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Absorption-Type Spin-off Contract Concluded to Enable Subsidiary to Succeed to Credit Card Business

FASF

 

 

December 17, 2009

To all concerned

Company name: East Japan Railway Company
Representative: Satoshi Seino, President
(Code: 9020, Section 1 of Tokyo / Osaka / Nagoya)
Contact for inquiries: Tadao Maekawa, Public Affairs
Department Manager
(TEL: 03-5334-1300)

At a meeting of the board of directors today, East Japan Railway Company (JR East) determined that it would conclude an absorption-type spin-off contract under which our 100% subsidiary View Card Co., Ltd. (below, VC) will succeed to the rights and duties of JR East’s credit card business as of February 1, 2010 (this succession was determined at a meeting of the board of directors on July 22, 2009, and announced in "Business Succession Through the Establishment of Subsidiaries and Spin-offs"). Details are below. Because this spin-off is to a 100% subsidiary, some disclosure items and details have been omitted.

[Reference] Overview of JR East’s credit card business

  1. Business launched : 1993
  2. Members : 3.19 million (as of March 31, 2009)
  3. Transactions : Shopping: 880.1 billion yen; cashing: 34.4 billion yen (results for FY2008)
  4. Main products : "VIEW Suica" Card, Otona no Kyujitsu Club Card, Lumine Card, JAL Card Suica, Bic Camera Suica Card, etc.
         

1.

Objective of reorganization

JR East’s credit card business has grown rapidly since its launch in 1993, with several attractive services including partner cards with other businesses and combined Suica/credit cards. The environment facing the credit card business, however, has changed greatly in recent years, in part because of stronger regulations on the business. To enhance profitability and competitiveness under these circumstances, JR East is opting to let a subsidiary succeed to its credit card business with the objective of ensuring a more dynamic business operations system and strengthening management of the business. By having a company specifically focused on the business to which it is succeeding, we seek to be able to make decisions more quickly and respond flexibly to changes in the business environment, thereby enhancing profitability and competitiveness.

2.

Overview of spin-off

(1) Spin-off timeline  
   Decision by board of directors  December 17, 2009
   Spin-off contract concluded  December 17, 2009
   Date spin-off takes effect  February 1, 2010 (planned)
General meeting of shareholders to approve spin-off:
  No general meeting of shareholders will be held at either company, because for JR East, the planned spin-off is a simple spin-off as stipulated in Company Law Article 784, Paragraph 3, and for VC, it is a simplified spin-off as stipulated in Company Law Article 796, Paragraph 1.

(2) Form of spin-off
  This will be a simple spin-off, with JR East as the split company and VC as the succeeding company.
   
(3) Spin-off allocation
  Because a wholly-owned subsidiary will be the succeeding company, VC will pay no consideration for the spin-off.
   
(4) Handling of share warrants and warrant bonds associated with reorganization
  JR East does not issue any share warrants or warrant bonds
   
(5) Change in capitalization due to spin-off
  There will be no change in JR East’s capitalization as a result of the spin-off
   
(6) Rights and duties to which the succeeding company will succeed
  Assets, liabilities, rights and duties associated with the credit card business to which VC is succeeding
VC will not succeed to the following, however; these will remain with JR East.
  1) Assets, liabilities, rights and duties associated with "Business EkiNet" and "VIEW Web"
  2) Duty to reimburse claims of overpayment
  The Suica business (including Suica licensing for credit cards issued by others) is not included in the credit card business to which VC is succeeding.
   
(7) Estimate of discharge of debt
  We have determined that there will be no problem discharging debts owed by JR East and VC on or after the day the spin-off takes effect.

3.

Overview of companies involved in spin-off
(as of September 30, 2009)


 
(Units: 1,000,000 yen, unless otherwise noted.)
  Split company Succeeding company (Items marked with* are estimates for February 1, 2010)
(1) Name East Japan Railway Company View Card Co., Ltd.
(2) Address 2-2 Yoyogi 2-chome, Shibuya-ku, Tokyo 5-1 Osaki 1-chome, Shinagawa-ku, Tokyo*
(3) Title and name of representative President Satoshi Seino President Tsugio Sekiji (JR East Managing Director and Director of IT/Suica Business Division)
(4) Business areas Passenger rail service, etc. Credit card business, etc.
(5) Capital 200 billion yen 5 billion yen*
(6) Established April 1, 1987 September 1, 2009
(7) Shares issued 400 million 2,000
(8) End of fiscal year March 31 March 31
(9) Number of Employees 73,454 (consolidated) 240 (non-consolidated)*
(10) Major customers General customers General customers*
(11) Major banks The Bank of Tokyo-Mitsubishi UFJ, Ltd. Sumitomo Mitsui Banking Corporation
Mizuho Corporate Bank, Ltd.
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.*
Sumitomo Mitsui Banking Corporation*
Mizuho Bank, Ltd.
(12) Chief shareholders and ownership ratios Japan Trustee Services Bank, Ltd. Trust Account 6.87%
Master Trust Bank of Japan, Ltd. Trust Account 4.98%
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3.13%
East Japan Railway Company 100%
(13) Business results and financial conditions for past three years
End of fiscal year East Japan Railway Company (wholly-owning parent company)(consolidated) View Card Co., Ltd. (wholly-owned subsidiary)(non-consolidated)
March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2007 March 31, 2008 March 31, 2009
Consolidated net assets 1,513,104 1,622,005 1,744,706 - - -
Consolidated total assets 6,968,031 6,942,002 6,965,793 - - -
Consolidated net assets per share (yen) 3,724.93 3,994.83 4,301.06 - - -
Consolidated net sales 2,657,345 2,703,563 2,696,999 - - -
Consolidated operating income 428,097 445,159 432,554 - - -
Consolidated current income 300,051 336,573 329,512 - - -
Consolidated net income 175,870 189,672 187,291 - - -
Consolidated net income per share (yen) 440.08 474.64 468.68 - - -
Dividends per share (yen) 90 100 110 - - -
Items marked with * for the succeeding company are estimates for February 1, 2010. The following is an overview as of September 30, 2009.
  • Address : 2-2 Yoyogi 2-chome, Shibuya-ku, Tokyo
  • Capital : 100,000,000 yen
  • Employees : 2 (non-consolidated)
  • Major customers : none
  • Major bank : Mizuho Corporate Bank, Ltd.
   
The company did a stock split of 100 shares for each ordinary share, effective January 4, 2009. The numbers given for "consolidated net assets per share (yen)," "consolidated net income per share (yen)" and "dividends per share (yen)" are calculated as if this stock split took place at the beginning of March 2007.
   
Because VC was established on September 1, 2009, there are no most recent business years to give settled data for.

[Overview of business division being spun off]

  (1) Business of the division being spun off
    Credit card business (except business related to Business EkiNet and VIEW Web). The Suica business (including Suica licensing for credit cards issued by others) is not included in the credit card business to which VC is succeeding.
     
  (2) Business results for the division being spun off
     
 
(Units: 100 million yen)
 
  Credit card business (a) East Japan Railway Company non-consolidated results (b) Percentage (a/b)
Net sales 190 19,674 0.96%
  (3) Assets and liabilities being spun off, and values
     
 
(Units: 1 million yen)
 
Assets Liabilities
Category Book value Category Book value
Current assets 193,469 Current liabilities 188,674
Fixed assets 105    
Total 193,574 Total 188,674

4.

Status after reorganization

The spin-off will have no effect on JR East’s name, address, representative’s title, business description, capital or fiscal period.
   

5.

Outlook

Because VC, the succeeding company, is a wholly-owned subsidiary, the spin-off will have no effect on consolidated results.
   
 
End
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