SPC Electronics to become wholly-owned subsidiary of Mitsubishi Electric through share exchange

TOKYO, JAPAN: Mitsubishi Electric Corp. and SPC Electronics Corp. announced today that they have concluded a share exchange agreement (hereafter the Share Exchange) after respective corporate decisions to have SPC Electronics become a wholly-owned subsidiary of Mitsubishi Electric.

The Share Exchange is scheduled for April 1, 2010, pending approval of the agreement on February 26 at SPC Electronics’ three separate shareholders’ meetings: the extraordinary meeting of shareholders, class shareholders' meeting of shareholders with common stock and with class B preferred stock.

Meanwhile, in accordance with Article 796, Paragraph 3 of the Japanese Companies Act, Mitsubishi Electric intends to treat the matter as a simplified share exchange, not requiring approval by the general meeting of shareholders.

Before the Share Exchange becomes in effect, SPC Electronics’ shares will be delisted on March 29, with the last day on the market scheduled on March 26, 2010.

On April 27, 2009, SPC Electronics announced a business recovery plan to become a profit-sustainable company through management reforms and business-improvement measures. The plan was developed following a sharp downturn in the business environment due to the economic crisis that started in the autumn of 2008, and still does not allow SPC Electronics to foresee when its business performances may recover.

The plan includes the following measures:

- Drastic revision of the company’s business portfolio through strategic reallocation, including termination of its cleaning equipment business and strengthening of its businesses for communications equipment, electronic equipment, coaxial and waveguide components and applied high-frequency heating equipment.

- Improvement of efficiencies by relocating production to the Tokyo Works and dissolving the electronic equipment production subsidiary.

- Soliciting voluntary retirements following implementation of the above measures.

This plan was meant to stabilize business by simplifying organizational structure and increasing productivity through integration, and also to reduce fixed expenses.

Meanwhile, Mitsubishi Electric judged that the best way to minimize the business impact of SPC Electronics’ asset deficiency would be to stabilize its financial condition, so on June 29, 2009, it underwrote preferred stock worth 5.5 billion yen issued by SPC Electronics.

SPC Electronics’ various measurements in structural reforms have since been promoted according to the original business recovery plan, and the company is now able to see progress in reducing fixed expenses and improving business efficiencies. To ensure SPC Electronics’ recovery, however, the company must expand its businesses in targeted fields by utilizing its specialized technologies, and also by pursuing greater synergy with Mitsubishi Electric.

Mitsubishi Electric had previously judged, at the time when SPC Electronics announced its business recovery plan and when Mitsubishi Electric underwrote SPC Electronics’ preferred stock, that it would be better for both companies to operate as separately listed corporations to enable SPC Electronics to recover as soon as possible, as well as to strengthen the Mitsubishi Electric Group’s consolidated financial condition.

In ensuing discussions with SPC Electronics, Mitsubishi Electric has determined that strengthened cooperation in businesses and technologies would help to strengthen SPC Electronics’ management structure and business expansion, while also helping Mitsubishi Electric to raise its competitiveness and efficiency, mainly in its electronic systems business. To best achieve such results, it has now been concluded that SPC Electronics should become a wholly-owned subsidiary of Mitsubishi Electric.

As a wholly-owned subsidiary, SPC Electronics would benefit from Mitsubishi Electric’s stable procurement of its specialized products, such as coaxial and waveguide components as well as microwave and millimeter-wave components.

Mitsubishi Electric also intends to brush up SPC Electronics’ products and technologies by promoting technology exchanges in Mitsubishi Electric’s system application engineering technologies, power circuit technologies and technologies in other fields. In addition, SPC Electronics’ clean rooms and other production infrastructure are expected to help improve productivity within the Mitsubishi Electric Group.

Furthermore, a synergistic complementary relationship will be pursued by strengthening cooperation in SPC Electronics’ businesses for electronic and communications equipment as well as coaxial and waveguide components. Resulting capabilities will then be leveraged to develop customers outside of the Group, both domestic and overseas.

In particular, expansion is envisioned in fields including high-efficiency power amplifiers for communications equipment, microwave and millimeter-wave components incorporated in radar equipment for meteorological and cosmic purposes, high-voltage and high-performance waveguides for satellites, ships and aircraft and a variety of testing equipment.

In the field of applied high-frequency heating equipment, cooperation with Mitsubishi Electric’s R&D sections will enable the company to better differentiate its products from competitors and meet market needs by developing products featuring higher energy efficiency, smaller size and lower environmental impact due to reduced carbon-dioxide emissions.

By increasing its synergy with Mitsubishi Electric and accelerating its growth strategies through the above-mentioned measures, SPC Electronics looks forward to the fastest-possible achievement of the goals in its business recovery plan.

Going forward, the two companies intend to maximize the effects of their merger, with the Mitsubishi Electric Group striving to strengthen and stabilize SPC Electronics’ performance while meeting its shareholders’ expectations.