[ TOKYO December 21, 2006 ] HOYA CORPORATION
(“HOYA”) and PENTAX Corporation
(“PENTAX”) announced today that they have reached a
basic understanding aimed at a management integration of the two
companies, expected to be completed on October 1, 2007 . The new
company’s name will be HOYA PENTAX HD Corporation. Under a
corporate center with strategic planning functions, the new company
will realign the business areas of HOYA and PENTAX. HOYA and PENTAX
have recognized that they are the best possible business partners to
establish a solid business structure that draws on their respective
strengths. Through this management integration, the planned new
structure will allow the new company to swiftly allocate significant
management resources to develop strategic business areas, aiming at
accelerating future growth.
1. Purpose of Management
In an integration of equals, HOYA and PENTAX aim to enhance customer
and shareholder value. The parties aim to achieve this through the
establishment of a solid management foundation that will draw on the
complementary managerial resources of the two companies to create
synergies and accelerate business growth.
The common core technological platform for HOYA and PENTAX is grounded
in optics, imaging and materials. Using this core platform, the two
companies aim to optimize their business portfolios, focusing on the
life care, optics, information technology, eye care and imaging systems
areas. Expected stable revenue from the information technology and eye
care areas will support the life care area to achieve strategic growth.
In addition, vertical integration of the optics areas will lead to
qualitative structural reform and further strengthen competitiveness.
The divisions of the new company are expected to be as follows:
* Life care area: (Major products
include: endoscopes, medical accessories, new ceramics, and intraocular
lenses) Life care is positioned as a strategic growth area. HOYA and
PENTAX will pursue business development in the minimally invasive
medical area where future demand is expected to grow. The newly
integrated company will operate in areas which range from diagnostic to
treatment fields, such as minimally invasive diagnosis using endoscopes
and treatment using endoscopes and ancillary surgical devices, and will
focus on globally cultivating bionic material markets including new
ceramics and intraocular lenses. In addition, HOYA and PENTAX will
enhance product development capabilities through aggressive research
and development and mergers and acquisitions strategies and will
strengthen sales and marketing structures in Japan and overseas.
Through these measures, HOYA and PENTAX aim to double the size of their
life care business.
* Optics area: (Major products include:
optical glass and lenses, digital camera modules, micro-lenses, etc.)
HOYA and PENTAX will vertically integrate the design, materials,
lenses, processing and module groups in the optics area, which is
expected to lead to qualitative structural reform and further
strengthen competitiveness. HOYA and PENTAX will mutually utilize their
respective manufacturing sites and customer bases, in order to secure a
competitive edge against newly emerging Asian players and strongly
position themselves for sustainable growth in the face of structural
change in the optics industry.
* Information technology area: (Major
products include: mask blanks, glass disk substrates, etc.) This is a
core earnings driver where HOYA has secured a leading market position
globally. The integrated company aims to further strengthen
competitiveness and growth in this area.
* Eye care area: (Major products
include: eyeglass lenses, contact lenses) Stable earnings growth is
expected in this business. Positioning this business as another core
earnings driver, the new company will continue to further strengthen
competitiveness and further grow this business area.
* Imaging systems area: (Major products
include: digital cameras, binoculars, etc.) In order to enhance
business value, the new company will differentiate its offerings by
specializing in high-value added products with unique technology and
will focus on areas where it has a competitive edge. This area will be
positioned as a foundation for development of new optical-related
equipment and is expected to diversify into the life care and security
* New areas, other areas: (Major
products include: business systems equipment, survey equipment, etc.)
HOYA and PENTAX seek to invest aggressively in areas where they see
future earnings growth opportunities. At the same time, they will focus
on selected business areas to improve efficiency and to achieve optimal
usage of managerial resources.
2. Background to the
Management Integration Plan
HOYA started as an optical glass manufacturer. Since its inception, the
company has been diversifying its business by leveraging its optical
materials technologies and precision processing technologies. HOYA has
successfully built global niche market positions through its aggressive
technological innovation and has established leadership in its areas of
expertise, resulting in strong earnings. In the information technology
area, HOYA has maintained a leading position globally for its
semiconductor-related mask blanks and glass disk substrates for hard
disk drives, and it is positioned as one of the leading manufacturers
in optical glass and lenses. The company has also established a leading
position in the eye care area, including in eyeglass lenses. HOYA
continues to cultivate new business areas, in particular
medical-related areas which are positioned as mid- to long-term core
growth drivers, and has initiated global business development of
intraocular lenses used for the surgical treatment of cataracts.
PENTAX’s expertise stems from its long-accumulated know-how
attained through the development and manufacturing of cameras and
lenses. The company has successfully adapted its optical design and
image processing technology for use in a variety of product areas and
has developed businesses based on this optical technology. In the life
care business, PENTAX has made early progress in developing a leading
global position in the production of endoscopes, and it is also
marketing globally various other products such as medical accessories
and new ceramics for bone grafts. In its optical components business,
PENTAX has leveraged its competitive edge in advanced optical
technologies, where its major products include digital camera modules
and DVD/CD convertible pickup lenses. PENTAX has also built a strong
global brand in its imaging systems division, and the company has
positioned the life care area as the focus for its mid- to long-term
growth strategy. PENTAX has been working to ensure earnings improvement
and company-wide growth through mergers and acquisitions, alliances and
aggressive research and development activities.
While the market for advanced medical products has been growing
globally with further growth expected, competition has also been
intensifying. HOYA and PENTAX have been developing advanced medical
products including endoscope diagnostics, minimally invasive surgical
technologies, and bionic materials including new ceramics and
intraocular lenses. In order to continue delivering growth in this
market, it is critical that HOYA and PENTAX leverage their respective
competitive advantages and make aggressive investments through mergers
and acquisitions and research and development, as well as establish
global sales and marketing networks at the earliest possible stage.
Significant structural changes have occurred in optical equipment and
related materials since the emergence of digital cameras. Competitors
in Asia have grown rapidly and are expected to continue gaining market
share through low price campaigns and increasing the added value of
their products. Along with existing camera manufacturers, home
appliance makers have also entered the digital camera market, further
intensifying competition in this segment. In order to maintain growth
capabilities, cost competitiveness must be strengthened by lowering
production costs and focusing on unique, high-end products. Measured
structural change is necessary to ensure differentiation in this
Based on the recognition that HOYA and PENTAX are the best possible
business partners to establish a solid business structure that draws on
their respective strengths, the two companies have reached a basic
understanding aimed at management integration. Through this management
integration, the planned new structure will allow the integrated
company to swiftly allocate significant management resources to develop
strategic business areas, aiming at future growth.
3. Method of Management
Under the terms of the basic understanding announced today HOYA will be
the surviving company.
4. Management Integration
The merger of the two companies is planned to become effective as of
October 1, 2007 .
5. New Company Name
After the management integration, the new company will be named HOYA
PENTAX HD Corporation.
6. New Company Structure
(1) Corporate Governance
The integrated firm will be managed through a committee system under
Japanese Company Law to ensure strong corporate governance. The board
will consist of 10 directors, five of whom will be non-executive
directors, further reinforcing management transparency. Three of the
executive directors will be appointed from HOYA and the others from
Fumio Urano (current PENTAX President & CEO) will become
Chairman of the Board and Hiroshi Suzuki (current HOYA President and
CEO) will become President & CEO.
(2) Organizational Structure
The structure of the integrated firm will be based on the concept of a
small headquarters with empowered business divisions. Allowing for an
appropriate transition period, the new company is expected to have a
corporate center with strategic planning functions and the business
divisions outlined below. Moreover, the newly integrated company will
continue to make the best possible use of the respective brands of both
HOYA and PENTAX.
* Life care area: Combining
HOYA’s medical division and PENTAX’s life care
* Optics area: Combining
HOYA’s optics division and PENTAX’s optical
* Information technology area: The
remaining business after separating HOYA’s optics division
from the electro-optics area
* Eye care area: The remaining business
after separating HOYA’s medical division from the eye care
* Imaging systems area: Continuing
PENTAX’s imaging systems division
* New areas, other areas: Continuing
other existing divisions
* Research and development: Integrating
HOYA’s research and development center and PENTAX’s
research and development division
7. Merger Ratio
Each shareholder of PENTAX common stock will be allotted 0.158 shares
of HOYA common stock per PENTAX share.
In order to achieve fairness, the parties received advice from third
party advisers in respect of the determination of the merger ratio.
HOYA was advised by UBS Securities Japan Ltd. (“UBS
Investment Bank”), and PENTAX was advised by Morgan Stanley
Japan Securities Co., Ltd., (“Morgan Stanley”) for
the basis of the merger ratio calculation. Both companies have
discussed the results presented by the financial advisors, and settled
at the ratio announced today.
Both financial advisors used a combination of average market price
analysis, discounted cash flow analysis, comparable trading multiples
analysis and other methods, respectively, to calculate the merger ratio.
Based on these analyses, HOYA obtained a fairness opinion from UBS
Investment Bank, and PENTAX from Morgan Stanley, regarding the merger
ratio from a financial point of view.
Neither UBS Investment Bank nor Morgan Stanley are related parties of
HOYA and PENTAX.
This ratio is subject to change if there is a material change in the
conditions which were used as fundamentals in the calculation.
HOYA and PENTAX intend to continue discussions to conclude a definitive
agreement on the management integration in early April 2007. The
expected schedule is outlined below. However, as discussions proceed,
if exceptional circumstances arise, the two companies may decide to
change the schedule or the method of integration in their effort to
achieve management integration.
1. Early April 2007: Signing of definitive
2. Middle of June 2007: HOYA will hold an Annual
General Meeting of Shareholders where it will seek approval for
proposed changes in the company articles of incorporation and the board
3. End of June 2007: PENTAX will hold an Annual
General Meeting of Shareholders where shareholders will be asked to
approve the merger agreement
4. October 1, 2007 : Effective merger date
5. TBA: Delivery to PENTAX shareholders of shares
in the new company
Under Article 796, Clause 3, of the Japanese Company Law, HOYA is not
required to receive shareholders’ approval for the merger.
9. Structure for
Proceeding with the Management Integration
HOYA and PENTAX will form an integration committee, co-chaired by Fumio
Urano, President & CEO of PENTAX, and Hiroshi Suzuki, President
and CEO of HOYA, to ensure swift and smooth integration of the
management and operations of the newly integrated company. The
integration committee will review the administrative systems of each
company, aiming at creating a best-practice administrative system for
the newly integrated company.
10. Accounting Policies
Accounting treatment associated with the merger will be disclosed when
definitively determined. The exact amount of goodwill, the probability
of accrual, and the amortization period have yet to be determined, and
will be disclosed in due course.
11. Expected Impact on
Earnings Forecasts as a Result of Merger
The newly integrated company aims to strengthen the competitiveness of
each business area and to maintain the rate of growth of corporate
The newly integrated company will continue the listing status of HOYA
on the First Section of the Tokyo Stock Exchange. Information regarding
the new company headquarters, total assets, paid-in capital, the number
of shares newly issued upon the merger, and treatment of warrants and
convertible bonds issued by PENTAX, will be provided when such matters