FOR IMMEDIATE RELEASE. April 30, 2010

Transcription

1 FOR IMMEDIATE RELEASE April 30, 2010 Company Name: Unicharm Corporation Representative: Takahisa Takahara President and CEO (TSE Code: 8113) Contact: Atsushi Iwata Executive Officer Legal & Intellectual Property Division Telephone: Company Name: Unicharm PetCare Corporation Representative: Gumpei Futagami President and CEO (TSE Code: 2059) Contact: Itsumi Matsuoka Executive Officer General Manager of Corporate Staff Division Telephone: Notice of Entering into a Merger Agreement between Unicharm Corporation and Unicharm PetCare Corporation with the Failure of a Tender Offer as a Condition Subsequent Unicharm Corporation ( Unicharm ) and Unicharm PetCare Corporation ( Unicharm PetCare, and together with Unicharm, Both Parties ), a consolidated subsidiary of Unicharm announced that the Board of Directors meeting held on April 30, 2010 entered into a merger agreement (the Merger Agreement ) effective today. Unicharm, as a surviving company, will consolidate Unicharm PetCare, as an extinct company, by way of absorption-type merger with cash consideration (the Cash-out Merger ) (effective on September 1, 2010) and the Consideration for the Merger for the cash to be paid as Consideration) after the tender offer from May 6, 2010 to June 16, 2010 on all outstanding shares of Unicharm PetCare (excluding common shares of Unicharm PetCare already held by Unicharm and treasury shares held by Unicharm PetCare (the Tender Offer and the Tender Offer Price for the price of the Tender Offer) with the failure of the Tender Offer as a condition subsequent. 1 Purpose of the Merger Unicharm and the group companies consisting of subsidiaries and related companies are under the corporate philosophy of NOLA&DOLA (Necessity of Life with Activities & Dreams of Life with Activities), mainly engage in the manufacture and distribution of baby care products, feminine care products and pet care products by making full use of processing and forming technologies of non-woven fabrics and absorbent materials which Unicharm has long developed since its establishment. Unicharm group has focused on business renovation in the domestic market and business expansion in the overseas markets mainly in Asia, as set out in the Global 10, 1

2 new Medium-Term Management Plan formulated in 2008, and currently provides diapers and feminine care products for customers in more than 80 countries around the world. However, the business environment has become increasingly uncertain on the economic growth in the Asian countries where it used to show solid growth due to severe economic conditions around the globe. In spite of these adverse circumstances, Unicharm group will protect its No.1 market share position mainly in Asian countries and continue to promote the corporate renovation with an aim to attain a global 10% share by developing new markets. Unicharm and its group started the manufacturing and distribution of pet care-related products in In October 1998, Unicharm transferred its pet care-related business operation to Uni-Taisei Corporation, a then subsidiary of Unicharm and the predecessor of Unicharm PetCare, based on the policy of concentration of management resources on the absorbent materials business. In October 2004, seeking the means to finance growth capital over the course of its management reform for the pet care-related businesses, Unicharm PetCare became the first pet care-related manufacturer to be a listed company. In September 2005, it was moved up to the first section of the Tokyo Stock Exchange Group, Inc. (the Tokyo Stock Exchange ). The Unicharm group regards the pet care business as a promising field thanks to the expected future growth of the domestic demand for pet care products as pets draw more attention as healers in the modern society facing a dwindling birthrate, an aging population, late marriages, and the growing number of negative news on the media and also as a consequence of the drastic improvement of the pet-owning environment, such as the large increase in the number of apartments which allow tenants to keep pets. Under these circumstances, it was concluded that the maximization of synergy effects with Unicharm, rather than the operation with Unicharm PetCare s independent management resources, would be the best way to further increase the speed of growth and expansion in the promising domestic pet care business. Furthermore, the Unicharm group expects that the global trend of market expansion for pet care products will continue given the market size of North America and Europe which are much larger than that of Japan and the growing emerging markets. Especially in China, the trend of market expansion appears prominent along with the improvement of the quality of life of the middle class and urban population in addition to the wealthy. Under these circumstances, the Unicharm group plans to develop its business, mainly in the pet care business, in a proactive manner by taking advantage of Unicharm PetCare s strength in technologies in high-end products and non-woven fabrics processing and Unicharm s resources. Unicharm PetCare, as a consolidated subsidiary of Unicharm, has independently run its business utilizing a certain degree of synergy between Unicharm and Unicharm PetCare under a certain level of soft governance as a listed company. Unicharm PetCare is currently a leader of the domestic pet care-related market by a narrow margin; however, some oligopoly is expected to be developed in this market as the aggregate market share of the top five companies is still less than 50%. Besides, since all the major global companies in the pet care-related business have entered this market, further fierce competition is expected in the process of market oligopolization in the future. Unicharm PetCare thus needs to gain the absolute No.1 market share as soon as possible under such circumstances. In addition, as consumers are increasingly demanding high-quality and low-price pet carerelated products under the recent economic environment of sluggish consumption and 2

3 deflation, Unicharm PetCare needs to promptly reconstruct and reinforce its operating base including its marketing ability, product development and purchase negotiation, and headquarters operation in order to ensure the future development in the domestic pet carerelated market. Therefore, Unicharm and Unicharm PetCare had a series of discussions and examinations about several measures with an aim to improve the corporate value of Both Parties since January In consequence, Unicharm reached the conclusion that it is necessary to ensure swift and flexible management judgment, to optimize corporate resources including the effective use of human resources at the whole-group level, and to expand the business through additional strategic investments jointly made by Unicharm and Unicharm PetCare in order to further strengthen the domestic markets, and to expand the overseas business where the future growth is expected for both companies. Unicharm believes that the merger of the two companies would be the best way based on the judgment that it is necessary to operate the business as a single entity in order to realize synergy for both companies as quickly as possible. It seems that the Tender Offer and business integration with Unicharm have enough strategic significance for Unicharm PetCare because of the following expected synergy effects: i. to ensure the mobility and flexibility as a member of the whole group of Unicharm including the domestic and overseas production sites, logistics network and ability of purchase negotiation of Unicharm ii. to optimize the management resources of Unicharm group as a whole including the utilization of human resources at home and abroad with regard to product development, marketing, and headquarters operation iii. to enable the safe and prompt global operation with an access to Unicharm s platform, such as local offices and distribution channels, in the overseas strategy iv. to enable additional strategic investment through the funding capability of Unicharm group v. to reduce listing-maintenance costs and to eliminate potential conflicts of interest concerning the parent-subsidiary listings As a result, the board of directors of Unicharm passed a resolution for commencing the Tender Offer and for entering into the Merger Agreement and Unicharm PetCare also passed a resolution for the Tender Offer to recommend to the shareholders of Unicharm PetCare to accept the Tender Offer and for entering into the Merger Agreement at the board meeting held today. Both Parties entered into the Merger Agreement today. Unicharm intends to respect the autonomy and independence of Unicharm PetCare s business and to pay careful attention to Unicharm PetCare s employees and management by introducing an in-house company system, and also keep the Unicharm Pet Care brand in consideration of its presence in the market and economic value after the business integration with Unicharm PetCare. 2 Outline of the Merger (1) Merger Schedule 3

4 March 31, 2010 April 30, 2010 April 30, 2010 April 30, 2010 (Scheduled) May 6, 2010 (Scheduled) June 16, 2010 (Scheduled) June 24, 2010 (Scheduled) June 29, 2010 (Scheduled) June 29, 2010 (Scheduled) July 30, 2010 (Scheduled) Record Date of Annual Meeting of Shareholders (Unicharm and Unicharm PetCare) Board of Directors Meeting (Unicharm and Unicharm PetCare) Contract Day of the Merger (Unicharm and Unicharm PetCare) Assignment of Unicharm PetCare shares to the watchlist Commencement date of the Tender Offer (Unicharm) Closing date of the Tender Offer (Unicharm) Annual Meeting of Shareholders(Unicharm) Annual Meeting of Shareholders (Unicharm PetCare) Assignment of Unicharm PetCare shares to the delisting post Delisting date for Unicharm PetCare September 1, 2010 (Scheduled) Effective date of the Merger October 29, 2010 (Scheduled) Commencement date of settlement In the event that the Cash-out Merger fulfills the requirements of short-form merger, no resolution may be adopted in Unicharm PetCare s shareholders meeting under Company Act Article 784 paragraph 1. The announcement of the short-form merger will be held at the same time of the announcement of results of the Tender Offer on June 17, (2) Type of Merger Subject to the failure of the Tender Offer as a condition subsequent, Unicharm as a surviving company will consolidate Unicharm PetCare as an extinct company by way of Cash-out Merger and accordingly, Unicharm PetCare will be dissolved on the effective date, September 1, 2010 after the Tender Offer. The shareholders of Unicharm, the surviving company, and those of Unicharm PetCare, the extinct company in the Cash-out Merger, may execute the right for share purchase against Unicharm or Unicharm PetCare pursuant to Article 797 or 785 of the Company Act and other provisions in the relevant laws, respectively. (3) Details of Consideration for the Merger Pursuant to the Merger Agreement, Unicharm will pay cash consideration of 3,825 yen in exchange for one ordinary share of Unicharm PetCare to the shareholders of Unicharm PetCare. In the Cash-out Merger, as cash is the only consideration there is no new share issuance. 4

5 (4) Treatment of Warrant and Bond Certificates with Stock Acquisition Right with respect to the Cash-out Merger Unicharm PetCare has not issued any warrants or bond certificates with stock acquisition right at this moment. 3 Basis of Evaluation of the Consideration for the Merger (1) Basis of Evaluation Unicharm requested Morgan Stanley Japan Securities Co., Ltd. ( Morgan Stanley ), a financial advisor which is independent from Unicharm and Unicharm PetCare, to evaluate the equity value of Unicharm PetCare for the purpose of providing Unicharm with a basis to determine the Tender Offer Price in order to ensure the fairness thereof. Morgan Stanley conducted a valuation analysis of Unicharm PetCare s equity value through a share price performance analysis, comparable companies analysis and discounted cash flow ( DCF ) analysis and then delivered the valuation report ( Tender Offeror Valuation Report ) to Unicharm (Unicharm has not obtained any opinion on the fairness of the Tender Offer Price (Fairness Opinion) from Morgan Stanley). A summary of the range of per share values of Unicharm PetCare for each valuation method conducted by Morgan Stanley is as follows; Valuation Method Share Price Performance Analysis Comparable Companies Analysis DCF Analysis Range of the Per Share Value of Unicharm PetCare from 2,977 yen to 3,115 yen from 2,652 yen to 3,346 yen from 3,352 yen to 4,732 yen The share price performance analysis resulted in a per share value of Unicharm PetCare ranging from 2,977 to 3,115 yen based on the closing price of Unicharm PetCare on the First Section of the Tokyo Stock Exchange on the base date (April 28, 2010) and the average closing price thereof for the latest one month (3,061 yen, rounded to the nearest yen), three months (2,977 yen, rounded to the nearest yen) and six months (3,007 yen, rounded to the nearest yen) prior to the base date. The comparable companies analysis resulted in a per share value of Unicharm PetCare ranging from 2,652 to 3,346 yen by evaluating the equity value of Unicharm PetCare through a comparison with listed companies operating a relatively similar business to that of Unicharm PetCare based on their financial indexes, including share price and profitability. The DCF analysis resulted in a per share value of Unicharm PetCare ranging from 3,352 to 4,732 yen by analyzing the corporate value and equity value using the present value of free cash flows which Unicharm PetCare is expected to produce in the future discounted at a certain level of discount rate, based on the earning forecasts prepared by Unicharm after the fiscal year ending in March 2012, taking into consideration various factors, including the management plan obtained from Unicharm PetCare, latest 5

6 business performance and information disclosed to the public and synergy effects expected to be generated from the business integration. Morgan Stanley estimated the per share value of Unicharm PetCare based on the financial projections prepared by Unicharm by making adjustments to the Unicharm PetCare s business projections and information obtained from Unicharm PetCare, and assumed and relied upon the accuracy or completeness of such material and information without independent verification of the accuracy or completeness thereof; Morgan Stanley has not independently evaluated or appraised the assets and liabilities (including contingent liabilities) of Unicharm PetCare, and has not requested any such evaluations or appraisals from a third party. Morgan Stanley assumed the Tender Offer and the Cash-out Merger will be duly executed in accordance with its terms, that the tax consequences will not be different from the estimates provided to Morgan Stanley, that all necessary approvals and consents from relevant governmental and regulatory agencies will be obtained to execute the Tender Offer and the Cash-out Merger without any adverse effects on the expected return, and that Morgan Stanley is not obliged to assess such matters; Morgan Stanley has not taken into consideration any impact of legal, accounting and tax consequences on Unicharm and Unicharm PetCare that may result from the Tender Offer and the Cash-out Merger. Unicharm, by reference to the results from each evaluation method described in the Tender Offeror Valuation Report provided by Morgan Stanley, comprehensively in consideration of the examples of premiums implied by the tender offer price at the time of its announcement in precedent tender offers for shares by entities other than the issuer, whether the board of directors of Unicharm PetCare would approve of the Tender Offer, the market share price performance of the common shares of Unicharm PetCare, and the expected number of subscriptions to the Tender Offer, and based on the results of discussion and negotiation with Unicharm PetCare, eventually determined the Tender Offer Price as 3,825 yen by the resolution of the board of directors held today. On the other hand, Unicharm PetCare said that they had appointed Nikko Cordial Securities, a financial advisor independent from Unicharm and Unicharm PetCare, as a third-party valuation institution and asked them to analyze the equity value of Unicharm PetCare for the reference over the course of deciding an opinion on the Tender Offer and obtained Unicharm PetCare Valuation Report from Nikko Cordial Securities on April 27, 2010 (However, it is understood that Unicharm PetCare has not obtained Fairness Opinion from Nikko Cordial Securities). According to Unicharm PetCare, the equity value of Unicharm PetCare was analyzed based on the financial information and estimates provided by Unicharm PetCare under certain premises and conditions through the methods of share price performance and DCF in Unicharm PetCare Valuation Report. In addition, according to Unicharm PetCare, Mr. Gunpei Futagami, President of Unicharm PetCare who gave informal consent to assume the post of director of Unicharm with a condition of an approval from shareholders of Unicharm at the 50th Annual Meeting of Shareholders scheduled on June 24, 2010, was involved in, as an essential member, in the drafting of the management plan which was provided to Nikko Cordial Securities to evaluate the equity value; however, such management plan and the facts which was based thereon did not vary greatly from the former ones and any drastic increase or decrease in profit was not expected. According to Unicharm PetCare, the equity value of Unicharm PetCare evaluated 6

7 through each method in Unicharm PetCare Valuation Report was as follows: By the method of stock price performance analysis, the equity value is 2,966~3,038 yen: by the DCF analysis, the equity value is 3,356~4,043 yen. Unicharm PetCare said that its board of directors, based on advice obtained from Nikko Cordial Securities as the financial advisor and Yanagida & Partners, as the legal advisor, has had a series of careful examination in consideration of the contents of the Unicharm PetCare Valuation Report, conditions of the Cash-out Merger, possibility of utilizing Unicharm s corporate resources, business and financial synergy effects that could be potentially realized from the business integration and with respect to the reports from the third-party commission established by the board of directors itself; as a result, it resolved, at a meeting held today, the approval of the Tender Offer and the recommendation to their shareholders of tendering shares based on the judgment that the business integration with Unicharm by way of the Tender Offer would contribute to the improvement of Unicharm PetCare s corporate value and benefits to be commonly enjoyed among shareholders, the conditions of the Tender Offer Price and others were reasonable and the Tender Offer would give full attention to the protection of minority shareholders interest and provide an opportunity for selling Unicharm PetCare s equity at a reasonable price. (Note 1) Morgan Stanley ( MS ), the U.S. parent company of Morgan Stanley Japan Securities Co., Ltd, and Mitsubishi UFJ Financial Group, Inc. ( MUFG ), as announced in the press release dated March 30, 2010, have entered into definitive agreements to integrate their securities operations in Japan (the "Integration"). Pursuant to the Integration, MS and MUFG will jointly establish two securities firms: (i) Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. ( MUMSS ) and (ii) Morgan Stanley MUFG Securities Co., Ltd. as of May 1, 2010, and the investment banking operations of Morgan Stanley Japan Securities Co., Ltd, which acts as Financial Advisor, are contemplated to be entirely transferred to MUMSS through a corporate demerger (absorption type demerger) on such date. (2) Evaluation Process Unicharm and Unicharm PetCare requested Morgan Stanley and Nikko Cordial Securities, respectively, to analyze the equity value of Unicharm PetCare for the purpose of providing Unicharm and Unicharm PetCare with a basis to determine the Consideration for the Merger to be consistent with the Tender Offer Price in order to ensure the fairness thereof. Morgan Stanley conducted a valuation analysis of Unicharm PetCare s equity value through a share price performance analysis, comparable company analysis and DCF analysis and Nikko Cordial Securities conducted valuation analysis of Target s equity through share price performance analysis, comparable company analysis and DCF analysis to determine the equity value of Unicharm PetCare and provided the analysis as stated in (1) Basis of Evaluation. Unicharm and Unicharm PetCare referred to the valuation report from Morgan Stanley and Nikko Cordial Securities, respectively, and after careful consideration and discussions, Unicharm and Unicharm PetCare reached agreement to enter into the Merger Agreement with the Consideration for the Merger of 3,285 yen per share on April 30, 2010 The Tender Offer Price 3,825 yen per share represents a premium of 22.8% (rounded to the first decimal place) on the closing price of 3,315 yen of the common share of Unicharm PetCare on the First Section of the Tokyo Stock Exchange on April 28, 2010, 25.0% (rounded to the first decimal place) on the simple average of 3,061 yen (rounded to the 7

8 nearest yen) of the closing share price of Unicharm PetCare for the past month (from March 29, 2010 to April 28, 2010), 28.5% (rounded to the first decimal place) on the simple average of 2,977 yen (rounded to the nearest yen) of the closing share price of Unicharm PetCare for the past three months (from January 29, 2010 to April 28, 2010) and 27.2% (rounded to the first decimal place) on the simple average of 3,007 yen (rounded to the nearest yen) of the closing share price of Unicharm PetCare for the past six months (from October 29, 2009 to April 28, 2010). (3) Relationship with Valuation Appraiser The financial advisor (valuation institution) of Unicharm, Morgan Stanley, does not fall under the category of a related party of either Unicharm or Unicharm PetCare and does not have any financial interest in either company. The financial advisor (valuation institution) of Unicharm PetCare, Nikko Cordial, also does not fall under any related party of either Unicharm or Unicharm PetCare and does not have any interest in both companies. (4) Likelihood of a Delisting of Shares and the Reasons Thereof 1 Likelihood of a Delisting of Shares and the Reasons Thereof The common stock of Unicharm PetCare is, currently listed on the First Section of the Tokyo Stock Exchange. However, as Unicharm has not set the maximum number of shares to be purchased, the shares of Unicharm PetCare may be delisted through specified procedures pursuant to the delisting standards of the Tokyo Stock Exchange depending on the results of the Tender Offer. Even if such delisting standards are not met upon completion of the Tender Offer, the common shares of Unicharm PetCare will be delisted on July 30, 2010 after being assigned as Securities under Supervision on April 30, 2010 and as Securities to be put on delisting post on June 29, 2010 by the Tokyo Stock Exchange. In the event that the Cash-out Merger fulfills the requirements of short-form merger, no resolution may be adopted in Unicharm PetCare s shareholders meeting under the Company Act Article 784 paragraph 1. The announcement of shortform merger will be held at the same time with the announcement of results of the Tender Offer on June 17, After the delisting, the common shares of Unicharm PetCare will not be able to be traded on the Tokyo Stock Exchange. 2 Reason of a Delisting of Shares and Consideration Status Unicharm and the group companies consisting of subsidiaries and related companies are under the corporate philosophy of NOLA&DOLA (Necessity of Life with Activities & Dreams of Life with Activities), mainly engage in the manufacture and distribution of baby care products, feminine care products and pet care products by making full use of processing and forming technologies of non-woven fabrics and absorbent materials which Unicharm has long developed since its establishment. Unicharm group has focused on business renovation in the domestic market and business expansion in the overseas markets mainly in Asia, as set out in the Global 10, new Medium-Term Management Plan formulated in 2008, and currently provides diapers 8

9 and feminine care products for customers in more than 80 countries around the world. However, the business environment has become increasingly uncertain on the economic growth in the Asian countries where it used to show solid growth due to severe economic conditions around the globe. In spite of these adverse circumstances, Unicharm group will protect its No.1 market share position mainly in Asian countries and continue to promote the corporate renovation with an aim to attain a global 10% share by developing new markets. Unicharm and its group started the manufacturing and distribution of pet care-related products in In October 1998, Unicharm transferred its pet care-related business operation to Uni-Taisei Corporation, a then subsidiary of Unicharm and the precursor of Unicharm PetCare, based on the policy of concentrating of management resources on absorbent materials business. In October 2004, seeking the means to finance growth capital over the course of its management reform for the pet care-related businesses, Unicharm PetCare became the first pet care-related manufacturer to be a listed company. In September 2005, it was moved up to the first section of the Tokyo Stock Exchange Group, Inc. (the Tokyo Stock Exchange ). The Unicharm group regards the pet care business as a promising field thanks to the expected future growth of the domestic demand for pet care products as pets draw more attention as healers in the modern society facing a dwindling birthrate, an aging population, late marriages, and the growing number of negative news on media and also as a consequence of the drastic improvement of the pet-owning environment, such as the large increase in the number of apartments which allow tenants to keep pets. Under these circumstances, it was concluded that the maximization of synergy effects with Unicharm, rather than the operation with Unicharm PetCare s independent management resources, would be the best way to further increase the speed of growth and expansion in the promising domestic pet care business. Furthermore, the Unicharm group expects that the global trend of market expansion for pet care products will continue given the market size of North America and Europe which are much larger than that of Japan and the growing emerging markets. Especially in China, the trend of market expansion appears prominent along with the improvement of the quality of life of the middle class and urban population in addition to the wealthy. Under these circumstances, Unicharm group plans to develop its business, mainly in the pet care business, in a proactive manner by taking advantage of Unicharm PetCare s strength in technologies in high-end products and non-woven fabrics processing and Unicharm s resources. Unicharm PetCare, as a consolidated subsidiary of Unicharm, has independently run its business with utilizing a certain degree of synergy between Unicharm and Unicharm PetCare under a certain level of soft governance as the listed company. Unicharm PetCare is currently a leader of the domestic pet care-related market by a narrow margin; however, the state of oligopoly is expected to be developed in this market as the aggregate market share of the top five companies is still less than 50%. Besides, since all the major global companies in the pet care-related business have entered in this market, further fierce competition is expected in the process of market oligopolization in the future. Unicharm PetCare thus needs to gain the absolute No.1 market share as soon as possible under such circumstances. In addition, as consumers are increasingly demanding for high-quality and low-price pet care-related products under the recent economic environment of sluggish consumption and deflation, Unicharm PetCare needs to promptly reconstruct and reinforce 9

10 the operating base including the ability of marketing, product development and purchase negotiation, and headquarters operation in order to ensure the future development in the domestic pet care-related market. Therefore, Unicharm and Unicharm PetCare had a series of discussions and examinations about several measures with an aim to improve the corporate value of Both Parties since January In consequence, Unicharm reached the conclusion that it is necessary to ensure swift and flexible management judgment, to optimize corporate resources including the effective use of human resources at the wholegroup level, and to expand the business through additional strategic investments jointly made by Unicharm and Unicharm PetCare in order to further strengthen the domestic markets, and to expand the overseas business where the future growth is expected for both companies. Unicharm believes that the merger of the two companies would be the best way based on the judgment that it is necessary to operate the business as a single entity to realize synergy for both companies as quickly as possible. It seems that the Tender Offer and business integration with Unicharm have enough strategic significance for Unicharm PetCare because of the following expected synergy effects: i. to ensure the mobility and flexibility as a member of the whole group of Unicharm including the domestic and overseas production sites, logistics network and ability of purchase negotiation of Unicharm ii. to optimize the management resources of Unicharm group as a whole including the utilization of human resources at home and abroad with regard to product development, marketing, and headquarters operation iii. to enable the safe and prompt global operation with an access to Unicharm s platform, such as local offices and distribution channels, in the overseas strategy iv. to enable the additional strategic investment through funding capability of Unicharm group v. to reduce listing-maintenance costs and to eliminate potential conflicts of interest concerning the parent-subsidiary listings Meanwhile, the circumstances since the Target listed on the exchange market in October 2004 has changed. With respect to the reduction of listing-maintenance costs, and also elimination of potential conflicts of interest concerning the parent-subsidiary listings, delisting from the exchange market has strategic significance. As a result of the Cash-out Merger, the stock of Unicharm PetCare will be delisted as stated in 1. With respect to the business integration of Unicharm and Unicharm PetCare, to avoid dilution of existing shareholders of Unicharm, and to take advantage of low cost debt financing capacity as well as to avoid the cumbersome filing requirement imposed by the U.S. Securities and Exchange Commission, Unicharm and Unicharm PetCare determined to pay cash consideration equal to the Tender Offer Price to the shareholders who did not accept the Tender Offer as the opportunity to earn the return of their investment in a prompt manner. In case that Unicharm PetCare s stock is delisted, such stock cannot be traded but pursuant to the Merger Agreement, Unicharm will pay a cash consideration of 3,825 yen in exchange for one ordinary share of Unicharm PetCare to the shareholders of Unicharm PetCare as stated in 2-(3) above 10

11 (5) Measures to Ensure the Fairness As Unicharm PetCare is a wholly-owned subsidiary of Unicharm, Unicharm and Unicharm PetCare took the following measures to ensure the fairness in series of discussion regarding the Tender Offer and the Cash-out Merger. 1 Obtaining the Valuation Report from the Independent Appraisers As stated in 3-(1), Unicharm and Unicharm PetCare separately asked independent valuation appraisers to analyze the equity value of Unicharm PetCare and by referring to the valuation report provided by such appraisers, each board of director discussed and passed resolution to enter into the Merger Agreement. 2 Establishment of the Independent Committee of Unicharm PetCare Unicharm PetCare mentioned that on April 5, its board of directors passed a resolution that it would establish an independent committee ( Independent Committee ) in order to mitigate the conflicts of interest and arbitrary decisions to ensure the fairness of the Tender Offer Price, Consideration for Merger, other conditions, and the fair process during the decision-making process of Unicharm PetCare and that it would consult the Independent Committee in the examination of the Tender Offer Price, Consideration for Merger and details of the opinion to be made on the Tender Offer. Unicharm PetCare also mentioned that 3 individuals, Mr. Shiro Bando (Lawyer, Representative of Bando Sogo Horitsu Jimusho), Mr. Seijun Fujita (Certified Public Accountant/Tax Accountant, Partner/Representative of Shinsoh Audit Corporation), Mr. Susumu Miyoshi (Former Senior Managing Executive Officer of Japan Airlines Corporation), were appointed as committee members as objectively and practically independent from Unicharm and Unicharm PetCare. According to Unicharm PetCare, the Independent Committee met several times from April 5 to April 28, 2010 to discuss the aforementioned consideration points and to obtain necessary information regarding the details and contents of the potential increase of corporate value with respect to the Tender Offer and Cash-out Merger from Unicharm PetCare s advisors, and to examine the information submitted by Unicharm PetCare s board of directors with respect to the Tender Offer and Cash-out Merger. Furthermore, the Independent Committee had question and answer sessions with personnel of Unicharm and Morgan Stanley. In addition, the Independent Committee referred to the Valuation Report prepared for Unicharm PetCare and had a question and answer session and explanation about Unicharm PetCare s valuation by Unicharm PetCare s financial advisor, Nikko Cordial Securities. Consequently, after careful discussion, on April 28, 2010, the Independent Committee unanimously approved the report to the board of directors which concluded that it was reasonable for the board of directors of Unicharm PetCare to express the consent for the Tender Offer and following Cash-out Merger, because the Independent Committee considered it as reasonable to judge that the Tender Offer and following Cash-out Merger would contribute to the improvement of Unicharm PetCare s corporate value, shareholders profits are carefully considered through a fair process, and the Tender Offer Price and Consideration for the Merger are appropriate. 3 Opinion from Legal Advisors Unicharm PetCare mentioned that its board of directors appointed Yanagida & 11

12 Partners as a legal advisor in order to ensure the transparency and objectivity in the decision-making process and discussed and examined whether the expression of approval of the Tender Offer and execution of the Merger Agreement would contribute to the improvement of the corporate value of Unicharm PetCare in a careful manner, receiving legal advice with regard to the method and process of decision-making of the board of directors and other points to remember including procedures for the Tender Offer and execution of the Merger Agreement. (6) Measures to Avoid Conflicts of Interest In consideration of the parent-subsidiary relationship between Unicharm and Unicharm PetCare, both companies took the following measures to avoid conflicts of interest. 1 Approval from All the Directors and Auditors free from Interest Unicharm PetCare mentioned that the meeting of the board of directors held today passed the unanimous approval for the Tender Offer to express its opinion supporting the Tender Offer and recommending shareholders of Unicharm PetCare to accept the Tender Offer and for the execution of the Merger Agreement. In addition, Unicharm PetCare mentioned that auditors who have no conflicts of interest expressed that they have no objection that the board of directors support the Tender Offer and recommend shareholders of Unicharm PetCare to accept the Tender Offer and for the execution of the Merger Agreement. Unicharm PetCare mentioned that outside directors, Mr. Takamitsu Igaue and Mr. Hironori Nomura, who are currently doubling as employees of Unicharm (treated as executive officers), due to conflicts of interest, did not attend the discussion and resolution and that they had not participated in the discussion and negotiation on behalf of Unicharm. Moreover, Mr. Yasushi Akita, an auditor, is also doubling as executive officer of Unicharm, did not attend the meeting of the board of directors due to conflicts of interest. Unicharm PetCare mentioned that, to mitigate conflicts of interest, prior to the discussion and resolution, Mr. Hitomitsu Kodama, Mr. Hirohiko Muromachi and all auditors excluding Mr. Yasushi Akita attended the discussion and only Mr. Hiromitsu Kodama and Mr. Hirohiko Muromachi attended the resolution, as Mr. Gunpei Futagami and Mr. Yoshiro Ando have agreed to be appointed as directors of Unicharm subject to the approval at Unicharm s 50th general shareholders meeting to be held on June 24, And then, from a viewpoint of constituting a quorum pursuant to the Article 369 of Company Act, Mr. Gunpei Futagami, Mr. Yoshiro Ando, Mr. Hiromitsu Kodama, Mr. Hirohiko Muromachi and all auditors excluding Mr. Yasushi Akita attended the discussion and Mr. Gunpei Futagami, Mr. Yoshiro Ando, Mr. Hiromitsu Kodama and Mr. Hirohiko Muromachi attended the resolution. Unicharm PetCare mentioned that, consequently, in every resolution, the resolution was passed by unanimous approval from the participating members of the board of directors for the Tender Offer to express its opinion supporting the Tender Offer and recommending shareholders of Unicharm PetCare to accept the Tender Offer and for the execution of the Merger Agreement. Furthermore, Unicharm PetCare mentioned that auditors who have no conflicts of interest expressed that they have no objection that the board of directors support the Tender Offer and recommend shareholders of Unicharm PetCare to accept the Tender 12

13 Offer and for the execution of the Merger Agreement. 4 Outline of Unicharm and Unicharm PetCare Surviving company (1) Corporate Unicharm Corporation Name (2) Head Office 182 Shimobun, Kinsei-cho, Shikokuchuo-City, Ehime (3) Name and Representative Director, President and Title of C.E.O. Representative Takahisa Takahara (4) Description of Business (5) Paid-in Capital (6) Date Established (7) Total Number of Shares Outstanding (8) Account Settlement (9) Number of Employees (10) Major Shareholders and Shareholding Ration Manufacturing and Sales, etc. of baby and child care products, feminine care products, and health care products Extinct Company Unicharm PetCare Corporation Mita, Minato-ku, Tokyo President & C.E.O. Gunpei Futagami Manufacturing and sales of pet food and pet care products 15,992 million yen 2,371 million yen February 10, 1961 October 6, ,981,591 shares 29,360,000 shares March 31 March 31 7,074 (on consolidated basis) (as of September 30, 2009) Unitec Corporation 17.93% Takahara Kosan K.K. 4.96% Japan Trustee Services Bank, Ltd. (Trust Account ) 4.74% The Master Trust Bank of Japan, Ltd. (Trust Account) 4.59% Takahara Kikin 4.52% Goldman Sachs and Company Regular Account 3.84% The Chase Manhattan Bank N.A. London S.L. Omnibus Account 2.87% Nippon Life Insurance Company 2.80% The Master Trust Bank of Japan, Ltd. (Trust Account of Retirement Benefit Trust Account) 2.78% The Iyo Bank, Ltd. 2.46% (As of September 30, 2009) 226 (on non-consolidated basis) (as of September 30, 2009) Unicharm Corporation 36.92% Unitec Corporation 9.40% Japan Trustee Services Bank, Ltd. (Trust Account) 6.22% The Master Trust Bank of Japan, Ltd. (Trust Account) 3.81% STATE STREET BANK AND TRUST COMPANY (Standing Proxy: Mizuho Corporate Bank, Ltd.) 2.00% STATE STREET BANK AND TRUST COMPANY (Standing Proxy: Mizuho Corporate Bank, Ltd.) 1.78% Japan Trustee Services Bank, Ltd. (Trust Account 9G) 1.49% MASA-JAPANESE EQUITY (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)1.48% Toshio Takahara 1.42% Keiichiro Takahara 1.22% 13

14 (As of September 30, 2009) (11) Relationships between Parties Capital Unicharm holds 10,840,000 share of Unicharm PetCare as of September 30, Relationship 2009 corresponding 36.92% voting rights Personnel Relationship Business Relationship (Note 1) (Note 2) (Note 3) The following personnel doubles as employees of both Unicharm and Unicharm PetCare; Mr. Takamitsu Igaue: Executive Officer of Unicharm and Director of Unicharm PetCare Mr. Hironori Nomura: Executive Officer of Unicharm and Director of Unicharm PetCare Mr. Yasushi Akita: Executive Officer of Unicharm and Auditor of Unicharm PetCare There is a transaction relationship between Unicharm and Unicharm PetCare such as below; 1 Information processing commission payment from Unicharm to Unicharm PetCare: 2008/3 37 million yen, 2009/3 38 million yen, 2010/3 37 million yen 2 Office rental expense from Unicharm PetCare to Unicharm: 2008/3 17 million yen, 2009/3 18 million yen, 2010/3 18 million yen Unicharm PetCare is a consolidated subsidiary of Unicharm and falls under the category of the Related Parties Status as a Related Party (12) Business Performance for the Latest Three Fiscal Years Fiscal Year End Unicharm (on consolidated basis) Unicharm PetCare (on non-consolidated basis) 2008/3 2009/3 2010/3 2008/3 2009/3 2010/3 Net Assets 179, , ,413 12,844 15,649 19,191 Total Assets 275, , ,771 22,612 25,907 30,329 Net Assets per share (yen) 2, , , Sales 336, , ,825 40,349 44,731 46,916 Operating Income 33,731 34,883 45,008 5,171 6,588 8,373 Ordinary Income 32,327 31,607 45,855 4,581 6,016 7,720 Net Income 16,683 17,127 24,463 2,776 3,541 4,533 Net Income per share (yen) Dividend per share (yen) (Million yen unless otherwise noted) (Note 1) Transaction amounts for 2010/3 have not received accounting and tax audit (Note 2) Each transaction amount does not include any consumption tax (Note 3) Each transaction price is decided by reference to the market price 14

15 5 Status after Merger Surviving company (1) Corporate Unicharm Corporation Name (2) Head Office 182 Shimobun, Kinsei-cho, Shikokuchuo-City, Ehime (Current head office of Unicharm Corporation) (3) Name and Title of Representative Representative Director, President and C.E.O Takahisa Takahara (Current Representative Director, President and C.E.O of Unicharm Corporation) (4) Description of Business Unicharm, the surviving company, mainly strengthen in the following business area; Baby and child care business Feminine care business Pet care business (5) Paid-in Capital 15,992 million yen (6) Account March 31 Settlement (7) Net Assets Non-consolidated basis : NA Consolidated basis : NA (8) Total Assets Non-consolidated basis : NA Consolidated basis : NA 6 Outline of Accounting Treatment The Merger will be treated as an incorporation transaction under a common authority under the Accounting Standard for Business Combinations. The amount of goodwill has yet to be determined. 7 Forecast of Impact on the Cash-out Merger An impact of the Cash-out Merger on the earnings forecast for the current fiscal year will be disclosed once the Tender Offer and the Cash-out Merger are completed and the details becomes available 8 Transaction with Controlling Shareholder Unicharm is the controlling shareholder of Unicharm PetCare. The Tender Offer and the Cash-out Merger, therefore, are considered as transactions with the controlling shareholder. Unicharm PetCare took the measures described in 3 (5) Measures to Ensure the Fairness and 3 (6) Measures to Avoid Conflicts of Interest to ensure the fairness of the Tender Offer and the Cash-out Merger. Unicharm, as a listed company, makes its own management decisions through its own organization to remain independent from Unicharm, and it is believed that Unicharm PetCare secures its independency. With regard to the Tender Offer and the Cash-out Merger, this independency corresponds to the guidelines of protection measures for minority shareholders. 15

16 (Reference) Consolidated Earnings Forecast of Unicharm (announced on April 30, 2010) and Actual Performance Earnings Forecast (March 31, 2011) Actual Performance (March 31, 2010) Sales Operating Income Recurring Income Net Income 393,000 48,000 46,500 25, ,825 45,008 45,855 24,463 (Reference) Non Consolidated Earnings Forecast of Unicharm PetCare (announced on April 30, 2010) and Actual Performance Earnings Forecast (March 31, 2011) Actual Performance (March 31, 2010) Sales Operating Income Recurring Income Net Income 23,700 4,100 3,750 2,210 46,916 8,373 7,720 4,533 16

17 <Risk Information concerning Forecasts> This press release includes forward-looking statements specified in the provisions of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended Actual results may materially differ from the predictions expressed or implied as the forward-looking statements due to known or unknown risks, uncertainty and other factors. Unicharm and its related companies shall not assure the righteousness and accuracy of the predictions expressed or implied as the forward-looking statements. The forward-looking statements in this press release are based on the information gained by the Tender Offeror as of the date first written above. The Tender Offeror and its related companies undertake no obligation to update or amend the description of such statements in response to matters and circumstances in the future. <Other Matters to Be Noted> Please be advised that pursuant to Article 167, Paragraph 3 of the Financial Instrument and Exchange Law of Japan and Article 30 of the Enforcement Ordinance, any person who has received information concerning the Tender Offer through this press release may be restricted from purchasing or otherwise trading the shares and other securities of the Target as a first-hand recipient of information under the regulations on insider trading, for 12 hours from the publication of this press release. Also please note that the Company shall not take any responsibility for any criminal, civil or administrative charge brought against any person for any of his/her/its purchase or trade. This press release has been prepared only for the purpose of informing the public of the Tender Offer. This has not been prepared for soliciting sales, purchases, or application in relation to the Tender Offer. When conducting any sales, shareholders should make appropriate judgments by yourselves after reviewing the tender offer explanatory statement for the Tender Offer. Neither this press release nor any part hereof constitutes a document to subscribe for, solicit the sales of, or apply for the purchase of, securities. Neither this press release (nor any part hereof ) nor its distribution shall be interpreted to be the basis of any agreement in relation to the Tender Offer, nor may it be relied on at the time of concluding any agreement. This press release contains future business predictions including plans, estimates and strategies based on the premises regarded as reasonable by the Company at the present moment. Actual results may differ materially from these predictions. Although the Tender Offer is being conducted in accordance with the procedures and disclosure standards prescribed by the Japanese laws, such procedures and disclosure standards may not always coincide with those of the United States. In particular, the rules and regulations under Sections 13(e) and 14(d) of the U.S. Securities Exchange Act of 1934, as amended do not apply to the Tender Offer and the Tender Offer is not being conducted in accordance with the procedures and requirements thereunder. All the financial information contained in this press release is not based on the U.S. accounting standards and not equivalent to that of companies incorporated in the U.S. The assertion of right or claim exercisable under the securities-related laws of the United States might be difficult for any entity because the Tender Offeror is a corporation incorporated outside the United States and all or any part of its directors are not resident in the United States. In addition, it might be difficult for any entity to file a complaint with a court outside the United States against a corporation outside the United States or any of its directors on the grounds of a violation of the securities-related laws of the United States. Furthermore, there is no guarantee that any entity could compel an overseas corporation or a subsidiary /related company thereof outside the United States to accept the jurisdiction of a U.S. court. Certain countries, regions and other jurisdictions may impose certain restrictions on the release, issuance or distribution of this press release under their laws and regulations. In such cases, you are required to pay attention to and comply with such restrictions. In any country or region where the implementation of the Tender Offer is illegal, even if you receive this press release, such receipt shall not constitute any application for the sale of, or solicitation for the application for the purchase of, shares, etc. in relation to this Tender Offer, and this press release shall be deemed as the distribution of information for reference only. End 17