OREANDA-NEWS. August 19, 2011. Mitsubishi Corporation (hereinafter "the Company" or the "Tender Offeror") has announced that its Board of Directors today passed a resolution to make a tender offer (hereinafter the "Tender Offer") for the shares of Chuo Kagaku Co., Ltd. (hereinafter the "Target Company"). Details are as follows.

1. Purpose of the Tender Offer

(1) Outline of the Tender Offer

As of August 19, 2011, the Company owns 1,888,800 shares of the Target Company whose shares are listed on the JASDAQ Standard market (hereinafter “JASDAQ”), which is operated by the Osaka Securities Exchange. The 1,888,800 shares represent a shareholding of 9.37% relative to the number of shares (20,149,098 shares) obtained by subtracting the treasury shares (of 890,902 shares) owned by the Target Company as of June 30, 2011, as stated in the Interim Report for the 52nd Period filed by the Target Company on August 12, 2011, from the total number of issued shares (of 21,040,000) as of June 30, 2011 in the same report (shareholding is rounded to the 2nd decimal place; hereinafter, all shareholdings calculated on the same basis unless otherwise stated). Separately, Mitsubishi Shoji Packaging Corporation (hereinafter “Mitsubishi Shoji Packaging”), a consolidated subsidiary of the Company, held 1,000,000 shares, or a shareholding of 4.96%, of the Target Company’s shares. At a meeting of the Board of Directors held on August 19, 2011, the Company resolved to purchase 4,798,000 shares (equivalent to a shareholding of 23.81%) of the 4,907,847 shares (equivalent to a shareholding of 24.36%) owned by Akihito Watanabe, the largest shareholder and an employee of the Target Company, and all of the 3,980,000 Target Company shares (equivalent to a shareholding of 19.75%) owned by Watanabe Kosan Co., Ltd. (hereinafter “Watanabe Kosan”), a company majority-owned by Akihito Watanabe and responsible for the asset management of said individual and his family members, through the Tender Offer to make the Target Company a consolidated subsidiary. Watanabe Kosan is listed as the second largest shareholder of the Target Company as of June 30, 2011 in the Target Company’s Interim Report for the 52nd Period filed on August 12, 2011.

As stated above, the primary objective of the Tender Offer is to convert the Target Company into a consolidated subsidiary by acquiring the Target Company’s shares held by Watanabe Kosan and Akihito Watanabe. Accordingly, the Company has set the minimum number of shares to be purchased at 8,778,000 shares (representing a shareholding of 43.57%) in the Tender Offer. If the total number of tendered shares is less than the minimum number of shares to be purchased, the Company will not purchase all the tendered shares.

The Company does not plan to delist the shares in the Target Company at this stage. However, the Company has not set an upper limit on the number of shares to be purchased in the Tender Offer in order to ensure that shareholders of the Target Company other than Watanabe Kosan and Akihito Watanabe who wish to sell at the price for the purchases of shares in the Tender Offer (hereinafter, the “Tender Offer Price”) have the same opportunity to sell their shares in the Target Company as Watanabe Kosan and Akihito Watanabe. Accordingly, if the total number of tendered shares exceeds the minimum number of shares to be purchased (of 8,778,000 shares), the Company will purchase all the tendered shares. (For details on the outlook and reason for delisting of the Target Company’s shares as a result of the Tender Offer, please see the subsequent section “(6) Outlook and Reason for Delisting”).

Of the 4,907,847 shares (shareholding of 24.36%) of the Target Company owned by Akihito Watanabe, Chuo Kagaku Shoji Co., Ltd. (hereinafter “Chuo Kagaku Shoji”), Sumitomo Mitsui Banking Corporation (hereinafter “SMBC”), and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (hereinafter “The Bank of Tokyo-Mitsubishi UFJ”) have pledges for 3,658,000 shares (shareholding of 18.15%), 1,080,000 shares (shareholding of 5.36%), and 60,000 shares (shareholding of 0.30%), respectively. (The total number of Target Company shares held by Akihito Watanabe for which pledges have been established is 4,798,000 shares, or a shareholding of 23.81%.) The Company concluded a Tender Offer Support Agreement with Akihito Watanabe on August 19, 2011 under which Akihito Watanabe agreed to tender the Target Company’s shares that are the subject of the above pledges, conditional upon the following: there are no material errors regarding the Company’s representation and warranty based on the Tender Offer Support Agreement, including: (i) (1) items concerning the Company’s lawful and effective establishment, and status as a viable going concern, along with the Company’s possession of all necessary legal rights and capacity, and executive capacity to conduct current business operations (2) items concerning the lawful and valid conclusion of the Tender Offer Support Agreement by the Company, and its possession of all necessary legal rights and capacity and executive capacity to execute the agreement, and the fact that the conclusion and execution of the agreement falls within the scope of the purpose of the Company’s business activities, along with the timely and proper implementation of procedures by the Company based on necessary laws, regulations and other rules for the conclusion and execution of the agreement; (3) the lawful and effective conclusion of the agreement by the Company, and the conferral of lawful, effective and legally binding obligations upon the Company by the agreement, and the possibility of the forcible execution of the agreement; (4) items concerning the lawful and proper implementation of necessary procedures based on laws, regulations and other rules for the conclusion and execution of the agreement by the Company; (5) the conclusion and execution of the agreement by the Company shall not breach any laws, regulations and other rules, or the Company’s Articles of Incorporation and other internal rules, and shall not constitute grounds for the non-fulfillment of obligations under agreements and other arrangements in which the Company is the principal party, nor shall it breach any judgments or other decisions reached by judiciary or government agencies; and (6) the Company knows no undisclosed material facts concerning the Target Company, except for facts concerning the Tender Offer, as stipulated in the body of Article 166, Paragraph 1 of the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, including subsequent amendments; hereinafter “the Act”). The agreement is also conditional upon (ii) the removal of pledges on the Target Company shares held by Akihito Watanabe for which the above pledges have been established, by way of increasing the number of shares recorded in the holding account of Akihito Watanabe at the nearest upper positioned institution. (Incidentally, even if the conditions are not fulfilled, Akihito Watanabe is not prohibited or restricted from supporting the Tender Offer at his discretion.)

Furthermore, of the 3,980,000 shares (shareholding of 19.75%) of the Target Company owned by Watanabe Kosan, The Bank of Tokyo-Mitsubishi UFJ and Saitama Resona Bank, Limited have established pledges for 2,320,000 shares (shareholding of 11.51%) and 1,660,000 shares (shareholding of 8.24%), respectively. (The total number of Target Company shares held by Watanabe Kosan for which pledges have been established is 3,980,000 shares, or a shareholding of 19.75%. This represents all of the Target Company’s shares held by Watanabe Kosan.) The Company concluded a Tender Offer Support Agreement with Watanabe Kosan on August 19, 2011 under which Watanabe Kosan agreed to tender the Target Company’s shares that are the subject of the above pledges, conditional upon the following: there are no material errors regarding the Company’s representation and warranty based on the Tender Offer Support Agreement including: (i) (1) items concerning the Company’s lawful and effective establishment, and status as a viable going concern, along with the Company’s possession of all necessary legal rights and capacity, and executive capacity to conduct current business operations (2) items concerning the lawful and valid conclusion of the Tender Offer Support Agreement by the Company, and its possession of all necessary legal rights and capacity and executive capacity to execute the agreement, and the fact that the conclusion and execution of the agreement falls within the scope of the purpose of the Company’s business activities, along with the timely and proper implementation of procedures by the Company based on necessary laws, regulations and other rules for the conclusion and execution of the agreement; (3) the lawful and effective conclusion of the agreement by the Company, and the conferral of lawful, effective and legally binding obligations upon the Company by the agreement, and the possibility of the forcible execution of the agreement; (4) items concerning the lawful and proper implementation of necessary procedures based on laws, regulations and other rules for the conclusion and execution of the agreement by the Company; (5) the conclusion and execution of the agreement by the Company shall not breach any laws, regulations and other rules, or the Company’s Articles of Incorporation and other internal rules, and shall not constitute grounds for the non-fulfillment of obligations under agreements and other arrangements in which the Company is the principal party, nor shall it breach any judgments or other decisions reached by judiciary or government agencies; and (6) the Company knows no undisclosed material facts concerning the Target Company, except for facts concerning the Tender Offer, as stipulated in the body of Article 166, Paragraph 1 of the Act. The agreement is also conditional upon (ii) the removal of pledges on the Target Company shares held by Watanabe Kosan for which the above pledges have been established, by way of increasing the number of shares recorded in the holding account of Watanabe Kosan at the nearest upper positioned institution. (Incidentally, even if the conditions are not fulfilled, Watanabe Kosan is not prohibited or restricted from supporting the Tender Offer at its discretion.)

The Company has heard from Watanabe Kosan and Akihito Watanabe that discussions were held among Watanabe Kosan, Akihito Watanabe and the above pledgeholders, namely The Bank of Tokyo-Mitsubishi UFJ, Saitama Resona Bank, SMBC and Chuo Kagaku Shoji, regarding the cancellation of rights to said pledges. As a result of the discussions, on August 19, 2011, Watanabe Kosan, Akihito Watanabe, The Bank of Tokyo-Mitsubishi UFJ, Saitama Resona Bank, SMBC and Chuo Kagaku Shoji agreed that the pledgeholders will cancel their respective rights to the aforementioned pledges and allow Watanabe Kosan and Akihito Watanabe to tender the Target Company’s shares that are the subject of the above pledges, provided that certain conditions are met, including the following: the Tender Offer Support Agreement has not been changed or revoked, and there is no rational likelihood that the above agreement will be revised or revoked through to the end of the Tender Offer Period; and that the Tender Offer has not been withdrawn, and that there is no rational likelihood that the Tender Offer will be withdrawn.

Before initiating the Tender Offer, the Company clarified that the following Target Company shareholders had no intention of applying to the Tender Offer: Mitsubishi Shoji Packaging Corporation, which held 1,000,000 shares, or 4.96%, of the Target Company's shares as of today; Mitsubishi Plastics, Inc. (hereinafter “Mitsubishi Plastics”), which held 662 thousand shares, or 3.29%, of the Target Company's shares as of June 30, 2011, according to the Target Company's Interim Report for the 52nd Period filed on August 12, 2011; JSP Corporation (hereinafter “JSP”), which held 625 thousand shares, or 3.10%, of the Target Company's shares as of June 30, 2011, according to the Target Company's Interim Report for the 52nd Period filed on August 12, 2011; and The Bank of Tokyo-Mitsubishi UFJ, which held 516 thousand shares, or 2.56%, of the Target Company's shares as of June 30, 2011, according to the Target Company's Interim Report for the 52nd Period filed on August 12, 2011. Together, these 4 companies held 2,803 thousand shares, or 13.91%, of the Target Company's shares as of June 30, 2011, according to the Target Company's Interim Report for the 52nd Period filed on August 12, 2011.

According to the Target Company, a meeting of the Target Company’s Board of Directors was held on August 19, 2011, in which all the Target Company’s directors participated in discussions and resolutions. At the meeting, the Target Company passed a resolution expressing unanimous support for the Tender Offer based on the following reasons, while leaving it to shareholders to decide for themselves whether or not to tender their shares responding to the Tender Offer.

In other words, according to the Target Company, the Target Company has until now considered strategies on an ongoing basis that will lead to optimal and appropriate earnings for all shareholders, with a view to medium- to long-term development and enhanced enterprise value of the Target Company. However, the Target Company is facing a difficult operating environment, characterized by severe market conditions in Japan. These conditions have been caused by market saturation, leading to price-based competition with rival companies and sluggish growth in net sales in Japan. Soaring crude oil prices have exacerbated the situation. Under these conditions, the Target Company believes that in order to continue to grow and raise enterprise value into the future, it must bolster its business base in Japan, as well as generate earnings from its business in China by strengthening and promoting operations there, and generate earnings in its domestic businesses through cooperation with Target Company suppliers and customers with a direct or indirect involvement in China.

Further, according to the Target Company, by becoming a consolidated subsidiary of the Company through the Tender Offer, the Target Company should see an improvement in its external creditworthiness, enabling it to reduce fund procurement costs and maintain and expand customers. The Target Company will also be able to utilize support from the Company in terms of sales, raw materials supply and other areas in its businesses. In particular, the Target Company should be able to capture synergies to some extent through cooperation with the Company, including (i) expanded sales channels in China through the Company’s global network, (ii) efficient procurement of materials through the Company’s network, (iii) joint proposals and joint development in undeveloped areas and in new products, (iv) and joint development of customers. Leveraging these advantages should enable the Target Company to address key management issues, such as strengthening its business base in Japan and growing further in China. Furthermore, the support of the Target Company’s largest shareholders, Akihito Watanabe and Watanabe Kosan for the Tender Offer should help improve the Target Company’s financial condition, by restructuring bankruptcy or reorganization claims etc. related to the Target Company’s golf course development business, which has continued to affect the Target Company’s balance sheet over a number of years.

According to the Target Company, for the abovementioned and other reasons, the Target Company decided that the synergies likely to result with the Company by becoming a consolidated subsidiary of the Company through the Tender Offer would help raise the Target Company’s enterprise value over the medium and long terms.