The business combination described in this document involve securities of a Japanese company. The business combination is subject to disclosure requirements of Japan that are different from those of the United States. Financial information included in this document, if any, was excerpted from financial statements prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws, since the issuer is located in Japan and some or all of their officers and directors reside outside of the United States. You may not be able to sue a Japanese company or its officers or directors in a Japanese court for violations of the U.S. securities laws. It may be difficult to compel a Japanese company and its affiliates to subject themselves to a U.S. court's judgment.
You should be aware that the issuer may purchase securities otherwise than under the business combination, such as in the open market or through privately negotiated purchases.
May 14, 2025
Company: Tsubakimoto Chain Co.
Representative
:
Takatoshi Kimura, President and Representative Director
(Code No.: 6371, Prime Market of the TSE)
Inquiries: Takeshi Tamura, Manager, Corporate Planning Department
(Tel.: +81-(6) 6441-0054)
Company: Daido Kogyo Co., Ltd.
Representative: Hirofumi Araya, President and Representative Director
(Code No.: 6373, Standard Market of the TSE)
Inquiries: Kenshin Noguchi, Senior Executive Officer, Chief Director of Business Strategy Unit
(Tel.: +81 (761) 72-1234)
"Notice Regarding Execution of Business Integration Agreement and Share Exchange Agreement (Simplified Share Exchange) for Business Integration of Tsubakimoto Chain Co. and Daido Kogyo Co.,Ltd."
Tsubakimoto Chain Co. ("Tsubakimoto Chain") and Daido Kogyo Co., Ltd. ("Daido Kogyo"; together with Tsubakimoto Chain, the "Companies") hereby announce that they resolved at their respective Board of Directors' meetings as of today to integrate business between the Companies and to conduct a share exchange (the "Share Exchange") through which Tsubakimoto Chain will become a wholly-owning parent company resulting from the share exchange and Daido Kogyo will become a wholly-owned subsidiary company resulting from the share exchange, and have executed a business integration agreement (the "Business Integration Agreement") and a share exchange agreement (the "Share
Exchange Agreement") between the Companies as follows.
Subject to approvals by the relevant authorities under applicable competition laws in Japan and Thailand, the Share Exchange will be conducted, in the case of Tsubakimoto Chain, by way of a simplified share exchange that does not require approval by a resolution of its general shareholders' meeting, as prescribed in Article 796, Paragraph 2 of the Companies Act, and in the case of Daido Kogyo, with the Share Exchange being approved by a resolution at its annual general shareholders' meeting to be held on June 24, 2025. The effective date of the Share Exchange is scheduled to be January 1, 2026.
Prior to the effective date of the Share Exchange, Daido Kogyo plans to delist its shares of common stock (the "Daido Kogyo Shares") from the Standard Market of the Tokyo Stock Exchange, Inc. ("TSE") on December 29, 2025 (with a final trading date of December 26, 2025).
Purposes of Business Integration through the Share Exchange
The Tsubaki Group (meaning the corporate group consisting of Tsubakimoto Chain, and 78 subsidiaries and eight affiliates of Tsubakimoto Chain (as of March 31, 2025); the same applies hereafter) is developing its business with a focus on four main businesses, namely Chain Operations, which is its original business, along with Motion Control Operations, Mobility Operations, and Materials Handling Operations, and has been actively pursuing alliances with other companies. Tsubakimoto Chain has acquired and consolidated as its subsidiaries the following companies: in 2006, Yamakyu Chain Co., which manufactures and sells plastic chains; in 2010, KABELSCHLEPP GmbH, which manufactures and sells cable and hose support and guiding devices; in 2012, the Mayfran Holdings Group, which manufactures and sells metal chip conveying and coolant treatment devices; and in 2018, Central Conveyor Company, LLC, which manufactures and sells material handling systems. Tsubakimoto Chain has achieved its business growth both by expanding its own business and by leveraging synergies through integration with such other companies.
Meanwhile, the Daido Kogyo Group (meaning the corporate group consisting of Daido Kogyo, and 20 subsidiaries and six affiliates of Daido Kogyo (as of March 31, 2025); the same applies hereinafter) originated from Araya Shokai founded in 1903, and was established as Kokueki Chain Co., Ltd. in 1933 and later renamed to its current name, Daido Kogyo Co., Ltd., in 1938. Currently, Daido Kogyo is primarily engaged in the motorcycle parts business, as well as the automotive parts business, the industrial machinery business, and the manufacture and sale of products such as assistive devices, as well as the provision of related services. In addition, the Daido Kogyo Group has established itself as the leading manufacturer and seller of chains for motorcycles in Japan by continuing, up to the present, to provide valuable products that meet the ever-changing needs of society.
In recent years, the domestic chain industry has been undergoing restructuring in response to changes in the market environment, such as an increase in foreign capital inflows. In addition, chain manufacturers from China and South Korea are aggressively entering the Japanese market, mainly through promotions at major domestic exhibitions, and there are some cases where customers of the Companies are considering entering into transactions with such chain manufacturers from China and South Korea as suppliers. Furthermore, restructuring and mergers among chain manufacturers in the United States and Europe are progressing actively, and the Companies anticipate that global competition will intensify only further. Moreover, the Companies are expected to respond to market demands for achieving a decarbonized society, such as reducing greenhouse gas emissions; thus, the business environment is also undergoing major changes.
Under these circumstances, Tsubakimoto Chain repeatedly conducted internal examinations with the belief that aiming to combine the comprehensive strengths of the Companies and strengthen their competitiveness in the global market by a business integration with Daido Kogyo will lead to protecting Japanese industry, ultimately contributing to the development of global industry. As a result of Tsubakimoto Chain's examinations, it was concluded that executing a share exchange, with Tsubakimoto Chain becoming a wholly-owning parent company resulting from the share exchange and Daido Kogyo becoming a wholly-owned subsidiary company resulting from the share exchange, would enable the Companies to integrate their management resources, create an efficient operating structure, improve the profitability of the entire group, and strengthen management. Tsubakimoto Chain has determined that the Companies share many commonalities in their medium-to-long-term management visions, and that the integration of their management resources will enhance the feasibility of achieving their goals in the areas of reducing environmental impact and developing innovative products aimed at achieving carbon neutrality. In addition, after comprehensively considering the structure of the business integration with Daido Kogyo from multiple perspectives, including the impact on the interests of shareholders of Tsubakimoto Chain and shareholders of Daido Kogyo, Tsubakimoto Chain concluded that the best course of action for enhancing the corporate value of the Companies is for Tsubakimoto Chain to make Daido Kogyo a wholly-owned subsidiary company of Tsubakimoto Chain through a share exchange, thereby achieving an optimal organizational structure, expanding business opportunities through information consolidation, streamlining duplicate operations across locations, and implementing optimal financial strategies. Accordingly, on December 13, 2024, Tsubakimoto Chain made a proposal to Daido Kogyo for a business integration plan based on the Share Exchange.
Upon receiving the above proposal from Tsubakimoto Chain, Daido Kogyo began concrete discussions regarding the Share Exchange. In commencing these concrete discussions of the Share Exchange, on December 20, 2024, Daido Kogyo established a special committee (the "Special Committee") composed of independent members who have no interests in Tsubakimoto Chain, and put in place a system for having concrete discussions including the appointment of external experts,
for the purpose of eliminating any arbitrariness or possible conflicts of interest in the decision-making process of Daido Kogyo's Board of Directors regarding the Share Exchange and thereby ensuring its fairness by considering the Share Exchange from a viewpoint independent from those of Tsubakimoto Chain and Daido Kogyo, and also for the purpose of obtaining opinions on whether the decision of Daido Kogyo's Board of Directors to proceed with the Share Exchange would be disadvantageous to minority shareholders. Under this system, careful consideration of the proposal from Tsubakimoto Chain led Daido Kogyo to recognize that the Share Exchange would contribute to the enhancement of its corporate value, based on the belief that the Share Exchange would lead to the creation of new business opportunities by enabling the Companies' groups to leverage each other's management resources, including human resources, assets, technologies, and know-how, and to achieve optimal financial strategies for the Companies' groups as a whole, thereby making it possible for the Companies to flexibly implement their management strategies from a medium-to long-term perspective.
It is expected that the following synergies and advantages will be produced from business integration via the Share Exchange for the Companies:
Expansion of overseas business
While Tsubakimoto Chain manufactures general industrial chains in North America, Europe, China, and Taiwan, it is proceeding with full-scale entry into the Global South market, represented by India, South America, and Africa, where future market expansion is expected. As Daido Kogyo already has manufacturing bases in the Global South market, Tsubakimoto Chain believes that it will be able to further expand its business with Daido Kogyo in this market. In addition, by utilizing Tsubakimoto Chain's strong business base in North America and Europe, Daido Kogyo will also be able to leverage the Companies' strengths to expand its overseas operations, including the expansion of sales channels for its products. Furthermore, the Companies believe that joint expansion by the Companies in regions such as Africa and the Middle East, where market development and expansion are expected in the future, will enable further global expansion.
Cross-selling in existing businesses
It is believed that cross-selling that leverages the strengths of the Companies will be possible, which would entail: the utilization of the Tsubaki Group's distribution channels to expand sales of developed products, including Daido Kogyo's motorcycle products and general-purpose seal chains; the sale of Tsubakimoto Chain's general industrial products, such as top chains and motion control products, through Daido Kogyo's sales channels; and collaborations involving Tsubakimoto Chain's conveyor system technology for the food and beverage industry and Daido Kogyo's vacuum conveyor technology.
New businesses and joint development
Tsubakimoto Chain certifies products that contribute to the solution of social issues as "sustainable products," and is actively enhancing the development and sale of such products. Specifically, such products include "eco-products" that contribute to the environment, such as wood chips and fuel conveyors for biomass power generation, V2X-compatible charging and discharging devices, and electric-assist three-wheeled bicycles, as well as "social products" that contribute to society, such as automatic sorting devices, unmanned transport vehicles, and arc chain actuators. Daido Kogyo also focuses on the development of "sustainability contribution products" such as electric motorcycles and micro hydroelectric power generators.
Daido Kogyo also aims to further expand its existing assistive device-related business. Daido Kogyo will be able to achieve the joint development of these sustainable products in cooperation with Tsubakimoto Chain through the Share Exchange.
In terms of technology, the Companies anticipate that combining their chain-related products, production, and manufacturing technologies will make it possible to create new products and further enhance their position in the global chain market. The Companies also believe that they will be able to work together to address issues such as reducing carbon dioxide emissions and utilizing waste heat in the manufacturing stage.
In addition to the business synergies that the Share Exchange will produce, it is anticipated that following the Share Exchange, the minority shareholders of Daido Kogyo will be able to benefit economically from the increased corporate value resulting from the synergies between the Daido Kogyo Group and the Tsubaki Group, as shareholders of Tsubakimoto Chain which includes Daido Kogyo group companies. Moreover, given the increasing burdens of supporting and bearing the costs of the development of the necessary organizational structure for a listed company, it is expected that this will also lead to a reduction in the workload and costs associated with maintaining Daido Kogyo's listing.
Although Daido Kogyo will be delisted as a result of the Share Exchange and lose the benefits generally obtained from being listed, such as the diversification of financing options through equity financing, the improvement of creditworthiness and the positive effects on recruiting activities, and the improvement of financial reliability through accounting audits, as a member of Tsubaki Group, Daido Kogyo will be able to raise funds by utilizing the Tsubaki Group's group financing, and therefore, there will be virtually no disadvantages to fundraising resulting from the loss of equity financing options. In addition, since Tsubakimoto Chain, which is listed on the TSE Prime Market, will become the wholly-owning parent company of Daido Kogyo, the risk of a decline in social credibility due to the delisting of Daido Kogyo is considered to be low, and the negative impact on recruitment and other areas is also expected to be minimal. Moreover, even after becoming a wholly-owned subsidiary company of Tsubakimoto Chain, Daido Kogyo will remain subject to consolidated financial audits for Tsubaki Group, thereby making it possible to