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Friday, Nov. 23, 2007

JT, Nissin in tender offer for Katokichi

Success of ¥109 billion bid would produce major frozen food maker


Staff writer

Japan Tobacco Inc. and instant noodle maker Nissin Food Products Co. announced Thursday they will acquire all the shares of scandal-tainted frozen food maker Katokichi Co. for ¥109 billion through a public tender offer.

News photo
Japan Tobacco Inc. President Hiroshi Kimura (left), Katokichi Co. President Tetsuji Kanamori (center) and Nissin Food Products Co. President Koki Ando hold a news conference in a Tokyo hotel Thursday. KYODO PHOTO

The move is aimed at merging the frozen food divisions of the three companies to create one of the biggest frozen food producers in Japan, with combined sales of ¥260 billion.

According to the plan, JT will launch a public tender offer for Katokichi from Nov. 28 to Dec. 26 for ¥710 per share to make Katokichi its wholly owned subsidiary. JT will then sell 49 percent of the shares to Nissin Food.

If the tender offer succeeds, Katokichi will be delisted from the Tokyo Stock Exchange as early as March. The TSE moved Katokichi to its monitoring post later Thursday.

Katokichi's board of directors voted to support the tender bid earlier Thursday. Katokichi President Tetsuji Kanamori will stay on as president while JT and Nissin Food will send their executives to join Katokichi's board of directors.

"There are many puzzle pieces missing to achieve growth," Kanamori said during a news conference. "When I thought how I can get those pieces in a short period of time, this was the best decision."

In addition, Kanamori said that with the backup and knowhow of JT and Nissin Food, Katokichi "can become a strong hybrid business entity."

Although potential synergy may have led the three to integrate their businesses, the increasingly competitive food products industry has also spurred the merger plan.

"The food products industry is faced with a very severe environment," Nissin Food President Koki Ando said.

Because of a falling birthrate and graying society, domestic demand has been on the decline, Ando said.

And to make things worse, prices of raw materials such as wheat and vegetable oil are rising, while companies need to invest heavily to install systems to adequately manage food product quality in light of recent food mislabeling frauds, he said.

"As a company, we need to (integrate businesses) to become efficient and to provide inexpensive and good products to our consumers," Ando said.

JT has been looking for partners to expand its food business amid the shrinking domestic cigarette market.

The merger plan is also aimed at rehabilitating the struggling Katokichi. In the business year to March, Katokichi fell into the red with a net loss of ¥9.84 billion.

Katokichi's Kanamori admitted that the company needs to be delisted from the TSE for now to focus on implementing drastic reforms and not worry about turning a profit in the short term.

The frozen food maker has also been under fire for improper accounting. Last week, police searched the home of Katokichi's former executive in Kagawa Prefecture on suspicion that the firm used falsified seals in business transaction documents between a subsidiary and an Osaka-based trading house.



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