Mitsubishi Electric And Mitsubishi Heavy Industries Reach Definitive Agreement To Integrate Their Power-Generator Systems Businesses

Mitsubishi Electric Corporation and Mitsubishi Heavy Industries, Ltd. have announced that they have reached a definitive agreement to integrate their power generator systems businesses under a joint venture.

As previously announced, the two firms agreed in principle last December 26 on a plan to transfer their respective businesses focused on power-generator systems to a proposed joint-venture company, which Mitsubishi Electric and Mitsubishi Heavy Industries will both be the shareholder, effective April 1, 2024.

Mitsubishi Electric and Mitsubishi Heavy Industries partnership

As of now, the two companies have signed definitive agreements

As of now, the two companies have signed definitive agreements, specifying the terms and conditions of integrating their power-generator systems businesses, the details of which are outlined below.

Prior to the establishment of the joint-venture company, a preparatory company will be established in due course, after which the remaining details will be finalized by the three parties by around the end of December 2023.

Purpose of Integration

Climate change due to global warming is triggering accelerating efforts worldwide to achieve carbon neutrality by reducing greenhouse gas (GHG) emissions to net zero.

Increasing demand for electricity in growing economies, particularly emerging markets, and heightened concerns about energy security, are expected to drive practical transitions to new forms of energy, such as hydrogen, ammonia and other carbon-free fuels, alongside existing thermal-power generation.

Large power plants, which have served as the backbone of power infrastructure so far, will play an important transitional role in balancing the variability of renewable energy due to weather and other factors.

Integration expected to strengthen partnership

The integration is expected to strengthen the partnership between the two companies

In the midst of such market changes, Mitsubishi Electric and Mitsubishi Heavy Industries have agreed to integrate related businesses, technologies and assets, in order to enhance market competitiveness.

The integration is expected to strengthen the partnership between the two companies to an unprecedented level, in order to expand their power-generator systems business globally and contribute to a carbon-neutral world.

Details of Integration

(1) Schedule

• Execution of basic agreement: December 26, 2022
• Decision on Absorption-type Company Split: May 29, 2023
• Execution of definitive agreements: May 29, 2023
• Execution of company-split agreement: End of December 2023 (tentative)
• Effective date of company splits: April 1, 2024 (tentative)

(2) Method and Equity Contribution

The method will be an absorption-type company split in which a preparatory company, which will be established by Mitsubishi Electric as a wholly owned subsidiary, will become the succeeding company, and Mitsubishi Electric and Mitsubishi Heavy Industries will be the transferring companies.

The preparation company will issue common stock for the split from Mitsubishi Electric and Mitsubishi Heavy Industries, with all shares being allotted to Mitsubishi Electric and Mitsubishi Heavy Industries respectively, however, both companies will mutually determine the number of shares to be allotted to each company.

The two companies will make adjustments so that Mitsubishi Electric will hold 51% and Mitsubishi Heavy Industries will hold 49% of the shares in the joint-venture company as of the effective date.

(3) Share Acquisition Rights and Bonds with Share Acquisition Rights

Mitsubishi Heavy Industries has not issued any bonds with share acquisition rights

Mitsubishi Electric has not issued any share acquisition rights nor has it issued any bonds with share acquisition rights.

The obligations under share acquisition rights issued by Mitsubishi Heavy Industries will not be transferred to or succeeded by the joint-venture company. Mitsubishi Heavy Industries has not issued any bonds with share acquisition rights.

(4) Changes in Amounts of Capital Accompanying Company Splits

There will be no change in the capital stock or capital reserves of Mitsubishi Electric or Mitsubishi Heavy Industries as a result of the company splits.

(5) Rights and Obligations Transferred to Joint-Venture Company

The joint-venture company will assume ownership of the related assets, liabilities, other rights and obligations, and existing contracts of Mitsubishi Electric and Mitsubishi Heavy Industries. Details of the integration including assets, liabilities, contracts, etc., will be specified in the absorption-type company split agreement to be executed around the end of December 2023.

(6) Outlook on Fulfillment of Obligations

Following the company splits, the obligations to be borne by the joint-venture company are expected to be duly performed.

Calculation Basis, etc., Concerning Allotment

The number of shares of the joint-venture company to be allotted to Mitsubishi Electric and Mitsubishi Heavy Industries will be determined through discussions and negotiations, based on the value of the businesses to be transferred after considering the financial performance (revenues, expenses, profits and cash flows) of the businesses subject to the integration, in addition to the assets, liabilities, existing contracts, rights and obligations, etc. to be transferred.

Outlook

The impact of the company splits on the business results and outlooks of Mitsubishi Electric and Mitsubishi Heavy Industries will be announced in a timely manner once confirmed.