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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. |
|
