
|Transactional relationship||Hitachi Transport System and Sagawa Express, a consolidated subsidiary of SG Holdings, provide transportation and other services to each other and carry out business transactions.|
|Related party or not||N/A|
|(ix) Consolidated results of operations and consolidated financial position for the latest three years|
|Fiscal year||Term ended|
|Equity attributable to equity holders of the parent (million yen)||169,327||174,295||184,830|
|Total assets (million yen)||374,206||434,796||459,386|
|Per share equity attributable to equity holders of the parent (yen)||1,517.93||1,562.47||1,656.91|
|Revenue (million yen)||547,517||625,466||678,573|
|Operating income (million yen)||19,535||15,590||21,465|
|Net income attributable to equity holders of the parent company (million yen)||11,156||5,338||13,250|
|Basic per share net income attributable to equity holders of the parent company (yen)||100.01||47.85||118.78|
|Dividend per share (yen)||25||26||28|
- Note:For its consolidated-basis financial statements, the company voluntarily adopted International Financial Reporting Standards ("IFRS") instead of Japanese GAAP starting with the annual securities report (yukashokenhokokusho) for the year ended March 2015. Additionally, consolidated-basis business performance indicators are presented pursuant to IFRS for the year ended March 2014 (audit completed pursuant to the provisions of Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act) and pursuant to Japanese GAAP for the year ended March 2013.
- Note:For the year ended March 2013, the figures are presented by reading "equity attributable to equity holders of the parent" as "total assets after deducting minority interests," "per share equity attributable to equity holders of the parent" as "net assets per share," "revenue" as "sales," "net income attributable to equity holders of the parent company" as "net income," and "basic per share net income attributable to equity holders of the parent company" as "net income per share."
4. Timeline of the Capital and Business Alliance
|(i) Board of Directors' approval||March 30,2016|
|(ii) Capital and Business Alliance Agreement execution||March 30,2016|
|(iii) transfer of Hitachi Transport System shares||May 19,2016(scheduled)*|
|(iv) transfer of Sagawa Express shares||May 20,2016(scheduled)*|
- Note:Execution of share transfer is subject to the receipt of a notice to the effect that as a result of the corporate merger review by the Fair Trade Commission pursuant to the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, a cease-and-desist order will not be issued