Nintendo Announces Plan To Acquire JESNET

What is JESNET? That was my immediate reaction to this news. Basically, it’s a company that has been distributing many of Nintendo’s physical products to retailers in Japan. As part of this agreement, JESNET will accept the assignment of the video game wholesale business from AJIOKA, another company that has worked with Nintendo to distribute products.

The reason for this acquisition is to unify Nintendo’s product development with JESNET’s and AJOIKA’s robust stocking and sales networks to form a supply structure that can meet consumer demand in a timely fashion. Basically, Nintendo would like better control over all facets of its product, from development to shipping. This move is intended to allow for rapid decision making and improved sales. Nintendo says that “These steps are intended to strengthen the overall competitiveness of the Nintendo group and increase its corporate value”.

The deal is set to officially take place on April 3, 2017 when Nintendo buys a majority of stock. It will have 70% of the voting rights. For full details of the acquisition, read the official brief below:

 

Notification of the Subsidiarization of JESNET Co. Ltd.
and the Acceptance of Assignment of Business from AJIOKA Co., Ltd.

Nintendo Co., Ltd., (HQ: Kyoto Minami-ku; Representative Director and President: Tatsumi Kimishima; hereinafter “Nintendo”) would like to announce that it has passed a resolution to acquire the stock of JESNET Co. Ltd. (HQ: Sapporo, Hokkaido; Representative Director and President: Jou Suzuki; hereinafter “JESNET”) and make it a subsidiary of Nintendo at the August 25, 2016 meeting of the Board of Directors. Furthermore, on the same day as JESNET becomes a subsidiary of Nintendo, JESNET will accept the assignment of the video game wholesale business from AJIOKA Co., Ltd. (HQ: Nishio, Aichi; Representative Director and President: Gentarou Ajioka; hereinafter “AJIOKA”). JESNET and AJIOKA have also agreed to this resolution.

1. Background for the Subsidiarization and Acceptance of Assignment of Business

As a manufacturer of video game systems, Nintendo is committed to bringing smiles to people across the world through products and services. To continue to produce an unprecedented level of fun, Nintendo has worked to produce products that anyone can enjoy, regardless of their age, gender or past gaming experience.

At the same time, JESNET and AJIOKA have been the largest-scale companies dedicated to handling Nintendo products in Japan for many years, selling mainly video game systems through their nation-wide distribution network.

This subsidiarization and acceptance of assignment of business will unify Nintendo’s product development acumen with JESNET’s and AJIOKA’s robust stocking and sales networks to form a supply structure that can meet consumer demand in a timely fashion. This means that Nintendo will have an integrated system from the development through supply of its products, allowing for rapid decision-making and an improvement in sales service. These steps are intended to strengthen the overall competitiveness of the Nintendo group and increase its corporate value.

2. Overview of JESNET Subsidiarization (1) Transfer of Stocks

Nintendo will obtain shares on April 3, 2017 (planned) by receiving 53,724 common shares in a third-party allocation of shares performed by JESNET, as well as receiving 6,677 common shares on the same day from multiple current shareholders, excluding J Holdings Co., LTD. Nintendo will hold 60,401 common shares in JESNET (proportion of voting rights: 70.0%), and JESNET will become a consolidated subsidiary of Nintendo.

The current principal shareholder of JESNET, J Holdings Co., LTD will continue to hold common shares in JESNET (proportion of voting rights: 15.0%) and AJIOKA will obtain common shares (proportion of voting rights: 15.0%) in the third-party allocation of shares performed by JESNET on the same day.

(2) Overview of Company Becoming a Subsidiary (JESNET)

1 Name

JESNET Co. Ltd.

2 Location

1-35, 19-chome Kita, Nango-dori, Shiroishi-ku, Sapporo, Japan

3

Representative title and name

Representative Director and President Jou Suzuki

4 Business lineup

Nintendo game systems, game system accessories, game software, card games, other amusement business

5 Capital stock

88 million yen

6 Date of foundation

December 24, 1952

Major shareholders and 7 their stock ownership

ratio

J Holdings Co., LTD. 54.5%

8

Connection with Nintendo

Capital relationship

JESNET holds 100,922 shares of Nintendo stock to facilitate the smooth business relationship.

Personal relationship

No applicable relationship

Business relationship

Nintendo has transactions handling Nintendo products with JESNET.

9 Operating results and financial conditions (past three years)

Fiscal year

FY ended July 2013

FY ended July 2014

FY ended July 2015

Net assets

8,638 million yen

8,996 million yen

9,128 million yen

Total assets

14,970 million yen

11,987 million yen

15,276 million yen

Net sales

78,363 million yen

65,477 million yen

57,062 million yen

Operating income

1,119 million yen

556 million yen

634 million yen

Ordinary income

1,128 million yen

588 million yen

733 million yen

Net income

652 million yen

380 million yen

383 million yen

(3) Number of Shares Obtained, Value of Shares and Status of Shares Held Before and After the Agreement

1

Number of shares held before the subsidiarization

0 shares (number of votes: 0) (proportion of voting rights: 0%)

2 Number of shares obtained

Common shares: 60,401 shares (number of votes: 60,401)
Of which, number received in third-party allocation of shares: 53,724 shares
Number received in receipt of shares: 6,677 shares

3 Value of shares

JESNET common shares: 4,530 million yen (note)
Note: Total value of allocation of shares and shares held by existing shareholders
Advisory fees, etc. (approximate value): 150 million yen
Total: 4,680 million yen

4

Number of shares held after the subsidiarization

60,401 common shares (number of votes: 60,401) (proportion of voting rights: 70.0%)

3. Overview of Acceptance of Assignment of Business from AJIOKA (1) Contents of Acceptance of Assigned Business

Video game wholesale business

(2) Operating Results of Assigned Business

AJIOKA has not prepared financial materials specifically for the assigned business; however, this business comprises the majority of AJIOKA’s profit and loss, so the overall operating results for AJIOKA are presented here.

(3) Items and Value of Assigned Business (as of June 30, 2016)

Note: The value above is the book value as of June 30, 2016. It is expected that the value of the assets to be transferred will change by the date of the assignment of business.

FY ended June 2015

FY ended June 2016

Net sales

41,819 million yen

38,735 million yen

Gross profit

1,754 million yen

1,654 million yen

Operating income

274 million yen

211 million yen

Ordinary income

682 million yen

381 million yen

Assets

Item

Book Value

Inventory

520 million yen

Total

520 million yen

(4) Value of Assigned Business and Method of Payment

The value of the assigned business is 1,000 million yen plus the value of the transferred assets listed above, to be determined after receipt.

The payment method will be cash.

(5) Overview of Transferring Business

1 Name

AJIOKA Co., Ltd.

2 Location

4-31, Sakuragi-cho, Nishio, Aichi, Japan

3

Representative title and name

Representative Director and President Gentarou Ajioka

4 Business lineup

Wholesale sales of computer game software and hardware and electronic parts

5 Capital stock

48 million yen

6 Date of foundation

April 24, 1962

7 Net assets

16,972 million yen

8 Total assets

19,238 million yen

Major shareholders and 9 their stock ownership

ratio

Nagoya Small and Medium Business Investment & Consultation Co., Ltd. 46.8%

10

Connection with Nintendo

Capital relationship

AJIOKA holds 77,517 shares of Nintendo stock to facilitate the smooth business relationship.

Personal relationship

No applicable relationship

Business relationship

Nintendo has transactions handling Nintendo products with AJIOKA.

Situations applicable to related parties

No applicable situations for related parties at Nintendo.

4.

Schedule for the Subsidiarization and Acceptance of Assignment of Business

Board of Directors Resolution: August 25, 2016
Agreement Execution Date: August 25, 2016
Planned Date for the Subsidiarization and Acceptance of Assignment of Business: April 3, 2017

(Note) This subsidiarization and acceptance of assignment of business assumes that there will be no cause found to prevent the subsidiarization and acceptance of assignment of business or to issue a cease and

desist order based on the results of the Japan Fair Trade Commission’s review of the report submitted following Article 10 paragraph 2 and Article 16 paragraph 2 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade.

5. Future Business Projection

This subsidiarization and acceptance of assignment of business will not have an effect on results for this fiscal year. Nintendo will begin including the effect on results in the earnings forecasts for the next fiscal year and later.

 

[Source: Nintendo]

Craig Majaski

Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He's currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.

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