Prospect Co. Announcement: Notice of Change in the Company's Consolidated Subsidiary (Share Transfer) and Acquisition of Silent Partnership Equity

Prospect Co. Announcement: Notice of Change in the Company's Consolidated Subsidiary (Share Transfer) and Acquisition of Silent Partnership Equity

PR Newswire

ST. PETER PORT, Guernsey, March 26, 2019

ST. PETER PORT, Guernsey, March 26, 2019 /PRNewswire/ -- Prospect Co., Ltd. (hereinafter referred to as the "Company") and its consolidated subsidiary, Kidoh Construction Industry Co., Ltd. (hereinafter referred to as "Kidoh Construction"), on approval of both companies' Board of Director's Meetings held today, have decided that all of the shares of Kidoh Construction owned by the Company will be sold to Kidoh Global Holdings Co. Ltd (hereinafter referred to as "KGH") and that the Company is to acquire an equity interest in a silent partnership related to the Narita Kozaki Solar Project owned by Kidoh Construction.

Note

1. Reasons for the Share Transfer

As of March 20, 2014, the Company acquired all issued shares of Kidoh Construction and made the company a subsidiary. Kidoh Construction is a leading company in the underground pipe jacking (underground microtunneling work such as water and sewage, gas, subway, utility tunneling, etc.), and in addition to the prestressed concrete (PC) work, it has made significant contributions to increasing the corporate value of our group by way of synergy effects in our solar business, such as contracting cable laying work for public roads covering approximately 5 km at power stations.

At this time, a management buyout (MBO) has been offered by KGH, which was established by Mr. Masaaki Nakano, President and Representative Director of Kidoh Construction (hereinafter referred to as Mr. Nakano), and Mr. Noriyasu Uehara (hereinafter referred to as Mr. Uehara), Executive Vice President, to purchase all of the Kidoh Construction stock held by the Company.

The intent of Kidoh Construction officers is to return Kidoh Construction as quickly as possible to a family-like corporate culture as it was at the time of its founding, without the need for external capital, and a system where it is possible to make quick decisions independently.  With the environment in place, including the necessary funding for the MBO, Kidoh Construction has made offer for the Share Transfer for the purpose of independence.

In the approximately five years since becoming a subsidiary of the Company, Kidoh Construction has been steadily improving its earning power, however in the future it will have amplified motivation for further development and corporate value growth. In addition, as for the Company, we anticipate the opportunity to further future development by reinvesting the proceeds from the Share Transfer.

In conjunction with the Share Transfer, the Company plans to acquire an additional 25% stake in the silent partnership investment for the Narita Kozaki Solar Project currently owned by Kidoh Construction. The Company currently holds 55% of the silent partnership equity interest, and after the additional acquisition, the Company will have an 80% interest.

2. Overview of consolidated subsidiary to be changed

1.

Company Name

Kidoh Construction Industry Co., Ltd.

2.

Location

Osaka Prefecture, Osaka City, Fukushima Ward Fukushima 4-6-31

3.

Title and Name of Corporate Head

President and CEO Masaaki Nakano

4.

Business Description

Underground pipe jacking construction such as water and sewage, underground passage, common duct, large box culvert, shield construction, PC (Prestressed Concrete) bridge and PC tank construction

Others, general civil engineering construction work

5.

Capitalization

JPY 83,303,500

6.

Established

October 29, 1946

7.

Major shareholders and shareholding ratio

Prospect Co., Ltd 94.95%

8.

Relationship between listed company and relevant company

Capital ties※

The Company holds 94.95% of Kidoh Construction's stock.

Personnel ties

One executive officer of the Company concurrently serves as a part-time director of Kidoh Construction.

Business relationship

Kidoh Construction is engaged in civil engineering work for projects promoted by the Company.

Status of related parties

Kidoh Construction falls under the Company's consolidated subsidiary.

9.

Business performance and financial position (consolidated) of the company over the last 3 years

Accounting Period

FY 3/2016

FY 3/2017

FY 3/2018

Net Assets (thousand yen)

3,102,322

3,254,736

3,412,727

Total assets (thousand yen)

7,178,441

6,320,315

6,357,843

Net assets per share (yen)

74,637.85

78,304.73

82,105.80

Revenue (thousand yen)

7,302,695

5,722,541

4,615,440

Operating Profit (thousand yen)

378,648

264,022

222,804

Ordinary income (thousand yen)

359,424

264,423

226,027

Net Income (thousand yen)

152,898

205,077

210,654

Net income per share (yen)

3,868.65

4,933.89

5,068.06

Dividend per share (yen)

1,202.99

1,267.00

1,267.00

※ The share ratio of the Company decreased from 100% to 94.95% due to exercise of the Kidoh Construction Stock Acquisition Rights granted to Mr. Nakano and Mr. Uehara on March 22, 2016.

3. Overview of the counterparty of the Share Transfer

1.

Company Name

Kidoh Global Holdings Co., Ltd.

2.

Location

Osaka Prefecture, Osaka City, Fukushima Ward Fukushima 4-6-31

3.

Title and Name of Corporate Head

Representative Director Masaaki Nakano

Representative Director Norikazu Uehara

4.

Business Description

Management of business activities of group companies, management guidance, etc.

5.

Capitalization

JPY 1,000,000

6.

Established

February 15, 2019

7.

Major shareholders and shareholding ratio

Masaaki Nakano 50%

Norikazu Uehara 50%

8.

Relationship between listed company and relevant company

Capital ties

There is no capital relationship between the Company and the concerned company. In addition, there is no capital relationship to be noted between the related parties and affiliated companies of the Company and the related parties and affiliated companies of the company.

Personnel ties

There is no personal relationship to be stated with the company. In addition, there is no noteworthy personal relationship between our company's associates and related companies and the company's associates and related companies.

Business relationship

There is no business relationship to be noted between the Company and the concerned company. In addition, there is no noteworthy business relationship between the related parties and affiliated companies of the Company and the related parties and affiliated companies of the company.

Status of related parties

The company does not fall under the related party of the Company. In addition, the related persons and affiliated companies of the company do not fall under the related parties of the Company.

9.

Operating results and financial position of the company for the last 3 years

The financial statements have not been prepared because the company has just been established.

4. The number of shares transferred, the transfer price and the status of shares owned before and after the transfer

1.

Number of shares owned before transfer

39,465 shares

(Number of Voting Rights: 39,465)

(Percentage of voting rights: 94.95%)

2.

Number of shares transferred and transfer price

39,465 shares (Price: 1,850 million yen) ※

(Number of Voting Rights: 39,465)

(Percentage of voting rights: 94.95%

3.

Number of shares owned after transfer

0 shares

(Number of Voting Rights: 0)

(Percentage of voting rights: 0%)

※ Regarding the sale amount, the agreed amount was decided following a third-party evaluation, verification by internal and outside experts (including lawyers and certified public accountants), and discussions with Mr. Nakano and Mr. Uehara.

5. Outline of Silent Partnership

1.

Company Name

Prospect Narita Kozaki Silent Partnership

2.

Location

30-8, Sendagaya 1-chome, Shibuya-ku, Tokyo

3.

Partnership contract conclusion date

August 29, 2017

4.

Operating Company

Godo Kaisha Prospect Narita Kozaki

5.

Acquisition Amount

JPY 200 million

6.

Acquisition ratio

25%

6. Schedule of Transfer

Board resolution

March 26, 2019

Contract date

March 26, 2019

Stock Transfer Execution Date

March 29, 2019

Transfer payment date

March 29, 2019

7. Future outlook

Although the Share Transfer will result in the company's exclusion from the Company's consolidated subsidiaries, the impact on the business performance of the current fiscal year is currently being reviewed and will be disclosed as it becomes clear.

Company Name: Prospect Co., Ltd.
Representative: President and CEO Masato Tabata
(Security Code: 3528 TSE 2nd Section)
Contact: Chief of General Affairs Jiro Taketani
(TEL: 03-3470-8411)

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