Basic Agreement Concerning a Business Integration between The Minato Bank, Ltd., Kansai Urban Banking Corporation and The Kinki Osaka Bank, Ltd.
The transactions pursuant to the business integration are made for the securities of Japanese companies. The offer is subject to disclosure requirements of Japan that are different from those of the United States. Financial statements included in the document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.
You should be aware that the issuer may purchase securities otherwise than under the exchange offer, such as in open market or privately negotiated purchases.
This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
Tokyo, March 3, 2017
Resona Holdings, Inc.
Sumitomo Mitsui Financial Group, Inc.
The Minato Bank, Ltd.
Kansai Urban Banking Corporation
The Kinki Osaka Bank, Ltd.
Resona Holdings, Inc. (Resona Holdings, President: Kazuhiro Higashi), Sumitomo Mitsui Financial Group, Inc. (SMFG, President: Koichi Miyata), The Minato Bank, Ltd. (Minato, President: Hiroaki Hattori), Kansai Urban Banking Corporation (Kansai Urban, President: Kazumasa Hashimoto) and The Kinki Osaka Bank, Ltd. (Kinki Osaka, President: Koji Nakamae) hereby announce that these companies have agreed (the "Basic Agreement") to proceed with discussion and consideration for the purpose of a business integration (the "Business Integration") of the three banks, Minato, Kansai Urban and Kinki Osaka (collectively, the "Integrated Group" and individually, the "Integrating Party"), at their respective board of directors meetings held today. The Business Integration is subject to the approval and permission of the relevant authorities.
1. Background and Objectives of the Business Integration
The banking industry is facing various accelerating structural changes, such as changes in the demographic structure of Japan and heightened awareness of an aging society, changes in the financial sector caused by technological advancements as well as the dawn of a new competitive era shattering walls between industries. By promptly establishing a new business model that meets such changes in the business environment, each Integrating Party, as a regional financial institution, desires to further contribute to the development of the regional economy and make a new start for its regrowth.
As the gross regional product (approximately JPY80 trillion) of the Kansai region, on which the businesses of the Integrated Group are based, constitutes 16% of the gross domestic product of Japan, The Integrating Parties, Resona Holdings and SMFG believe that contributing to the further stimulation and vigorous growth of the Kansai economy, while making the best use of the strengths and characteristics of each Integrating Party, is the most important mission for financial institutions whose primary market is the Kansai region and will eventually contribute to the sustainable growth of the Japanese economy.
Based on such basic understanding, the Integrated Group will aim to deepen the long-term relationships with its customers and local communities that each Integrating Party has established over the years and will also aim to establish one of the leading regional financial groups in Japan and the largest regional financial group in the Kansai region where its employees will work with great motivation and pride.
The Integrated Group will strive to create a "New Retail Financial Services Model that is in Step with the Future of the Kansai Region" based on the following basic concepts and policies:
[Basic Concepts to be Considered for the Business Integration]
- The Integrating Parties, Resona Holdings and SMFG will proceed with discussion and consideration on the assumption that each Integrating Party will be integrated in the spirit of equal footing.
- Resona Holdings will own a majority of the voting rights in the holding company of the Integrated Group (please refer to 2. below, the "Holding Company"). The Holding Company will be a consolidated subsidiary of Resona Holdings.
- The Holding Company will be an equity method affiliate of SMFG.
- The Holding Company will maintain its independence in line with the requirements for publicly listed companies in Japan.
- The Integrated Group will aim to create a new retail financial services model while respecting the strengths and regional characteristics that each Integrating Party has cultivated.
- The Holding Company and each Integrating Party will establish a governance structure adequate for a listed group of companies in order to maximize the effect of the Business Integration under Resona Holdings' governance of the group.
- With respect to Kansai Urban and Kinki Osaka, we will examine ways to optimize their business structure and maximize the effect of the Business Integration, including a potential merger of the two banks, before a definitive agreement concerning the Business Integration (the "Definitive Agreement") is executed.
[Basic Policies of the Integrated Group]
- To create a new retail financial services model that is in step with the future of the Kansai region and beyond the reach of existing regional banks, while trying to further contribute to the Kansai region's customers and local communities:
- To establish one of the leading regional financial groups in Japan and the largest regional financial group in the Kansai region with a strong customer base and business platform as well as an outstanding branch network (379 branches);
- To provide retail financial services by making the best use of sophisticated products and solutions in areas such as trusts, real estate, asset management, securities and overseas expansion support functions; and
- To contribute to the Kansai economy in a fundamental manner by demonstrating high-quality financial intermediary functions.
- To improve the productivity and enhance the capital foundation of the Integrated Group through the Business Integration:
- To further improve the operational efficiency and boost the productivity of the Integrated Group by giving consideration to the sharing operational reorganization know-how within the Resona Holdings group and each Integrating Party and to integrating their respective administrative functions and systems into those of the Resona Holdings group;
- To build a strong capital foundation; and
- To optimize the management structure of the Integrated Group based on sound management practices supported by a high level of corporate governance awareness and also based on local characteristics in order to maximize the effectiveness of the Business Integration.
- To develop a new corporate culture:
- To establish a corporate culture appropriate for a new retail financial services model with a high standard of awareness of duties and a free and open-minded environment;
- To cultivate a corporate culture that enables employees to feel proud and motivated while respecting work-life balance; and
- To allocate personnel and treat individual officers and employees fairly by fully considering the characteristics of each Integrating Party while ensuring fairness and transparency in line with the spirit of equal footing between the Integrating Parties.
2. Structure of the Business Integration
We are planning to integrate Minato, Kansai Urban and Kinki Osaka through a holding company structure whereby these banks will become wholly-owned subsidiaries of the intermediate holding company to be incorporated under the umbrella of Resona Holdings. The specific structure and method of the Business Integration, including stock transfers, stock exchanges and other methods, are subject to further discussion. The Integrating Parties, Resona Holdings and SMFG will determine how to deal with the preferred stock issued by Kansai Urban after considering various options but prior to the execution of the Definitive Agreement.
Image Chart of the Integrated Group
3. Summary of the Integrated Group
The Integrated Group will be one of the leading regional financial groups in Japan with a competitive and full-scale branch network (379 branches) that can be a platform for providing services to customers (mainly in Osaka, Hyogo and Shiga prefectures) in a cohesive manner. The total assets of the Integrated Group will amount to JPY11.4 trillion (6th position among the regional bank groups in Japan), loans and bills discounted will amount to JPY8.6 trillion (5th position among the regional bank groups in Japan), gross banking profit will amount to JPY160 billion (4th position among the regional bank groups in Japan) and net income will amount to JPY44.4 billion (5th position among the regional bank groups in Japan).
[For reference]Summary of the Integrated Group (FY Ended March 2016)
|Minato||Kansai Urban||Kinki Osaka||Total|
(on a consolidated basis)
|JPY3,484.6 billion||JPY4,483.0 billion||JPY3,516.5 billion||JPY11,484.2 billion|
|Loans and bills discounted
(on a consolidated basis)
|JPY2,495.3 billion||JPY3,747.1 billion||JPY2,437.1 billion||JPY8,679.6 billion|
(on a consolidated basis)
|JPY3,093.3 billion||JPY3,812.1 billion||JPY3,207.3 billion||JPY10,112.8 billion|
|Gross banking profit
(on a non-consolidated basis)
|JPY45.2 billion||JPY63.8 billion||JPY51.0 billion||JPY160.0 billion|
(on a non-consolidated basis)
|JPY7.0 billion||JPY15.1 billion||JPY22.3 billion||JPY44.4 billion|
|Number of branches
(as of the end of February 2017)
(101branches in Hyogo and 4 branches in Osaka)
(76 branches in Osaka, 52 branches in Shiga and 9 branches in Hyogo)
(106 branches in Osaka and 8 branches in Hyogo)
(186 branches in Osaka, 118 branches in Hyogo and 52 branches in Shiga)
The corporate name, head office location, representative and officer composition, institutional design and other related matters will be discussed among the Integrating Parties, Resona Holdings and SMFG and will be determined prior to the execution of the Definitive Agreement.
4. Integration Ratio
The integration ratio in the Business Integration will be determined, upon good-faith discussion, among the Integrating Parties, Resona Holdings and SMFG prior to the execution of the Definitive Agreement by taking into consideration the result of due diligence, a share price valuation by a third-party valuation institution and other related factors.
5. Establishment of an Integration Preparation Committee
The Integrating Parties will establish an integration preparation committee, which will engage in thorough discussion regarding the Business Integration in order to realize the above-described basic concepts and basic policies of the Business Integration in a smooth manner. Furthermore, Resona Holdings and SMFG will provide full-scale assistance regarding the Business Integration.
|March 3, 2017 (Today)||Execution of the Basic Agreement|
|By around the end of September 2017 (Scheduled)||Execution of the Definitive Agreement|
|By around the end of November 2017 (Scheduled)||Extraordinary Meeting of Shareholders for the Approval of the Business Integration|
|Around April 2018 (Scheduled)||Delisting date from Tokyo Stock Exchange (Minato and Kansai Urban)|
|Around April 2018 (Scheduled)||Completion date of the Business Integration|
|Around April 2018 (Scheduled)||Listing date of the Holding Company|
- *Please download the following PDF file and refer to "7. Summary of the Three Banks" on page 7 for details of the three banks.