Mitsui Chemicals

Mitsui Chemicals and Sumitomo Chemical to Consolidate Entire Businesses
Pursuing Global Leadership in the 21st Century

November 17, 2000
Mitsui Chemicals, Inc.
Sumitomo Chemical Company, Ltd.

Mitsui Chemicals, Inc. ("Mitsui") and Sumitomo Chemical Company, Ltd. ("Sumitomo") have reached a basic agreement to consolidate all their businesses by around October 2003 to become "a global leader in the chemical industry of the 21st century". A joint study into the specifics of the business consolidation ("Consolidation")is now underway.

The Consolidation will be preceded by the integration of the polyolefins businesses of Mitsui and Sumitomo by around October 2001.

1. Rationale for the Consolidation

Mitsui and Sumitomo have built a close collaborative relationship and mutual trust through, among others, the formation of joint ventures such as Evolue Japan Co., Ltd.(1996), Japan Polystyrene Co., Ltd.(1997) and most recently Nippon A & L Inc.(1999). In the meantime, the business environment is becoming increasingly difficult for Mitsui and Sumitomo, as markets continue to grow borderless and a race against overseas competitors ever intensifies. U.S. and European companies are boosting their competitive strength through mega-mergers and business re-structuring and, above all, vigorous investments into Asia.

Given the situation, Mitsui and Sumitomo came to realize that enhancing competitiveness through expanded business scale is a must for securing future growth and further enhancing corporate value. With such a common understanding, the two companies have basically agreed that the consolidation of their entire businesses would be their best choice.

2. Toward Global Leadership in the 21st Century

The Consolidation will create Asia's largest and the world's fifth-ranked global chemical company able to compete effectively against world top-tier chemical concerns both technologically and financially. The new company will seek to become “a global leader in the chemical industry of the 21st century” by pursuing business activities worldwide.

The consolidated company is expected to contribute significantly to the betterment of society at large by supplying useful, high quality, and safe products, developed through technological innovation, that will enable people around the world to lead more fulfilled and comfortable lives in harmony with the global environment. The new company will endeavor to increase shareholder value, win high respect from customers and communities where it operates, and create an attractive working environment in which employees can pursue the job assignment vigorously with pride and satisfaction. Last but not least, the company will pursue business activities based on fair and free competition, not to mention its commitment to maintaining high ethical standards and complying with national and international laws and regulations.

3. Method and Structure of the Consolidation

(1) Structure of the Consolidation

Mitsui and Sumitomo will consolidate businesses in their entirety, based on the spirit of equal partnership. The two companies will initially establish a Holding Company by means of joint share transfer and list it on a stock exchange market in Japan with a view to integrating all the businesses under a single entity by targeting around October 2003. Its specific details such as the mode of business operation will be determined by around March 2001.

Both companies' polyolefins businesses will be consolidated by around October 2001, ahead of other businesses. The ratio of shareholding by Mitsui and Sumitomo in the company consolidating the polyolefins businesses will be 50:50.

(2) Consolidation Ratio

The Consolidation ratio will be determined by taking into account the prevailing prices of each company's outstanding shares at the time of the Consolidation as well as other relevant factors to be considered.

(3) Name, headquarters location, etc. of the new company

The name, headquarters location and other details of the new company will be agreed upon later by both companies.

(4) Joint organization to promote the Consolidation

Both companies will jointly set up a Business Consolidation Study Committee to supervise specific studies conducted by both companies toward the Consolidation. The Committee will be headed jointly by Mr. H. Nakanishi, President of Mitsui and Mr. H. Yonekura, President of Sumitomo. Under the Business Consolidation Study Committee, sub-committees will be organized to study specific details relating to the Consolidation. To materialize the Consolidation smoothly and effectively, each of Mitsui and Sumitomo will further improve its financial and other strengths and prepare for the successful integration of management, personnel and other systems of the two companies.

4. Benefits from the Consolidation

1) Benefits in overall corporate management

  1. A greater business scale and improved operational efficiencies will provide effective avenues to all aspects of production, marketing, and research with which the new company can compete successfully with world top-class chemical players.
  2. The new company, with combined corporate resources, will be able to build better business portfolio and to focus on core businesses that will offer stronger competitive advantage.
  3. The concentration and integration of both companies' scientific and technological expertise can promote and reinforce research and development activities.

2) Benefits in respective business fields

  1. Petrochemicals and Basic Chemicals Fields A greater business scale will improve global competitiveness. For example, the new company will be able to establish a firmer stronghold for the petrochemical business in Asia by installing in Singapore a new ethylene cracker of more than 1 million tons per annum and operating a well-balanced and profitable petrochemical complex with various ethylene and propylene derivatives in which Mitsui and Sumitomo respectively boast excellence.
  2. Performance Materials, Fine Chemicals and Life Science Fields The Consolidation will enable the two companies to produce substantial synergies by implementing business activities on a broader basis, reinforcing research & development capability, etc.

For example, by combining the diverse technological resources of Mitsui and Sumitomo, the new company can develop and supply more swiftly electronics and information related materials with those functions that the emerging IT society will require. In the agricultural chemicals business, Sumitomo's global presence, coupled with Mitsui's research and development capability, will augment the competitive strength of the new company. In the life science field such as pharmaceuticals, the enriched management resources will provide the new company with a stronger platform for vigorous business expansion in the future.

5. Business Scope at the time of the Consolidation

Petrochemicals & Basic Chemicals Field ethylene, propylene, raw materials for synthetic fibers, phenol & bisphenol, styrene monomer, MMA, polyethylene & polypropylene, elastomers, inorganic industrial chemicals, aluminum, etc.
Performance Materials, Fine Chemicals & Life Science Fields Performance products, additives & functional chemicals, urethane chemicals, fine chemicals, electronics & information related materials, dyestuff, pharmaceutical intermediates, agricultural chemicals, household insecticides & public hygiene products, pharmaceuticals (such as ethical drugs and diagnostics), etc.
Target financial performance of the new company on a consolidated basis for fiscal 2006 is as follows:
Target in Fiscal 2006 (For reference)
Simple sum of the two companies in Fiscal 1999
Net Sales ¥ 3 Trillion ¥ 1.8 Trillion *
Operating Income ¥ 300 Billion ¥ 125.8 Billion
Recurring Income ¥ 250 Billion ¥ 124.4 Billion
Net Income ¥ 150 Billion ¥ 34.5 Billion
*
Petrochemicals & Basic Chemicals Fields : About ¥ 1.0 Trillion
Performance Materials, Fine Chemicals & Life Science Fields : About ¥ 0.8 Trillion

6. Outline of Mitsui and Sumitomo

For further information, please contact:

Mitsui Chemicals, Inc.
Corporate Communications
Tel: 03-3592-4060
Sumitomo Chemical Co., Ltd.
General Affairs Dept.
Tel: 03-5543-5102