FERROTEC HOLDINGS CORPORATION News Release: Ferrotec Holdings Corporation (6890 TSE Standard)
June 7, 2023
Notice of the Issuance of Euro-Yen Denominated Convertible Bonds with Stock Acquisition
Rights Due in 2028
Ferrotec Holdings Corporation (Representative Director: He Xian Han; hereinafter "the Company") announces that at the meeting of Board of Directors held on June 7, 2023, we resolved to issue the euro-yen denominated convertible bonds with stock acquisition rights due in 2028 with the aggregate face amount being 25 billion yen (hereinafter "the bonds with stock acquisition rights"). Details are as follows.
[Background of the issuance of the bonds with stock acquisition rights]
Since establishing a thermo-electric module manufacturing subsidiary in Hangzhou City, Zhejiang, China in 1992, our corporate group has been actively developing manufacturing factories in China and expanding our business through M&A. As a company that was founded in the U.S., developed in Japan, and is expanding in China, we wish to become a global company that expands its business activities globally, not only in the electronics industry, but also in elemental technologies in manufacturing, and delivers high-quality products to the world at internationally competitive prices.
In the semiconductor industry, where our corporate group belongs, there have been concerns about the impact of the recent friction between the U.S. and China on the global semiconductor supply chain, and our corporate group has been seeking to diversify risks and maintain our competitive advantage by adjusting the global allocation of manufacturing factories from a geopolitical perspective.
As a result, we have concluded that the southeastern Asian region, especially Malaysia, will become a global hub for semiconductor equipment manufacturing, where a large number of semiconductor-related companies have recently entered the market, including major semiconductor equipment manufacturers, which are important customers of our corporate group. We decided to enter the Malaysian market in May 2022, based on the support of the Malaysian Investment Development Authority and strong requests from our customers to expand into the country. The new Malaysian Factory will have a site area of approximately 80,000 m2 and will engage in robot assembly, quartz product processing, ceramics processing, metal processing, and other businesses. The factory is currently under construction and is scheduled to begin operations in 2023. In the future, we plan to make this factory the core factory of our group outside of China.
In addition, in 2022, our corporate group decided to return to manufacturing in Japan (reshoring), which excels in basic material technology for semiconductor material products, add more floor space to the ceramics factory at the Ishikawa Factory in conjunction with the relocation and expansion of the Kansai Factory of our subsidiary Ferrotec Material Technologies Corporation (hereinafter "FTMT"), and establish a new factory for manufacturing semiconductor material products and offering related services in Kikuchi-gun, Kumamoto Prefecture, where a factory of a major Taiwanese semiconductor manufacturer will be built, with construction work currently underway with the aim of commencing operations in FY2024.
Furthermore, from the viewpoint of strengthening the business portfolio in response to changes in the business environment and developing new pillar businesses for the future, in 2022, the Company acquired Toyo Knife Co., Ltd. (hereinafter "Toyo Knife"), a leading manufacturer of industrial knives, and Ohizumi Mfg. Co., Ltd. (hereinafter "Ohizumi Mfg."), a major manufacturer of temperature sensor products, as consolidated subsidiaries through takeover bid. Demand for high-precision knives (knives for the information industry) manufactured by Toyo Knife for such items as films for EV lithium-ion batteries and temperature sensors manufactured by Ohizumi Mfg. is expected to grow, especially in China, as EVs become more popular. Both companies intend to expand their market shares as soon as possible by utilizing our overseas management resources, and we intend to develop them into future pillar businesses for the Company.
Under these circumstances, in order for the Company to push forward with various measures while flexibly adapting to the business environment, it is necessary to make continuous investments for growth from a medium/long-term perspective. In addition, we have concluded that it is essential to build a stronger and more stable financial base. While taking into consideration various factors, including financing needs, financing costs, diversification of financing methods, impact on share dilution, and the market environment, we resolved to issue the bonds with stock acquisition rights.
[Purpose of use of procured funds]
Proceeds from the issuance of the bonds with stock acquisition rights (hereinafter "the proceeds") will be used as follows. Capital investments in domestic and overseas subsidiaries shown below are to be carried out through investments and loans from our company to the subsidiaries.
- Approximately 15.1 billion yen by the end of March 2024 as funds for construction of a factory in a Malaysian subsidiary (Ferrotec Manufacturing Malaysia Sdn. Bhd.) and capital investment forn robot assembly, quartz product processing, ceramics
News Release: Ferrotec Holdings Corporation (6890 TSE Standard)
processing, metal processing, and other businesses.
- Approximately 4 billion yen by the end of March 2025 as funds for the construction of the Ishikawa Factory No. 3 in connection with the relocation and expansion of the Kansai Factory of FTMT, as well as capital investment related to ceramic products
- Approximately 2 billion yen by the end of March 2024 as funds for the construction of a new Kumamoto factory, which will be responsible for manufacturing semiconductor material products and offering related services
- Approximately 850 million yen by the end of March 2024 as construction funds and capital investment funds for a factory specializing in knives for the information industry of Toyo Knife.
In addition, the remaining amount after deducting the total amount of (1) to (4) above from the proceeds will be used to repay bonds and long-term debt by the end of March 2024.
[Purpose of issuance of the bonds with stock acquisition rights]
In selecting financing methods, the Company has been discussing financing methods that will enable improvement of the financial balance in the future at the lowest possible cost, while taking into account the future medium/long-term interest rate outlook and market trends. As a result, our company has concluded that the issuance of the bonds with stock acquisition rights, which have the following characteristics, is the most appropriate method.
Because the financial balance can be improved by issuing the bonds with stock acquisition rights with zero coupons to minimize interest costs
Because the bonds with stock acquisition rights will be considerate to the existing shareholders, as the conversion price is set at a higher level than the market value, minimizing the dilution of earnings per share, etc. for the time being
Because a 130% call option clause is attached to the bonds with stock acquisition rights, so that if the stock price rises by over a certain percentage of the conversion price over a certain period of time, the Company may choose to redeem the bonds with stock acquisition rights at face value, so it is expected to promote the conversion of the bonds with stock acquisition rights into shares and increase the Company's capital base in the future
I. Euro-yen denominated convertible bonds with stock acquisition rights due in 2028
1. | Name of the bonds with stock | Euro-yen denominated convertible bonds with stock acquisition rights due in 2028 of |
acquisition rights | Ferrotec Holdings Corporation | |
2. | Paid-in amount for the bonds with | 100% of the face value of the bonds |
stock acquisition rights | ||
3. | Payment date and date of | June 23, 2023 (London time, same hereafter unless otherwise indicated.) |
issuance of the bonds with stock | ||
acquisition rights |
4. Matters related to offering
Offer price of the bonds with stock acquisition rights (issue price)
5. Matters related to stock
acquisition rights
(1) Type, description, and number of shares to be
issued upon exercise of stock
acquisition rights
(2) Total number of stock acquisition rights to be issued
(3) Date of allotment of stock acquisition rights
News Release: Ferrotec Holdings Corporation (6890 TSE Standard)
6. Matters related to the bonds with
stock acquisition rights
(1) | Total amount of bonds with | The sum of 25 billion yen and the total amount of the face values of the bonds relating to |
stock acquisition rights | the alternative bonds with stock acquisition rights | |
(2) | Interest rate of the bonds | The bonds are not subject to interest. |
with stock acquisition rights | ||
(3) | Redemption date | June 23, 2028 |
This document is a press release for public announcement in relation to the issuance of convertible bonds with stock acquisition rights of the Company. We did not prepare this document to solicit any kind of investment. We have no intention to offer or sell the bonds with stock acquisition rights in Japan.
In addition, this document does not constitute an offer for the bonds with stock acquisition rights in any jurisdiction including the United States. It is not possible to offer and sell the bonds with stock acquisition rights in accordance with the Securities Act of 1933 without registration or exemption from registration of the bonds with stock acquisition rights in the United States. When an offer or sale of securities is performed in the United States, an English prospectus which is created in accordance with the Securities Act of 1933 is used. We will not offer or sell the bonds with stock acquisition rights in the United States regarding this matter.
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Ferrotec Holdings Corporation published this content on 28 June 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 June 2023 05:12:07 UTC.
