Lawson, Inc. approved two company splits at its Board meeting held on Thursday, September 6, 2016: company split No.1 with Lawson as the split company and fully owned subsidiary Lawson San'in Co., Ltd. as the succeeding company, and; company split No. 2 with Poplar Co., Ltd. as the split company and Lawson as the succeeding company. The Lawson San'in Board will approve two further company splits: company split No.3 with Poplar as the split company and Lawson San'in the succeeding company, and; company split No. 4 with Poplar's fully owned subsidiary Poplar Project Co., Ltd. the split company and Lawson San'in the succeeding company. This release offers more details on the four company splits.

The four company splits will be only conducted once all necessary legal procedures and actions relating to the prohibition of private monopoly and assurance of fair trading have been satisfied.

1. Aim of company splits

As explained in its news release dated August 4, 2016 entitled 'Lawson and Poplar agree joint convenience store operation in the San'in region,' Lawson signed a joint-operation contract for the San'in region with convenience store operator Poplar Co., Ltd. to promote the joint operation of Lawson-chain convenience stores in the area.
The San'in region has witnessed significant social change with an ageing population and increase in the number of nuclear families. Against that background, on December 8, 2014, Lawson and Poplar signed a capital and business alliance contract covering areas such as joint procurement of ingredients and products, and the sharing of distribution infrastructure. After signing a subsequent basic business alliance at the store level on September 18, 2015, Poplar Project began operating two LAWSON POPLAR double-brand stores in November 2015, which have proved a successful precursor for the development of a new brand in the region.
To further promote joint convenience store operations with Poplar and develop a full-fledged LAWSON POPLAR brand for the San'in region, Lawson has agreed to inherit a portion of the rights and obligations linked to the Poplar convenience store business, both directly and indirectly through its Lawson San'in subsidiary company.
Lawson San'in will start operations as a regional franchise from November 2016. The franchise operation will manage a total of 289 stores comprising 54 franchise and directly operated POPLAR stores that intend to switch to the LAWSON POPLAR brand, and 235 LAWSON stores currently operated by Lawson's Tottori and Shimane branch offices. The new area franchise will draw on the inherent strengths of both companies to create community-focused stores that local people can rely on. More detail of the joint-operation contract is outlined below.

  1. (1) Lawson established Lawson San'in Co., Ltd. on September 1, 2016 to act as a regional franchise headquarters for the San'in region. Lawson intends to transfer the assets, rights and obligations relating to convenience stores currently operated by Lawson's Tottori and Shimane branch offices to Lawson San'in. via company split No.1.
  2. (2) Lawson will inherit from Poplar the land titles and lease contracts for stores transferring from Poplar to the LAWSON POPLAR brand and for the two experimental double-brand stores, along with any rights to claim return of security deposit relating to those contracts (claims for return of security payments for cooperative building sinking funds, etc.) via company split No.2.
  3. (3) Poplar will transfer to Lawson San'in a portion of assets, rights and obligations pertaining to the convenience stores operations for those existing POPLAR stores in the San'in region that wish to change to the joint LAWSON POPLAR brand. This transfer will be conducted via company split No.3, the price of which will be equal to, or less than, 30% of Lawson San'in stock.
  4. (4) Poplar Project will transfer the operation of its two experimental double-brand convenience stores to Lawson San'in via company split No.4.

2. Overview of company splits

(1) Schedule

Board meeting to approve company split No.1, No.2 (Lawson) September 6, 2016
Board meeting to approve company split No.2, No.3 (Poplar) September 6, 2016
Board meeting to approve company split No.1, No.3, No.4 (Lawson San'in) September 14, 2016 (tentative)
Board meeting to approve company split No.4 (Poplar Project) September 6, 2016
Signing of company split No.1, No.2, No.3, No.4 agreements September 15, 2016 (tentative)
Effective implementation of company split No.1, No.2, No.3, No.4 November 1, 2016 (tentative)
Payment delivery November 1, 2016 (tentative)

Note: The company splits are considered simple company splits under the Companies Act for both Lawson and Poplar and, as such, are expected to be executed without seeking prior approval from general shareholders' meetings.
Split No.1: Item 2, Article 784 (Lawson)
Split No.2: Item 2, Article 796 (Lawson), Item 2, Article 784 (Poplar)
Split No.3: Item 2, Article 784 (Poplar)

(2) Type

Company split No.1

Simple absorption-type, with Lawson as the split company and Lawson San'in the succeeding company.

Company split No.2

Simple absorption-type, with Poplar as the split company and Lawson the succeeding company.

Company split No.3

Absorption-type, with Poplar as the split company and Lawson San'in the succeeding company.

Company split No.4

Absorption-type, with Poplar Project as the split company and Lawson San'in the succeeding company.

(3) Financial payments relating to the company splits

Company split No.1

No financial payment will be extended given that Lawson San'in is a fully owned subsidiary of Lawson.

Company split No.2

The succeeding company Lawson will pay the split company Poplar 676 million yen.

Company split No.3

The succeeding company Lawson San'in plans to transfer 4,183 Lawson San'in shares as payment to the split company Poplar, equivalent to 29.28% of outstanding shares post company splits.

Company split No.4

The succeeding company Lawson San'in plans to transfer 102 Lawson San'in shares as payment to the split company Poplar Project, equivalent to 0.71% of all outstanding shares post company splits.

(4) New equity and bond warrants generated by the company splits

None

(5) Increase in capital related to the company splits

None

(6) Rights and obligations to be inherited by succeeding companies

The succeeding companies will inherit all, or a portion, of the convenience store business segments designated for company splits No.1, No.2, No.3 and No.4. For details of specific segments refer to Section 5: Summary of inherited business segments.

(7) Execution of obligations

None of the succeeding companies are expected to have any problems executing obligations with respect to any debts acquired under company splits No.1, No.2, No.3 and No.4.

3. Value allocation for company splits

(1) Underlying basis and reasoning
To ensure a fair and appropriate allocation of value to the company splits, Lawson appointed certified public tax account corporation Natsume Office as an independent calculation agent. Natsume Office calculated the value of the underlying operations corresponding to corporate splits No.2, No.3 and No.4. Lawson and Poplar took into consideration the calculations performed by the independent calculation agent as well as the latest businesses performance and future business prospects of underlying operations. Having carefully discussed all details relating to the four company splits, both companies judged the content listed in Section 2 (Overview of company splits), item (3) (Financial payments relating to the company splits) to be fair and proper.

(2) Information pertaining to value calculations
① Name of calculation agent and relationship with Lawson and Poplar
As stated above, Lawson appointed certified public tax account corporation Natsume Office as an independent calculation agent to value company split No.2, No.3 and No.4. Natsume Office has no significant relationship with Lawson, Poplar or related parties, and no significant vested interested in the stated company splits.
② Calculations explained
Natsume Office used a discounted cash flow (DCF) method income approach when calculating the value of the underlying operations for company split No.3 and No.4, Natsume Office judged it appropriate to base its valuation on expected cash flow to be generated from the continued operation of underlying assets by the new owner Lawson San'in.
As a result of its calculations, Natsume Office suggested Poplar receive between 4,165 - 4,226 Lawson San'in shares as payment for company split No.3, and Poplar Project receive between 59 - 120 Lawson San'in shares as payment for company split No.4.
Under the DCF method, operations were valued using a fixed discount rate to calculate the present value of projected cash flow for Lawson San'in, based on long-term business projections compiled by Lawson and Poplar for February 2017 through February 2031. The forecasts incorporate an expected operating loss in the initial fiscal year to reflect the fact that the first-year calculation only includes four months of inherited-store operation, and that some investment will be required for store rebranding. The business is expected to report a larger operating profit in the following fiscal year, as the new joint branding helps boost daily sales at inherited stores. The projections do not include any further significant volatility in profitability beyond that point.
The DCF method income approach was also considered appropriate for the valuation of company split No.2, based on the expected cash flow to be received by Lawson from Lawson San'in going forward.
The assumed value range for company split No.2 was calculated between 669 - 891 million yen. Based on that valuation, Lawson judged a financial payment of 676 million to Poplar to be appropriate.
This valuation was calculated based on the same long-term financial projections for Lawson San'in mentioned above.
When calculating the value of underlying operations, Natsume Office used information provided by Lawson, either through public disclosure or specifically for the purpose of the evaluation. All information and documentation provided was assumed to be accurate and comprehensive. Natsume Office did not undertake any active checks of the accuracy or entirety of the information. In addition, Natsume Office did not conduct its own evaluation, appraisal or measurement of the underlying assets and obligations, or any analysis or evaluation of each individual asset or obligation, nor did it commission a third-party appraisal or measurement of these assets.

(4) Delisting of Lawson, Inc.
The four company splits are not expected to result in the delisting of Lawson, Inc.

4. Overview of Lawson, Inc., Poplar Co., Ltd. and Lawson San'in Co., Ltd.

(1) Company split No.1

(1) Company name Lawson San'in Co., Ltd. Lawson, Inc.
(2) Business location 2-141, Kamo, Yonago city, Tottori East Tower, Gate City Osaki, 1-11-2 Osaki, Shinagawa-ku, Tokyo
(3) Name and title of
representative director
Naoto Shibaori
President and CEO
Genichi Tamatsuka,
Chairman and CEO,
Representative Director
(4) Main areas of business operation Convenience store operation Development of the LAWSON convenience store franchise chain
(5) Capital 10 million yen 58,506 million yen
(6) Established September 15, 2016 April 15, 1975
(7) Shares issued 10,000 100,300,000
(8) Fiscal year-end End of February End of February
(9) Number of employees - 8,377 (Consolidated)
(10) Major business partner - Mitsubishi Shokuhin Co., Ltd.
(11) Major Bank - The Bank of Tokyo-Mitsubishi UFJ, Ltd .
(12) Major shareholders and shareholdings (as of February 29, 2016) Lawson, Inc.:100.00%
  • ・Mitsubishi Corporation
  • 33.5%
  • ・Japan Trustee Services Bank, Ltd.
  • (Trust account)
  • 4.1%
  • ・The Master Trust Bank of Japan, Ltd.
  • (Trust account)
  • 3.5%
(13) Existing relationship with Lawson, Inc.
Capital Fully owned subsidiary
Personal No significant relationship
Business No significant relationship
Pertinent connections with related parties No significant relationship
(14) Recent overview of corporate results and financial position for FY2015 (Consolidated)
Millions of yen
Net assets - 272,997
Total assets - 803,212
Net assets per share (Yen) - 2,643.97
Gross operating revenue - 583,452
Operating profit - 72,541
Recurring profit - 69,622
Net profit - 31,381
Net earnings per share (Yen) - 313.81

Note: The succeeding company Lawson San'in is recently established, so does not display recent business results or financial data.

(2) Company split No.2

(1) Company name Lawson, Inc. Poplar Co., Ltd.
(2) Business location East Tower, Gate City Osaki, 1-11-2 Osaki, Shinagawa-ku, Tokyo 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima
(3) Name and title of
representative director
Genichi Tamatsuka,
Chairman and CEO,
Representative Director
Shinji Meguro, President & CEO
(4) Main areas of business operation Development of the LAWSON convenience store franchise chain Convenience store operation
(5) Capital 58,506 million yen 2,410 million yen
(6) Established April 15, 1975 April 20, 1976
(7) Shares issued 100,300,000 9,905,822
(8) Fiscal year-end End of February End of February
(9) Number of employees 8,377 (Consolidated) 413
(10) Major business partner Mitsubishi Shokuhin Co., Ltd. Mitsubishi Shokuhin Co., Ltd.
(11) Major Bank The Bank of Tokyo-Mitsubishi UFJ, Ltd . Hiroshima Bank, Ltd.
(12) Major shareholders and shareholdings (as of February 29, 2016)
  • ・Mitsubishi Corporation
  • 33.5%
  • ・Japan Trustee Services Bank, Ltd.
  • (Trust account)
  • 4.1%
  • ・The Master Trust Bank of Japan, Ltd.
  • (Trust account)
  • 3.5%
  • ・Poplar Employee Shareholding
  • Association
  • 3.14%
  • ・The Hiroshima Bank, Ltd.
  • 2.14%
(13) Existing relationship with Poplar Co., Ltd.
Capital Lawson is Poplar's third largest shareholder (495,300 shares, 5.0% voting rights)
Personal No significant relationship
Business No significant relationship
Pertinent connections with related parties No significant relationship
(14) Recent overview of corporate results and financial position for FY2015 (Consolidated)
Millions of yen
Net assets 272,997 2,893
Total assets 803,212 12,628
Net assets per share (Yen) 2,643.97 292.11
Gross operating revenue 583,452 38,777
Operating profit 72,541 82
Recurring profit 69,622 129
Net profit 31,381 60
Net earnings per share (Yen) 313.81 6.08

(3) Company split No.3

(1) Company name Lawson San'in Co., Ltd. Poplar Co., Ltd.
(2) Business location 2-141, Kamo, Yonago city, Tottori 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima
(3) Name and title of
representative director
Naoto Shibaori President and CEO Shinji Meguro, President & CEO
(4) Main areas of business operation Convenience store operation Convenience store operation
(5) Capital 10 million yen 2,410 million yen
(6) Established September 15, 2016 April 20, 1976
(7) Shares issued 10,000 9,905,822
(8) Fiscal year-end End of February End of February
(9) Number of employees - 413
(10) Major business partner - Mitsubishi Shokuhin Co., Ltd.
(11) Major Bank - Hiroshima Bank, Ltd.
(12) Major shareholders and shareholdings (as of February 29, 2016) Lawson, Inc.:100.00%
  • ・Poplar Employee Shareholding
  • Association
  • 3.14%
  • ・The Hiroshima Bank, Ltd.
  • 2.14%
(13) Existing relationship between the two companies
Capital No significant relationship
Personal No significant relationship
Business No significant relationship
Pertinent connections with related parties No significant relationship
(14) Recent overview of corporate results and financial position for FY2015 (Consolidated)
Millions of yen
Net assets - 2,893
Total assets - 12,628
Net assets per share (Yen) - 292.11
Gross operating revenue - 38,777
Operating profit - 82
Recurring profit - 129
Net profit - 60
Net earnings per share (Yen) - 6.08

Note: The succeeding company Lawson San'in is recently established, so does not display recent business results or financial data.

(4) Company split No.4

(1) Company name Lawson San'in Co., Ltd. Poplar Co., Ltd.
(2) Business location 2-141, Kamo, Yonago city, Tottori 665-1 Asacho Oaza Kuchi, Asakita-ku, Hiroshima
(3) Name and title of
representative director
Naoto Shibaori President and CEO Shinji Meguro, President & CEO
(4) Main areas of business operation Convenience store operation Convenience store operation
(5) Capital 10 million yen 1 million yen
(6) Established September 15, 2016 November 2, 2015
(7) Shares issued 10,000 20
(8) Fiscal year-end End of February End of February
(9) Number of employees - 2
(10) Major business partner - Lawson, Inc.
(11) Major Bank - Hiroshima Bank, Ltd.
(12) Major shareholders and shareholdings (as of February 29, 2016) ・Lawson, Inc.:100.00% ・Poplar Co., Ltd.:100.0%
(13) Existing relationship between the two companies
Capital No significant relationship
Personal No significant relationship
Business No significant relationship
Pertinent connections with related parties No significant relationship
(14) Recent overview of corporate results and financial position for FY2015 (Consolidated)
Millions of yen
Net assets - -4
Total assets - 46
Net assets per share (Yen) - 4,659.48
Gross operating revenue - 77
Operating profit - -5
Recurring profit - -5
Net profit - -5
Net earnings per share (Yen) - -5,859.48
Net assets - 0

Note: The succeeding company Lawson San'in is recently established, so does not display recent business results or financial data.

5. Summary of inherited business segments
(1) Business operations of inherited segments

Company split No.1
The assets, rights and obligations relating to convenience store operations of 235 stores inherited from Lawson.

Company split No.2
The land titles and lease contracts for 52 stores inherited from Poplar and two experimental double-brand stores, any rights to claim return of security deposit relating to those contracts (claims for return of security payments for cooperative building sinking funds, etc.), and the right to claim return of security deposit relating to rolling contracts for a portion of the stores inherited from Poplar.

Company split No.3
A portion of convenience store operations pertaining to 52 stores inherited from Poplar.

Company split No.4
Convenience store operations pertaining to the two experimental double-brand stores inherited from Poplar Project.

(2) Gross operating profit of inherited business segments (2015.3.1 - 2016.2.29)

Company split No.1 6,125 million yen
Company split No.2 None
Company split No.3 2,145 million yen
Company split No.4 77 million yen

(3) Type and financial value of inherited assets, liabilities

Details of the assets, liabilities and other rights and obligations relating to the company splits will be disclosed upon confirmation after the absorption-type company split agreements come into effect on November 1, 2016 (tentative).

6. After the company splits

There will be no change to Lawson, Inc.'s trading name, business location, representative director status, busness operations, capital or financial year end as a result of the company splits.

7. Accounting methods

Company split No.1 is treated as an acquisition under Japan's Accounting Standard for Business combination. As a result, Lawson San'in will measure the assets acquired and liabilities assumed from Lawson at their fair value on the date acquired.

Company split No.2 is treated as an acquisition under Japan's Accounting Standard for Business combination. As a result, Lawson will measure the assets acquired and liabilities assumed from Poplar at their fair value on the date acquired.

Company split No.3 is treated as an acquisition under Japan's Accounting Standard for Business combination. As a result, Lawson San'in will measure the assets acquired and liabilities assumed from Poplar at their fair value on the date acquired.

Company split No.4 is treated as an acquisition under Japan's Accounting Standard for Business combination. As a result, Lawson San'in will measure the assets acquired and liabilities assumed from Poplar Project at their fair value on the date acquired.

8. Future business outlook

Any impact on Lawson's consolidated business performance from company split No.1 No. 2, No.3 and No.4 is expected to be minimal.

Lawson Inc. published this content on 09 September 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 23 September 2016 08:58:05 UTC.

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