STRICTLY PRIVATE AND CONFIDENTIAL
Non-Binding Letter of Intention
We, 【買い手】 (a company incorporated in Japan), would like to express a serious interest in undertaking an investment in 【対象会社】(the “Company”), by way of the acquisition of XX% of the outstanding shares of the Company from 【売り手】 (the “Proposed Transaction”), and are pleased to submit this non-binding letter of intention (the “Letter”) for your consideration.
Please note that our indication of interest in this Letter will serve as a basis for further discussions and is contingent on the advice of our professional advisors, completion of our due diligence, negotiations and execution of definitive agreements.
このレターは”Subject to DD”（DD次第でやってみないと分からない）ということを強調しています
We believe that the Company, its subsidiaries and associate companies (the “Group”) and their respective businesses and assets would be an excellent strategic fit with our existing businesses. 【買い手】 has significant experience in operating businesses that are complementary to that of the Group, a combination of which will facilitate the transfer of best practices and know-how to and from the Group.
The acquiring entity for this Proposed Transaction is envisioned to be 【買い手】 or one of its subsidiaries. 【買い手】 was established in XXXX and is a public Japanese company headquartered in XXX prefecture, Japan, and is listed on the first section of the Tokyo Stock Exchange with a market capitalization of approximately [JPY XXX]. 【買い手】 is a leading player within XX industry and is primarily involved in the manufacturing and sales of XX to customers located in Japan and overseas including XX.
As part of its strategy to expand, 【買い手】 intends to further develop its overseas businesses, with a focus on economically growing countries.
【買い手】 believes that the Company’s product offering is within the volume zone of demand for XXX which presents further opportunities for growth. In order to establish a foothold within volume zone of XX segment, 【買い手】 requires further strengthening of its distribution and procurement functions to cater to the broad demands of its customers. Based on our evaluation of the Company’s product offering, operating geographies and current customer base, we believe that the Company is a most suitable partner for us to achieve our strategic objectives and look forward to developing a partnership that can mutually support the growth of both our companies.
We believe that the Proposed Transaction can generate significant additional value for all stakeholders of the Company. A successful partnership between our companies can further increase the presence and recognition of the Company as well as boost sales, profitability and free cash flow of the Company over time. In addition, the Proposed Transaction offers 【売り手】 the opportunity to monetize their investment in the Company.
Post-transaction, 【買い手】 foresees the following business synergies between our companies:
- Joint sales approach to markets in which sales efforts have not been fully developed or realized and are deemed suitable for the Company’s product offering with the aim of capturing market share;
- Generating synergy through the combination of the Company’s product procurement capabilities together with 【買い手】’s know-how in relation to materials, XXX design know-how and quality control knowledge;
- For markets that the Company already has a substantial presence in, 【買い手】 can supply branded products. In addition, the brand could be introduced into the distribution network of 【買い手】’s products if no obstacles in the current existing distribution system arise; and
- 【買い手】 would, through the holding of mutual discussions with the Company, like to conclude business alliance agreements with the Company in relation to the marketing and business development strategies in each country in which the Company currently does business.
【買い手】 is prepared to offer a non-binding purchase consideration of 【1株当たりの価格】 per share for 【取得割合】% of the outstanding shares of the Company, representing [取得株式数] shares based on the total of 【発行済株式総数】 outstanding shares (the “Indicative Offer”). The Indicative Offer is subject to either a positive or negative adjustment, depending on the results of our due diligence and any changes to the assumptions underlying our Indicative Offer as stated within paragraph .
We are considering the acquisition of 【取得株式数】shares of the Company currently held by【売り手】. The final number of shares to be acquired from【売り手】 shall be discussed and mutually agreed upon at a later stage. 【買い手】 intends to pay the final consideration in cash to the 【売り手】, upon the successful completion of the Proposed Transaction.
Indicative Offer Assumptions（前提条件）
The Indicative Offer of 【1株当たりの株価】 per share was derived by applying approximately 【プレミアム割合】 premium to the Company’s 1 to 12 month Volume Weighted Average Price (VWAP) based on our analysis of the EV/EBITDA, P/E and P/B trading multiples of peer group companies and past acquisitions within XX sector in 【国名】as at XX 2019]. Our Indicative Offer is based on information received from the management meetings held between 【売り手】and【買い手】on XX 2019 and XX 2019 as well as publicly available information.
We seek to conduct a due diligence program for a period of 【DD期間：8 weeks】 with the Company that is customary for a transaction of this size and nature. In order for us to proceed with an offer for internal governance and valuation purposes, we propose a due diligence program covering the business, financial, tax and legal aspects of the Company. Subject to further discussions and input from our due diligence advisors, the scope of due diligence may be expanded at a later stage, if deemed necessary, to include other aspects of the Company. For further details on the proposed scope and schedule of the due diligence program, please refer to Schedules 2 and 3 respectively.
We understand that the Company operates across different geographies, with numerous subsidiaries being located in different countries. 【買い手】 and its advisors, in the course of due diligence, would like to conduct site visits of the Company as well as with respect to its key subsidiaries and facilities. The scope of site visits shall be discussed and mutually agreed upon at a later date between 【買い手】 and the Company.
As part of the Proposed Transaction, 【買い手】 seeks board representation at the Company and would like to hold further discussions with the Company in relation to its request for one (1) or more board seats post-transaction.
Neither party is obligated by this Letter to enter into or execute any definitive agreement for the Proposed Transaction (“Definitive Agreement”). During negotiations 【買い手】 intends to discuss, among other things, the inclusion of the following term in the Definitive Agreement :
Principle Terms and Conditions（最終契約書上の主要条件）
The closing of the Proposed Transaction will be subject to, among other things, the following terms and conditions:
- 【買い手】 being satisfied, at its own discretion, with its due diligence of the Company and its subsidiaries, and the grant of final approval by the board of directors of 【買い手】;
- Necessary and appropriate governmental, tax and regulatory approvals having been obtained and being in full force and effect;
- Assumptions in the financial projections (if any) of the Company are reasonable, achievable and take into account the Company’s past performance as well as future economic outlook;
- Continuation and maintenance of current business relationships or contracts with the Company’s customers;
- Continued retention of the Company’s key management members as part of management post-transaction; and
- Execution of a mutually agreeable Definitive Agreement, including key term and conditions relating to, among others, anti-dilution measures, representations, warranties and indemnities.
Authorizations and Approvals（機関決定）
This Letter has been approved by the board of directors of 【買い手】.
Prior to our submission of the final binding offer and execution of the Definitive Agreement, we will require other internal approvals including the approval from our board of directors.
We are prepared to rapidly engage and deploy our advisors for this Proposed Transaction. To advise 【買い手】 in this proposed Transaction, we have engaged 【フィナンシャルアドバイザー名】as our financial advisors and will quickly engage legal, tax and accounting and other advisors as deemed required promptly in order to start due diligence. 【売り手】and the Company, on the one hand, and 【買い手】, on the other hand, will pay their own costs and expenses incurred in connection with this Proposed Transaction whether or not it proceeds to closing, including (without limitation) any costs and expenses relating to the preparation and negotiation of this Letter, any final binding offer, and any other documents and agreements contemplated herein.
This Letter is confidential to 【買い手】 and 【売り手】 and its representatives and is subject to the confidentiality agreement between 【買い手】 and 【売り手】dated [XXXX], which continues in full force and effect.
This Letter shall be governed by and construed in accordance with the laws of Japan. All disputes arising out of or in connection with from this Indicative Offer or this Letter shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (“ICC”) by three arbitrators, with each party appointing one arbitrator and with the chairman of the panel being appointed by the ICC in accordance with the said Rules. The arbitration shall be held in Tokyo, Japan, and the language of the arbitration shall be English.
In recognition of the time which will be expended and the expenses that will be incurred by 【買い手】 in relation to the Proposed Transaction, for a period of four (4) months commencing from the date of this Letter (the “Exclusivity Period”), 【売り手】 will not, either directly or indirectly through representatives (including for the avoidance of doubt the Company or any of its representatives), (I) supply, disclose or otherwise make available any information about the Company, its business, assets or liabilities or the 【売り手】 therein to any person other than 【買い手】 or its representatives for the purpose of evaluating, or deciding whether to pursue or make an offer in connection with, or (II) submit, solicit, initiate, induce, seek, encourage, countenance, respond to or discuss any proposal or offer from or to any person other than 【買い手】 or its representatives that could lead to any proposal or offer from or to any person other than 【買い手】 regarding, any potential transaction either (x) with a nature similar to that of the Proposed Transaction, or (y) which would, or is intended to, result in the disposal (whether by way of sale, offer, transfer or otherwise, whether direct or indirect) of all, or a material part of, the business, assets or rights of the Company. Further, for the duration of the Exclusivity Period, the parties agree that they will discuss and negotiate the Proposed Transaction with other in good faith and fully and promptly cooperate in the due diligence process contemplated herein. The Exclusivity Period may be extended upon mutual written agreement between 【買い手】 and 【売り手】.
This Letter reflects the current intention of 【買い手】 and is not intended to constitute a contract or binding offer or to create any binding legal obligations on any party, except with regard to the last sentence of paragraph 13 and paragraphs 14 to 17 hereof. No contract or agreement providing for any transaction involving the business of the Company shall be deemed to exist between or among 【買い手】, the Company, 【売り手】, and any of their respective affiliates unless and until a binding definite agreement regarding the Proposed Transaction has been executed and delivered. This Letter may be amended or modified only by a writing executed by both parties. Further, either party may terminate this Letter by providing notification to the other in writing, with such termination to take effect on the date of such notice. Paragraphs 14 (Confidentiality) and 15 (Governing Law) shall survive termination of this Letter.
Subject to, among other things, the successful realizing of synergistic effects between the Company and 【買い手】 as outlined in paragraph 2 (Strategic Rationale), 【買い手】 is open to further investing into the Company, the amounts and acquisition methods of which shall be at 【買い手】’s sole discretion and at a timing that 【買い手】 deems as appropriate.
Please sign and return the enclosed copy of this Letter as soon as possible to confirm your receipt and as indicated your agreement to the foregoing. We look forward to our continued discussions and the progress of this mutual beneficial transaction.
[Signature page follows]
On behalf of 【買い手】
ACCEPTED AND AGREED