28th November, 2003
Sony Computer Entertainment Inc. Becomes a Wholly-Owned Subsidiary of Sony Corporation
The following information is true and accurate at the time of publication.
November 28, 2003
Sony Computer Entertainment Inc. Becomes a Wholly-Owned Subsidiary of Sony Corporation
Tokyo, Japan - 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 Stock for stock exchange ratio 1 10,000
(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 business Manufacture and sale of electronic
and electrical machines and
equipment
Develop, manufacture and sell electronic equipment using computer systems for entertainment and education and their peripheral devices and parts (3) Date of incorporation May 7, 1946 November 16, 1993 (4) Location of head office 7-35, Kitashinagawa 6-chome,
Shinagawa-ku, Tokyo 6-21, Minamiaoyama 2-chome,
Minato-ku, Tokyo (5) Representative Nobuyuki Idei,
Representative Corporate Executive Officer
Ken Kutaragi,
Representative Director
(6) Share capital ¥480,261 million ¥1,933 million (7) Total number of shares issued and outstanding 929,488,030 shares 38,500 shares (8) Shareholders' equity ¥1,849,256 million ¥156,413 million (9) Total assets ¥3,663,008 million ¥495,609 million (10) Date of settlement March 31 March 31 (11) Number of employees 17,730 2,000 (12) Major customers Affiliated manufacturing and sales
companies inside and outside Japan
Affiliated manufacturing and sales
companies inside and outside Japan
(13) Major shareholders and voting rights ratios 1 Moxley & Co. 12.8%
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%
1 Sony Corporation 99.74%
2 Ken Kutaragi 0.26%
(14) Main banks Sumitomo Mitsui Banking Corporation,
The Bank of Tokyo-Mitsubishi, Ltd.
and others
Sumitomo Mitsui Banking Corporation and others
(15) Business results for the three most recent years (unit: millions of yen)
Sony SCE 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 Ordinary
income (loss)
81,502 (6,122) (29,525) 4,643 46,781 43,012 Net income (loss) 45,002 29,635 (4,868) 3,339 28,686 24,215 Net income (loss) per share (yen) 49.18 32.22 (5.46) 86,736 745,100 622,391 Dividends per share (yen) 25 25 25 0 343,000 0 Shareholders' equity per share (yen) 2,021.33 2,024.10 1,968.62 2,792,768 3,705,947 3,798,807
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.
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