Matsushita Electric to Acquire all Outstanding Shares of two Listed Subsidiaries by Share Exchange

Osaka, Japan (PROTEXT) - Move Meant to Enhance the Group's Competitiveness in Refrigeration and Air Conditioning Equipment Businesses Matsushita Electric Industrial Co., Ltd. ("MEI"), (NYSE: MC; PCX) and two of its listed subsidiaries, Matsushita Refrigeration Company ("MRC") and Wakayama Precision Company ("WPC") today agreed that, subject to the approval of the shareholders of MRC and WPC, the two subsidiaries will become wholly-owned subsidiaries of MEI through share exchange procedures pursuant to the recently amended Commercial Code of Japan. The three companies are undertaking this agreement in order to unify their business strategies and to achieve greater efficiency, speed and responsiveness through maximum utilization of the group's vast management resources in the refrigeration, air conditioning and related equipment fields on a groupwide and global business perspective. MEI, headquartered in Osaka, Japan, is one of the world's leading producers of electronic and electric products for consumer, business and industrial use, which it markets around the world under the "Panasonic," "National," "Technics" and "Quasar" brand names. Its annual consolidated sales were 7,640.1 billion yen for the year ended March 31, 1999. MEI's shares are listed on all eight stock exchanges in Japan and, outside Japan, on the New York, Pacific, Amsterdam, Dusseldorf, Frankfurt and Paris stock exchanges. MRC, based in Osaka, is one of Japan's leading manufacturers of refrigerators, freezers, vending machines, food industry- related equipment and business-use air conditioning equipment. Its products are mostly sold through MEI's sales networks. MRC's shares are listed on the Tokyo Stock Exchange and the Osaka Securities Exchange (both on the First Section), with approximately 52% of its outstanding shares currently held by MEI. WPC, also based in Osaka, mainly manufactures compressors for air conditioning equipment, and compressors for freezing and refrigeration equipment. It supplies a substantial portion of its product output to MRC and MEI. WPC's shares are listed on the Second Section of the Osaka Securities Exchange. Of all its outstanding shares, approximately 47% are currently held by MEI and approximately 7% by MRC. The share exchange agreements between MEI and each of the two subsidiaries have been signed, following resolutions passed at the Board of Directors meetings of the three respective companies held today. Subject to approval at the respective extraordinary shareholders' meetings of MRC and WPC, both to be held on February 22, 2000, they will become wholly-owned subsidiaries of MEI on or around April 1, 2000. Due to an exemption under the Commercial Code, MEI's shareholders' approval will not be sought for the exchange agreements. Details of the agreement reached today are as follows: 1. Purpose of acquiring all outstanding shares of two subsidiaries To build a stronger management structure that can respond to the changing business environment, the Matsushita group has been promoting the "Inter- Business Cluster Collaboration," in which MEI's divisional companies and subsidiaries work in cooperation, building on their respective strength and expertise in each field. Today's agreement is intended to enhance this groupwide management policy. By converting MRC into a wholly-owned subsidiary, MEI will be able to implement a comprehensive business strategy that integrates related operations throughout the group in such areas as refrigeration and freezing equipment, air conditioning equipment and vending machines. In the refrigeration and freezing equipment business, MRC's position in the industry will be further enhanced in this core business, through increased coordination with the Matsushita group's overall home appliance and household equipment strategy. In the air conditioning equipment business, the Matsushita group will be able to improve its competitiveness by integrating the strategies of MRC into MEI's Air-Conditioner Company (an internal divisional company). This business will also be further enhanced by taking advantage of the tie-up relations with Daikin Industries, Ltd., the agreement for which was also entered into today. Meanwhile, MRC's vending machine operations will benefit from enhanced coordination with MEI's food industry-related sales divisions to more effectively integrate such areas as R&D, manufacturing, sales and marketing. These steps are expected to increase the group's ability to respond to the specific needs of its customers in this particular industry. As an integral part of these arrangements, WPC, which primarily produces compressors for air conditioning and freezing equipment, will also be converted into a wholly-owned subsidiary of MEI. 2. Terms and conditions of exchange offer (1) Method Subject to their approval at the extraordinary shareholders' meetings referred to below, the shareholders (excluding MEI) of MRC and WPC will become shareholders of MEI by accepting allotment of new shares of common stock to be issued by MEI through the exchange offer procedures. Concurrently, shares of MRC and WPC, held by their respective shareholders, will be transferred to MEI, and the two subsidiaries will become wholly- owned subsidiaries of MEI. (2) Schedule On February 22, 2000, the share exchange agreements will be presented for approval at the extraordinary shareholders' meetings of MRC and WPC. (Note: MEI is not required to convene a shareholders' meeting for approval of the agreements as mentioned above.) According to the current schedule, March 31, 2000 will be the final date for MRC and WPC shareholders to submit their share certificates, and April 1, 2000 is set as the effective date of the share exchange. (3) Share exchange ratios The shareholders of MRC will be allotted new shares of MEI common stock (with par value 50 yen per share) at the ratio of 0.186 MEI shares for each MRC share held; while the shareholders of WPC will be given new MEI shares of common stock (with par value 50 yen per share) at the ratio of 0.093 MEI shares for each WPC share held. In determining the above exchange ratios, MEI sought advice from The Nomura Securities Co., Ltd. (Nomura), while the two subsidiaries received advice from KPMG Corporate Finance K.K. (KPMG), in each case as independent advisors. In order to calculate the exchange ratios, Nomura primarily applied market price analysis and discounted cash flow analysis for assessment of corporate values of MEI and MRC, and market price analysis and re-evaluated net worth method for WPC. Meanwhile, KPMG calculated the exchange ratios by primarily utilizing market price analysis and discounted cash flow analysis for assessment of corporate values of all three companies. Following examination of these calculations by Nomura and KPMG and discussions among MEI and the two subsidiaries, the three group companies have agreed to the exchange ratios set forth above. (Note: These ratios may be revised by consultation among the three companies in the event any material changes arise to the position of assets or management condition of any of the three companies.) 3. Basic data of the three parties (as of March 31, 1999) (1) Matsushita Electric Industrial Co., Ltd. (Parent company alone) -- Principal line of business: Manufacture and sale of electronic and electric equipment -- Date of incorporation: December 1935 -- Location of head office: Kadoma, Osaka, Japan -- Representative: Yoichi Morishita, President and Director -- Share capital: 209,444 million yen -- Total number of shares issued and outstanding: 2,062,344,774 shares of common stock (with par value 50 yen each) -- Shareholders' equity: 2,376,413 million yen -- Total assets: 4,165,861 million yen -- Number of employees: 45,485 (2) Matsushita Refrigeration Company -- Principal line of business: Manufacture and sale of refrigerators, vending machines and other food industry-related equipment, and air conditioning equipment -- Date of incorporation: February 1939 -- Location of head office: Higashi-Osaka, Osaka, Japan -- Representative: Tadashi Kubota, President and Director -- Share capital: 11,942 million yen -- Total number of shares issued and outstanding: 176,583,954 shares of common stock (with par value 50 yen each) -- Shareholders' equity: 76,081 million yen -- Total assets: 125,944 million yen -- Number of employees: 4,442 (3) Wakayama Precision Co., Ltd. -- Principal line of business: Manufacture and sale of compressors for air conditioning equipment, compressors for freezing and refrigeration equipment, and oil temperature regulators -- Date of incorporation: September 1949 -- Location of head office: Suita, Osaka, Japan -- Representative: Takuya Fujimoto, President and Director -- Share capital: 500 million yen -- Total number of shares issued and outstanding: 10,000,000 shares of common stock (with par value 50 yen each) -- Shareholders' equity: 990 million yen -- Total assets: 1,715 million yen -- Number of employees: 78 (Note: Amounts less than 1 million yen have been omitted.) 4. Financial results for the most recent 3 years (in millions of yen, except per share amounts) (1) Matsushita Electric Industrial Co., Ltd. (Parent company alone) Fiscal year ended: 1997/3/31 1998/3/31 1999/3/31 Net sales 4,797,706 4,874,526 4,597,561 Recurring profit 143,312 156,350 122,746 Net income 83,125 91,203 62,019 Net income per Share (yen) 39.43 43.18 29.67 Dividends per Share (yen) 13.00 12.50 14.00 (2) Matsushita Refrigeration Company Fiscal year ended: 1997/3/31 1998/3/31 1999/3/31 Net sales 174,287 158,261 149,476 Recurring profit (loss) 4,971 2,527 (2,015) Net income 4,622 2,050 189 Net income per Share (yen) 26.18 11.61 1.07 Dividends per Share (yen) 10.00 10.00 7.50 (3) Wakayama Precision Co., Ltd. Fiscal year ended: 1997/3/31 1998/3/31 1999/3/31 Net sales 2,503 2,422 2,276 Recurring profit 5 18 3 Net income 4 18 3 Net income per Share (yen) 0.49 1.84 0.40 Dividends per Share (yen) -- -- - - (Note: Amounts less than 1 million yen have been omitted, except per share amounts.) 5. Change after the share exchange No changes are currently contemplated with respect to trade names, principal lines of business, location of head offices and corporate representatives of the three companies, all of which will remain as stated above in the section titled "3. Basic data of the three parties." The share capital of MRC and WPC will remain the same as at present. However, MEI's share capital will increase to approximately 210,370 million yen, as a result of the issue of new shares for exchange with MRC and WPC shareholders. (Note: New shares to be issued upon conversion of outstanding convertible bonds are not included in this calculation.) It should also be noted that the share exchange will have no immediate material effect on MEI's consolidated financial results, since MRC was already a consolidated subsidiary of MEI and WPC's sales have been substantially incorporated in the sales of MRC and MEI. However, it is expected that transforming MRC and WPC into wholly-owned subsidiaries of MEI will raise the group's overall management efficiency and enhance business strategies, thus leading to the possibility of operational performance improvements within the entire Matsushita group in the future. This release includes forward-looking statements that reflect Matsushita group's plans and expectations in relation to the share exchange schemes described above and the benefits resulting from them. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including in particular the ability of MEI to integrate the operations of MRC and WPC effectively, that may cause Matsushita group's actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Notice to United States investors The business combination referred to in this release (the "Transaction") involves securities of foreign companies. The Transaction is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial information included in this release has been prepared in accordance with foreign accounting standards that may not be comparable to similar financial information of United States companies. It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since MEI, MRC and WPC are located in a foreign country, and some or all of their officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violation of U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment. You should be aware that MEI, MRC and WPC may purchase securities otherwise than through the Transaction, such as in open market or privately negotiated purchases. ots Original Text Service: Matsushita Electric Industrial Co., Ltd. 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