Press Information

Formal Approval Received for Absorption-type Split of MHI's Commercial Aero Engine Business to Consolidated Subsidiary

No.1830
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Tokyo, August 28, 2014 - Mitsubishi Heavy Industries, Ltd. (MHI) received formal approval at a Board of Directors Meeting today to undertake an absorption-type split under which the company's operations in commercial aero engines will be taken over by a new group company, Mitsubishi Heavy Industries Aero Engines, Ltd., as earlier disclosed on March 31, 2014. As the matter involves a simple split to a wholly-owned group company, some items and contents are omitted from the disclosure particulars.

1. Aims of the Company Split

In recent years the commercial aero engine market has seen a succession of new product developments spurred by brisk demand, and significant growth is expected to continue going forward. For MHI to respond to this challenge, improvements in production capacity and manufacturing technologies are needed in order to boost the company's competitiveness, and greater capital strength is demanded in order to continue participation in development programs in the field of commercial aero engines, an area in which joint international development forms the mainstream. To achieve those goals, MHI has taken the decision to carry out a simple absorption-type split, effective October 1, of its commercial aero engine operations, to be taken over by a newly established group company. In doing so, MHI looks to create a wholly integrated structure encompassing all aspects from sales and engineering to manufacture and repair, to set in place a structure enabling enhanced production capacity, and to promote greater capital strength through infusions of external funds.

2. Overview of the Company Split
(1) Schedule
Vote at Board of Directors Meeting: August 28, 2014
Date of Agreement Signing: August 29, 2014 (subject to change)
Effective Date of Company Split: October 1, 2014 (subject to change)

*The company split will be a simple absorption-type split pursuant to Article 784, Paragraph 3 of the Companies Act of Japan. Approval at a general shareholders meeting as stipulated in Article 783, Paragraph 1 of that Act is therefore not required.

(2) Company Split Method
This will be a simple absorption-type split, with MHI as the splitting company and Mitsubishi Heavy Industries Aero Engines as the successor company.

(3) Allocation Relating to Company Split
Coinciding with the company split, Mitsubishi Heavy Industries Aero Engines will issue 980 shares of common stock to be allocated in full to MHI.

(4) Handling of Stock Acquisition Rights and Bonds with Stock Acquisition Rights Accompanying the Company Split
Obligations based on the stock acquisition rights of MHI, the splitting company, will neither be transferred to nor succeeded to by Mitsubishi Heavy Industries Aero Engines, the successor company. MHI has not issued any bonds with stock acquisition rights.

(5) Changes in Amount of Capital Accompanying the Company Split
The company split will result in no decrease either in MHI's capital or in its capital reserve.

(6) Rights and Obligations Transferred to the Successor Company
1) The successor company will succeed to the intellectual properties and related assets, rights and obligations pertaining to the aero engine business of the splitting company (with the exception of anything stipulated as exempt in the split agreement).
2) Any and all liabilities or other obligations of the splitting company which the successor company succeeds to shall be succeeded cumulatively.
(7) Outlook on Performance of Obligations
Any obligations which the splitting company and the successor company should bear as a result of the company split will be duly met.

3. Outline of the Companies Involved in the Company Split
Splitting Company
(as of March 31, 2014)
Successor Company
(as of August 28, 2014)
(1)Name Mitsubishi Heavy Industries, Ltd. Mitsubishi Heavy Industries Aero Engines, Ltd.
(2)Head Office 16-5, Konan 2-chome, Minato-ku, Tokyo 1200, Higashi-tanaka, Komaki, Aichi Prefecture (on premises of Nagoya Guidance & Propulsion Systems Works)
(3)Representative Shunichi Miyanaga
President and CEO
Katsuyuki Shimauchi President
(4)Business Manufacture, etc. of ships, marine engines, power systems, machinery, steel structures, aircraft, aerospace systems, industrial machinery, special vehicles, etc. 1. Engineering, manufacture and repair of aero engines, their parts and components, and related equipment; marketing of parts and components
2. Engineering, manufacture and repair of gas turbines used for power generation and mechanical drive, and related equipment; marketing of parts and components
3. All business operations auxiliary to the foregoing
(5)Capital 265,608 million yen 20 million yen
(6)Establishment January 11, 1950 July 1, 2014
(7)Number of issued shares 3,373,647,813 10
(8)Fiscal year end March 31 March 31
(9)Major shareholders and shareholdings
・The Master Trust Bank of Japan, Ltd. (Trust Account)
4.7%
・Japan Trustee Services Bank, Ltd. (Trust Account)
3.9%
・The Nomura Trust and Banking Co., Ltd. (Retirement Allowance Trust, The Bank of Tokyo-Mitsubishi UFJ, Ltd Account)
3.7%
・J P Morgan Chase Bank 380072
2.3%
・Meiji Yasuda Life
2.3%
Mitsubishi Heavy Industries, Ltd.
100%

Note: As described in our News Release dated March 31, 2014 ("MHI to Establish New Company for Commercial Aero Engine Operations"), discussions are under way to receive investment capital from IHI Corporation and the Development Bank of Japan.

(10) Fiscal Status and Earnings Results (Consolidated) of the Splitting Company during the Most Recently Completed Fiscal Year
Net assets 1,774,223 million yen
Total assets 4,886,035 million yen
Net assets per share 459.99 yen
Revenues 3,349,598 million yen
Operating income 206,118 million yen
Ordinary income 183,159 million yen
Net income 160,428 million yen
Net income per share 47.81 yen
(11) Description of Business being Split or Succeed to
1) Development, engineering, manufacture, marketing and after-sale servicing of commercial aero engines
2) Business auxiliary to the foregoing products
(12) Earnings of Business being Split or Succeeded to
Business being Split (a) MHI total (consolidated) in FY ended March 2014 (b) Percentage (a/b)
Revenues 37,413 million yen 3,349,598 million yen 1.1%
(13) Assets and Liabilities of Business being Split or Succeeded to
Assets 116.2 billion yen
Liabilities 66.2 billion yen
4. Status of Splitting Company after Split
Name: Mitsubishi Heavy Industries, Ltd.
Head Office: 16-5, Konan 2-chome, Minato-ku, Tokyo
Representative: Shunichi Miyanaga, President and CEO
Business: Manufacture, etc. of ships, marine engines, power systems, machinery, steel structures, aircraft, aerospace systems, industrial machinery, special vehicles, etc.
Capital: 265,608 million yen
Fiscal year end: March 31
5. Status of Successor Company after Split
Name: Mitsubishi Heavy Industries Aero Engines, Ltd.
Head Office:
1200, Higashi-tanaka, Komaki, Aichi Prefecture,
(on premises of Nagoya Guidance & Propulsion Systems Works)
Representative: Katsuyuki Shimauchi
Business: 1. Engineering, manufacture and repair of aero engines, their parts and components, and related equipment; marketing of parts and components
2. Engineering, manufacture and repair of gas turbines used for power generation and mechanical drive, and related equipment; marketing of parts and components
3. All business operations auxiliary to the foregoing
Capital: 500 million yen
Fiscal year end: March 31
6. Outlook

Impact from the company split on MHI's earnings will be minimal, on both a consolidated and non-consolidated basis.