Efforts to Enhance Corporate Value Introduction of Takeover Defense Measures. May 2007

Transcription

1 Efforts to Enhance Corporate Value Introduction of Takeover Defense Measures 1 May 2007

2 Table of Contents 1. Efforts to Enhance Corporate Value 2. Introduction of Takeover Defense Measures 2

3 1. Efforts to Enhance Corporate Value 3

4 Efforts to Enhance Corporate Value A business portfolio made up of the company's mainstay control business and businesses with growth potential ATE business, photonics business, advanced stage business A business portfolio with synergies among core measurement, control, and information technologies A high level of technology supported by a strong R&D organization Highly competitive in the plant control market No. 1 in Japan and No.4 worldwide High reliability for social infrastructure support Control business supports lifelines such as electricity and water purification Photonic business supports optical communications infrastructure Governance system 4

5 Efforts to Date Long-term Management Vision VISION-21 & ACTION-21 First Milestone - Restructuring Phase (Year ended March Year ended March 2006) Realizing Healthy & Profitable Operation VISION-21 corporate vision ACTION-21 corporate strategy Business structure reform strategy Group management reform strategy 5

6 Review of Management Measures FY00-05 Business structure reform strategy 1 2 Sale of equity stake in joint venture companies Hewlett-Packard Japan Yokogawa Johnson Controls Yokogawa Analytical Systems Acquisition of 100% equity stake in Ando Electric and integration of its operations Acquisition of high-frequency (optical) measurement technology Expansion of semiconductor tester product lineup 4 Reinforcement of global business system Establishment of Yokogawa Electric International in Singapore Establishment of Yokogawa Electric China Co., Ltd. and Yokogawa China Co., Ltd. Establishment of engineering office in Houston,USA 5 Matoi Projects Promotion of new business creation and existing business expansion 3 Realignment of manufacturing facilities Realignment of manufacturing facilities in Japan from 19 to 4 factories Transfer of flowmeter and recorder production lines to wholly owned manufacturing subsidiary in China 6 Investment for advanced technology development Commercialization of new businesses including photonics, stage, and life science businesses 6

7 Review of Management Measures from FY00-05 Group management reform strategy 1 Streamlining of subsidiaries Group companies in Japan ( 60 companies 30 companies) Group companies outside Japan (72 companies 60 companies) 4 Reinforcement of corporate governance Appointment of external director Appointment of external corporate auditor 2 Introduction of performance-based remuneration system 5 Reinforcement of corporate compliance system Introduction of mission standard system Standards of Business Conduct for the Yokogawa Group 3 Introduction of defined contribution pension plan Change the pension system from defined benefit pension plan to defined contribution plan 7

8 Review of Sales and Operating Income FY00-05 Consolidated sales (billion yen) Consolidated operating income (billion yen) FY00 FY01 FY02 FY03 FY04 FY05 FY06 0 8

9 9 Share Price Share price over past 5 years

10 Second Milestone - Growth Phase Basic Strategy 1. Dramatic improvement in management efficiency 2. Expansion of sales through globalization 3. Continued investment in advanced technology development to start new businesses 10

11 Business Strategy - Control Business Aiming to become the global number one company in 2010 Expansion of ETS service business in Japan market Active investment in growing international markets Enhancement of product development capabilities for the VigilantPlant initiative to achieve the ideal plant 11

12 Business Strategy - Measurement Equipment Being more competitive in the ATE business and expanding the product lineup Greater product competitiveness and a stronger R&D organization Creation of a semiconductor solution business model Enhancement of sales organization for faster global deployment 12

13 Business Strategy - New Businesses Establishment of business foundation in growth markets Establishment of the core optical communications business in the photonics field Development of the large ultra-precision stage business in the advanced stage field Concentration of resources in brain science and genome science 13

14 Management Targets FY06 FY07 FY08 FY10 Orders (Billion ) Sales (Billion ) Operating income (Billion ) ROS

15 Approach to Returns to Shareholders Aiming for continuous dividend payments Basically aiming for a consolidated payout ratio of 30% for the entire year Annual dividends per share Payout ratio FY yen 19.5% FY05 FY06 FY yen yen yen 17.2% 31.4% 30.0% 15

16 Corporate Governance System Number of outside directors increased from one (1) to two (2) Three (3) of the ten (10) members of the board are independent directors. Directors serve a one (1) year term. 16

17 Bios of Outside Directors Masahisa Naito 1993 Head of the Industrial Policy Bureau in MITI 1998 Representative Director and Executive Vice President of Itochu Corporation 2000 Executive Vice Chairman of Itochu Corporation 2003 Chairman of The Institute of Energy Economics, Japan Outside Director of Yokogawa to present day Yasuro Tanahashi 1997 Managing Director Nippon Steel Corporation 2000 Representative Director and President of NS Solutions Corporation 2003 Representative Director and Chairman of NS Solutions 2007 Scheduled to be appointed as advisor of NS Solutions Scheduled to be appointed as Outside Director of Yokogawa 17

18 Bio of Independent Director Yo Narimatsu 1986 Manager of the Electronic Components and Measurement Department at Yokogawa Hewlett-Packard* 1999 Left Yokogawa Hewlett-Packard * Representative Director and Executive Vice President of Agilent Technologies** 2006 Representative Director and President of Quintiles Transnational Director of Yokogawa to present day * History of Hewlett-Packard Japan (Formerly Yokogawa Hewlett-Packard) 1963 Yokogawa Hewlett-Packard established (51% Yokogawa, 49% HP) 1983 Capital increased by 7.44 billion yen (75% HP, 25% Yokogawa) 1995 Name changed to Hewlett-Packard Japan 1999 Joint venture with Yokogawa dissolved - became wholly-owned subsidiary of HP. Measurement Division spun off to form Agilent Technologies ** No equity relationship with Yokogawa Electric Corporation 18

19 2. Introduction of Takeover Defense Measures 19

20 Our Approach to Takeover Defense Measures Aiming to maximize corporate value and shareholder value by realizing VISION-21 & ACTION-21 When a takeover bid is made, a decision is made from the perspective of maximizing corporate value and shareholder value There must be sufficient time and information for shareholders and the board of directors to consider the takeover bid. Introduction of takeover defense measures for securing and improving corporate value, and serving the interests of all shareholders 20

21 Mechanism of Countermeasures Against Large-scale Acquisition of Yokogawa Shares (Takeover Defense Measures) Appearance of a large-scale acquirer (At least 20% of voting rights) Request for acquirer to provide information Independent committee considers information Recommendation made to board If acquirer does not follow procedures, or If corporate value or shareholder value is harmed Defense measures triggered (with gratis allotment of Stock Acquisition Rights) If corporate value and shareholder value are not harmed Defense measures not triggered 21

22 Rationale of the Plan (1) A resolution to introduce or update the plan needs to be passed by the general shareholders' meeting. The term of the plan is two (2) years (sunset clause), and it can be abolished before the end of the term through a resolution passed by the general shareholders' meeting. Three (3) of the ten (10) people on the board are independent directors.* Establishment of independent committee The independent committee is made up of five (5) people including two (2) outside directors, one (1) outside auditor and two (2) outside experts. Makes operational decisions such as whether plan is to be triggered or abolished An overview of the decisions reached by the independent committee is given to shareholders. * There are two (2) outside directors in accordance with the Company Act. 22

23 Rationale of the Plan (2) Establishment of rational and objective conditions for triggering the Plan Prevention of arbitrary actions by the board Rational and objective conditions are established and the Plan cannot be triggered unless they are met Refusal of dead-hand and slow-hand poison pills Can be abolished by directors designated and appointed by the acquirer The term of directors has been reduced to one year 23

24 Bios of Members of the Independent Committee (1) Masahisa Naito 1993 Head of the Industrial Policy Bureau in MITI 1998 Representative Director and Executive Vice President of Itochu Corporation 2000 Executive Vice Chairman of Itochu Corporation 2003 Chairman of The Institute of Energy Economics, Japan Outside Director of Yokogawa to present day Yasuro Tanahashi 1997 Managing Director Nippon Steel Corporation 2000 Representative Director and President of NS Solutions Corporation 2003 Representative Director and Chairman of NS Solutions 2007 Scheduled to be appointed as advisor of NS Solutions Scheduled to be appointed as Outside Director of Yokogawa 24

25 Bios of Members of the Independent Committee (2) Shugeru Hikuma 1998 Executive Director of Bank of Japan 2000 Special advisor to MHS Planners, Architects & Engineers 2001 President of Credit Risk Database Association 2004 Outside Auditor of Yokogawa to present day Takaaki Wakasugi 1985 Professor of the Faculty of Economics at the University of Tokyo 2004 Professor of the School of Business Administration at Tokyo Keizai University to present day Naoto Nakamura 1985 Joined Mori Sogo Law Offices 1998 Established and operates Nakamura Naoto Law Office to present day 25

26 The projections contained within this document are based on certain conditions and assumptions decided upon by the management using data current as of the date the document was prepared. Actual performance may differ greatly as a result of a variety of factors in the future. 26