Aug 26,2016

Daido Steel

Merger between consolidated subsidiaries

Daido Steel Co., Ltd. (“Daido” or “the Company”) announces that it resolved at its Board of Directors Meeting held at August 26, 2016 that two of its consolidated subsidiaries, namely, Daido Electronics Co., Ltd, (“DEC”) and Intermetallics Japan Corp. (“IMJ”) will be merged as follows.

1. Purpose of the merger

The Company has declared, in its mid-term management plan, that it is the basic policy to contribute to support growth around the world, as a specialty steel manufacturer, through collaboration with its customers, and it has ranked the high performance magnet business as the important growth segment. In this segment, Daido group established (spun off) DEC at January, 1990. Then, DEC expanded its manufacturing and marketing units at Ayutthaya, Thailand and Shenzhen and Suzhou, China as its overseas subsidiary companies. Besides, Daido established IMJ with two other companies as the joint venture at December, 2011. Then, these three companies dissolved this joint venture and Daido acquired IMJ as wholly owned subsidiary company at March, 2015.

Daido group will integrate Neodymium(Nd) bonded magnets, Nd hot formed magnets and Samarium-Iron-Nitrogen(SmFeN) bonded magnets, produced and sold by DEC group, with Nd sintered magnets, produced and sold by IMJ, through this merger between DEC and IMJ at this time. The purpose of this merger is the proposal of total solution to the wide needs of various customers of automobile, factory automation and home appliances, etc. by rapidly presenting magnets with the adequate quality and shape from wide lineup of magnets, which is the strength of Daido group, and realizing the customer’s request.

Moreover, by taking full advantage of the know-how which each company has cultivated so far, Daido group will realize optimization of manufacturing and process by enhancing the strength of marketing and technology, cost reduction by efficient management, faster delivery times, and optimal local production by using the overseas subsidiary companies of DEC and others. As stated above, through the activities of realizing collaboration with our customers by the proposal of total solution and of enhancing our QCD capabilities, Daido group intends to launch the new products and to increase production capabilities with regard to high performance magnet business where the demand is expected to extremely increase onward. Daido group will continue to support the future of all fields where the high performance magnets are in use.

2. Summary of the Merger

(1) Timeline

The date of BOD meeting of the Company August 26, 2016
The date of BOD meeting of IMJ October 24, 2016 (subject to change)
The date of BOD meeting of DEC October 25, 2016 (subject to change)
The date of conclusion of Absorption-type Merger Agreement October 25, 2016 (subject to change)
Extraordinary general meeting of stockholders of DEC to approve the merger December 16, 2016 (subject to change)
Extraordinary general meeting of stockholders of IMJ to approve the merger December 16, 2016 (subject to change)
Effective date of the merger January 1, 2017 (subject to change)

(2) The method of the merger

The merger will be an absorption-type merger in which DEC will be the surviving company and IMJ will be absorbed.

(3) Details of allotment relating to the merger

Because it is a merger between wholly owned subsidiaries of the Company, there will be no allotment of new shares or other assets based on this merger.

(4) Treatment of share option and bond with share option of the merged companies

None.

3. The outline of the merged companies (as of Jun 30, 2016)

  the surviving company the absorbed company
(1) Company name Daido Electronics Co., Ltd, Intermetallics Japan Corp.
(2) Location 1642-144 Nasubigawa,Nakatsugawa-shi Gifu, Japan Same as written left
(3) Representative person Yoshio Inagaki,President and CEO Toshiharu Noda,President and CEO
(4) Line of business Magnet business Same as written left
(5) Amount of stated capital 1,490 million JPY 100 million JPY
(6) Date of establishment January 26, 1990 December 7, 2011
(7) Accounting period March 31 Same as written left
(8) Shareholder / Share ratio Daido, 100% Same as written left

4. The state after the merger

No change of trade name of surviving company, location of its head office, line of business, amount of stated capital and accounting period. Representative person after the merger (including the possibility of no change) is unresolved.

5. Outlook going forward

This merger will be expected to affect plus profit for the merged companies through the efficient management, etc., but the impact on the Company’s performance will not be material because it is an absorption-type merger between wholly owned subsidiaries of the Company.

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