Hitachi Capital Corporation and Mitsubishi UFJ Lease and Finance Company Limited Agree to Merge

Business Integration (Presentation Material)

[Reference translation – in case of any discrepancy, the original Japanese version shall prevail.]

September 24, 2020
To whom it may concern,
Company Name      Mitsubishi UFJ Lease & Finance Company Limited
Representative        Takahiro Yanai, President & CEO
(Code: 8593, 1st Section of Tokyo Stock Exchange and 1st Section of Nagoya Stock Exchange)
Company Name      Hitachi Capital Corporation
Representative        Seiji Kawabe, President & CEO
(Code: 8586, 1st Section of Tokyo Stock Exchange)

Notice concerning Conclusion of Agreement on Business Integration through Merger
between Mitsubishi UFJ Lease and Hitachi Capital

Mitsubishi UFJ Lease & Finance Company Limited (“Mitsubishi UFJ Lease”) and Hitachi Capital
Corporation (“Hitachi Capital”) hereby announce that the two companies resolved, at the respective board of
directors meetings of the two companies which were held today, on their business integration (the “Business
Integration”) through a merger (the “Merger”) and concluded the business integration agreement and the
merger agreement, as indicated below.

Based on the capital and business alliance concluded in May 2016, the two companies have been in collaboration, including incorporation of the Japan Infrastructure Initiative Company Limited (“JII”) in order to reinforce the overseas infrastructure investment business. Also, the two companies had considered business integration as one of the options and constructively continued discussions to strengthen the relationship. Through that process, the two companies recognized that JII’s business had steadily progressed, and that the two companies’ businesses had little duplication and were in an ideal complementary relationship. Eventually, the two companies reached an agreement, determining that business integration through merger is the optimal means to promptly adapt to drastic environmental changes and further open up new areas of their advanced asset businesses based on a constructive discussion in the spirit of mutual respect and fairness.

As a result of the Business Integration, the two companies will become a global player in the sector in terms of size and business lines by being able to complement each other’s business domains and strengthen their respective management bases. Upon the Business Integration, a new integrated company (the “New Integrated Company”) will aim to create sustainable social value by operating an advanced asset business beyond the leasing business  framework and providing customers with new value in countries and regions across the world.

The Business Integration is planned to be implemented and become effective on April 1, 2021 (the “Effective Date”), upon the approval to be granted at each of the extraordinary meetings of shareholders of the two companies planned to be held in late February, 2021. The implementation of the Business Integration is premised on the receipt of necessary authorizations and approvals from relevant domestic and overseas authorities, as well as other approvals necessary for its taking effect.

Prior to the Effective Date (April 1, 2021), the common stock of Hitachi Capital is scheduled to be delisted as of March 30, 2021 (the last day of trading will be March 29, 2021) in the 1st Section of the Tokyo Stock Exchange, Inc. (the “Tokyo Stock Exchange”).

The two companies recognize that their major shareholder, Mitsubishi UFJ Financial Group, Inc. (“Mitsubishi UFJ Financial Group”), Mitsubishi UFJ Lease’s major shareholder, Mitsubishi Corporation (“Mitsubishi Corporation”), and Hitachi Capital’s major shareholder, Hitachi, Ltd. (“Hitachi”; Mitsubishi UFJ Financial Group, Mitsubishi Corporation and Hitachi are collectively referred to as the “Major Shareholders”), understand that the Business Integration is an extension of the details of the announcement made by the two companies in 2016 and the discussions to strengthen their relationship based thereon.

I. Backgrounds and Purposes of the Business Integration
1. Backgrounds of the Business Integration
(1) Changes in social situations and challenges
In recent years, there have been drastic changes in the external environment as well as the trends and megatrends influencing domestic and international economies in the long term, such as climate change, shortages of resources, de-carbonization to break dependence on resources and fossil fuels, demographic changes, technological innovation, urbanization, the shifting of the global economy, and global multipolarization, all of which are accelerating.

Further, global expansion of the COVID-19 pandemic from this year resulted in a paradigm shift for the overall economy and society, and qualitative restructuring of supply chains, digitalization to adapt to a data economy, and shifts from mass production and consumption to a circular economy in corporate activities, among other changes, are thought to make progress.

(2) Common Challenges of the Two Companies
In connection with these changes in the external environment, the roles required for leasing companies are changing to better resolve social issues through business investments and operations, in addition to conventional leases and finances.

Moreover, in both during and after the COVID-19 pandemic situation, business models at an industry level are expected to change rapidly at a speed which has exceeded all expectations. In such circumstances that all companies are to adapt to the environmental changes, the prominence of leasing companies, holding various asset-related functions and offering flexible services which are not limited to financial functions, will increase further.

As both companies have been closely cooperating with various industries, they have reached a conclusion that, as well as to contribute to various customers and local communities, and to create social value, while regarding these drastic environmental changes in society and the relevant industries as new business opportunities, it is necessary to further expand the operational bases and to strengthen the financial bases of both companies.

2. Purposes of the Business Integration
The two companies have set the goal of sustainable enhancement of corporate value through the resolution of social issues to realize a rich society that can adapt to environmental change, as stated in the medium- to long-term corporate vision statements of their respective medium-term management plans.

With the Business Integration, the two companies will realize (i) complementing each other’s business domains, (ii) strengthening their management bases, and (iii) creating new value based on (i) and (ii) and grow stronger, by developing the business as an integrated entity under a unified vision and philosophy.

(i) Complementing each other’s business domains
By building ideal, mutually complementary relationships, the New Integrated Company may establish an extensive and comprehensive lineup of businesses, and achieve diversification in its portfolios in terms of both business domains and geographical areas. This will help the New Integrated Company not only to establish a solid and stable revenue structure that will be less susceptible to the external environment, but also to increase profitability via expanded investment activities utilizing its enhanced capabilities.

(ii) Strengthening the management base
The New Integrated Company aims to build strong management bases which will support sustainable growth through concentrating the management resources and expertise of the two companies, which are sources of corporate competitiveness, via utilization and enhancement of human resources, utilization of partner networks, reinforcement of financial bases, advancement of risk management, and promotion of digitalization.

(iii) Creating new value
The New Integrated Company is intended to offer new value beyond the framework of traditional leasing companies to customers by entering into new business domains and geographical areas, as well as strengthening and expanding the focal business domains of the two companies.

Due to the Business Integration, the New Integrated Company will be one of the largest global players in the industry in terms of both its size and business domains, with 10 trillion yen of total assets, over 100 billion yen of net profit, and nearly 10,000 employees. The New Integrated Company will accurately capture the changing needs of its customers and local communities in countries and regions across the world, and utilize its expanding scale and built-up capital to develop into a company that can provide solutions to modern social issues.

3. Basic Strategy of the New Integrated Company
(1) Corporate vision
The New Integrated Company will continue to follow the corporate visions shared by the two companies, which include providing solutions to social issues and achieving sustainable growth in order to enhance corporate value over the medium to long term.

(2) Goals of the New Integrated Company
The New Integrated Company will aim to accomplish its corporate vision by developing an advanced asset business beyond the framework of the leasing business and striving to create social value with a pioneering spirit in countries and regions across the world. The corporate goal of the New Integrated Company has been titled “Voyager to the Frontier,” with intentions to exert its initiatives and open up and develop new frontiers in the focused domains of social infrastructure & life, environment & energy, mobility, sales finance, and global assets.

In order to realize such goals, it is necessary for the New Integrated Company to create synergies combining the strengths of the two companies: Mitsubishi UFJ Lease’s ability to offer value from advanced assets as an asset-business platform company, and Hitachi Capital’s ability to create and offer value to its stakeholders by accurately capturing the needs of both customers and local communities as a “Social Values Creating Company”.

(3) Business model of the New Integrated Company
The New Integrated Company aims to monetize asset values by building up businesses utilizing asset value creativity as an asset holder, whose portfolio contains not only tangible assets but also extensive intangible assets, including computerized assets such as software and database, innovative assets such as R&D and licensing, and economic competitiveness such as human resources and organizational structure.

To these ends, the New Integrated Company will continually innovate and evolve business models by developing five types of asset businesses: Asset-based Financial Solutions, Asset Investments and Loans, Asset Added-value Services, Provision of Asset Utilization Value, and Asset Utilization Business.

Asset value creativity will allow the realization of the improvement of the business competitiveness of customers and business partners, as well as the New Integrated Company, by creating and providing functions that utilize assets contributing to the creation of values to be provided to industries and societies one after another.

(4) Values to be provided by the New Integrated Company
The New Integrated Company will adapt to environmental changes, solve social issues, and create social value through its corporate activities, which are based on a solid business foundation. The New Integrated Company will create value in the entire industry and society by integrating the knowledge of the two companies and taking into account the viewpoint of various stakeholder.

For example, the New Integrated Company will, through collaboration with key partners, offer solutions combining the provision of asset utilization value and finance, and ideas for new businesses which enable customers to solve their business challenges, as well as assist the entire industry in accelerating responses to social issues, such as de-carbonization, digitalization, etc.

The New Integrated Company will also contribute to developing safe and secure communities in a new normal society by proposing the optimization of industrial and social activities via leveraging smart systems and creating ecosystems.

In addition, the New Integrated Company will aim to promote ESG management in order to support the sustainability of the global environment and enhance corporate social responsibility and governance from a medium- to long-term perspective. In doing so, it will strive to enhance shareholders’ interests and establish a working environment that will satisfy employees, which may be a model case both during and after the COVID-19 pandemic.

(5) Business Regions of the New Integrated Company
The New Integrated Company will actively develop its business in five regional areas: Japan, Europe, the Americas, Greater China, and Asia & Oceania. While carefully assessing the unique characteristics of each region, the New Integrated Company will develop a business model rooted in the region. By continuing to innovate, the New Integrated Company will exert a unique presence in each region.

(6) Anticipated synergies
The New Integrated Company aims to create synergies from three aspects: mainly the cost aspect of synergies such as optimizing management resources etc., the sales aspect of synergies which is difficult to quantify as of now due to the anti-trust laws constrains and synergies created by utilizing capital capabilities developed upon the Business Integration.

Specifically, by demonstrating the synergy effects on costs due to optimization of the management resources which became possible upon the Business Integration and by aiming for top-line growth by strengthening sales capabilities through utilization of each other’s network, an annual synergy effect of 10 billion yen is anticipated by FY2023 as highly feasible synergy.

Meanwhile, with regards to sales synergies, other than sharing of collaborative networks based on the capital and business alliance, since the two companies cannot exchange sales-related information due to anti-trust laws, it is difficult for them to quantify synergies in this regard; however, they are scheduled to conduct a discussion in earnest after the clearance.

In addition, by utilizing capital capabilities and effects of diversification in its portfolios realized by the Business Integration and conducting efficient capital management while striving to maintain the current level of credit ratings, the New Integrated Company aims to accumulate assets and expand its investments in businesses.

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