Notice of Withdrawal of Planned Commencement of Tender Offer for Toyo Construction Co., Ltd. (Securities Code: 1890)

Yamauchi-No. 10 Family Office LLC (formerly Vpg LLC) and KITE Co., Ltd. (collectively “YFO”) had decided to acquire common shares (the "Target Company Shares") in Toyo Construction Co., Ltd. (the "Target Company") through a tender offer (the "Tender Offer") under the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended). YFO had published the "Notice Concerning Planned Commencement of Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)” on May 18, 2022 (including subsequent amendments, the “Tender Offer Notice”[1]) in connection with the Tender Offer. As most recently amended, YFO had announced its plan to commence the Tender Offer before the end of December 2023. Unless otherwise expressly defined herein, the terms used in this document shall have the meanings as defined in the Tender Offer Notice.

In response, the Board of Directors of the Target Company published the “Notice Regarding Expression of Opinion (Opposition) Regarding the Application for a Tender Offer for Company Shares by Godo Kaisha Yamauchi-No.10 Family Office and Kabushiki Kaisha KITE” on December 14, 2023, in which the Target Company announced its opposition to the Tender Offer.

In response to the request made by the Board of Directors of the Target Company and its Special Committee on October 4, 2023[2], YFO submitted refined measures to increase corporate value on November 30, 2023, and December 1, 2023. YFO’s refined measures to increase corporate value were prepared based on the information disclosed by the Target Company at the time, taking into account the feasibility of the Target Company’s new medium-term management plan in light of YFO’s quantitative evaluation of its measures to increase corporate value, and by adding the quantitative effect of YFO’s measures to increase corporate value. YFO does not intend to object to the fact that the Target Company’s new medium-term management plan is an appropriate “target value.” However, YFO believes the medium-term management plan to be inappropriate to use ‘as-is’ as a financial forecast for the purpose of calculating the value of the shares for privatization because the medium-term management plan is not a “base case” based on past performance or future market trends, and there have already been discrepancies in the sales performance and major changes that undermine the assumptions underlying the medium-term management plan. As such, YFO has been proposing its refined measures to increase corporate value using the aforementioned method, but YFO did not reach a common understanding with the Target Company.

In addition, the Target Company indicated that the premium of YFO’s revised proposed price for the Target Company Shares is insufficient compared with the closing price of the Target Company Shares as of the day before the announcement of the proposal in their press release expressing opposition to the Tender Offer. However, based on the information disclosed by the Target Company to date, YFO believes it would be difficult to make a proposal at a price exceeding 1,255 yen per share.

For the above reasons, YFO determined that it would be difficult for the Board of Directors of the Target Company to express its support for YFO’s current acquisition proposal and recommend the Target Company shareholders to tender their shares and thus for the conditions precedent for the Tender Offer to be satisfied, and YFO decided to withdraw its planned commencement of the Tender Offer.

The Target Company’s press release indicates that it would seriously consider a new serious proposal made by YFO, if such a proposal were made. YFO intends to provide necessary support to increase corporate value and shareholder value of the Target Company as long as it is a shareholder of the Target Company, but YFO has not made any determination as to whether it will make a new proposal. Also, YFO has not at this time made any determination as to how or when to dispose of the Target Company Shares held by YFO and its Special Related Parties[3].

[1] Refers to:
“Notice Concerning Amendment to "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"" dated June 8, 2022,
 "Notice Regarding Change of "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"" dated June 30, 2022,
 "Notice Regarding Change of "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"" dated September 30, 2022,
 “Notice of Extension of Proposed YFO Acquisition on "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"” dated November 11, 2022,
 "Notice of Extension of Proposed YFO Acquisition regarding "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"” dated December 13, 2022, and
 "The January 27, 2023 Policy of the Company and its Affiliates Regarding The "Notice Concerning the Tender Offer for Shares of Toyo Construction Co., Ltd. (Securities Code: 1890)"” dated January 27, 2023.

[2] Refers to the Target Company’s request to submit: “(Progress of Disclosed Matters) Notification Concerning Receipt of First Special Committee Report Regarding Proposal from Godo Kaisha Yamauchi-No.10 Family Office and Kabushiki Kaisha KITE and Company’s Policy Regarding Response Thereto” on October 4, 2023, and “refined corporate value enhancement measures that are developed with specific measures materializing the business model presented by YFO etc. (The refined corporate value enhancement measures must include at least (i) business plans for the Company reflecting such corporate value enhancement measures (including pro forma B/S and P/L); (ii) investment plans such as capital expenditures and M&A investments; (iii) repayment plans regarding the financing for the acquisition; (iv) measures to mitigate any negative impact on the existing businesses; and (v) if the tender offer price is to be increased, the price after increase.)” provided in the Company’s press release “(Progress of Disclosed Matters) Notification Concerning Status of Consideration of Proposal from Godo Kaisha Yamauchi-No. 10 Family Office and Kabushiki Kaisha KITE” on November 14, 2023.

[3] Refers to WK1 Limited, WK2 Limited and WK3 Limited.