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Formal Decision Taken on Absorption-type Split of Marine Diesel Engine Businesses

Mitsubishi Heavy Industries, Ltd.
Mitsubishi Heavy Industries Marine Machinery & Engine Co., Ltd.
Kobe Diesel Co., Ltd.
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Tokyo, February 1, 2017 - Mitsubishi Heavy Industries, Ltd. (MHI), its wholly owned subsidiary Mitsubishi Heavy Industries Marine Machinery & Engine Co., Ltd. (MHI-MME), and Kobe Diesel Co., Ltd. have moved forward with discussions of a previously concluded basic agreement and a memorandum of understanding to pursue integration of their marine diesel engine businesses. Today MHI-MME and Kobe Diesel have concluded an absorption-split agreement such that MHI-MME's marine diesel engine business will be transferred to Kobe Diesel from April 1 (subject to change).

1. Objectives of the Absorption-type Split

Both MHI-MME and Kobe Diesel have worked to improve long-term corporate value while complementing each other through their licensor / licensee relationship. The two companies will now further develop this relationship by vertically integrating their respective businesses as licensor (development, design, after-sale servicing) and licensee (manufacture, marketing, after sale-servicing). In so doing, the companies will create an agile and flexible business management system as a specialized engine manufacturer with end-to-end business processes across the value chain. This absorption-type split agreement has been concluded under the common recognition that it is essential for sustainable growth and the development of the "UE" engine business to improve profitability and competitiveness while flexibly responding the business environment.

Kobe Diesel will formulate a concrete integrated business plan that makes use of the strengths of both its high value-added business model as a licensor of MHI-MME and its business model as a low-cost manufacturer, while continuing to receive technical support from MHI for development and production. In addition, the company will build stronger collaborative relationships with "UE" licensee companies based on customer patronage, emphasizing the creation of added value. At the same time the company will foster a sense of unity and will aim to further expand and develop Japan's world-class marine diesel engines. MHI and MHI-MME will continue to closely collaborate with Kobe Diesel to support the development of its marine diesel engine business.

2.Overview of the Absorption-type Split

(1) Effective date
April 1, 2017 (subject to change)

(2) Absorption-type Split Method
This will be an absorption-type split, with MHI-MME as the splitting company and Kobe Diesel as the successor company.

3. Outline of the Companies Involved in the Absorption-type Split

(as of March 31, 2016)

  Successor Company Splitting Company
(1) Name Kobe Diesel Co., Ltd. Mitsubishi Heavy Industries Marine Machinery & Engine Co., Ltd. (MHI-MME)
(2) Head Office 1, Minamifutami, Futami-cho, Akashi-city, Hyogo Prefecture 1-1, Akunoura-machi, Nagasaki-city, Nagasaki Prefecture
(3) Representative Michio Shimizu
President and Representative director
Kazuo Soma
President and CEO
(4) Business Manufacture, repair and marketing of marine diesel engines Development, design, marketing, after-sale servicing, and licensing operations of marine machinery and engine products.
(5) Capital 2,215 million yen 1,000 million yen
(6) Establishment June 10, 1920 October 1, 1977