Notice of Company Split (Simple Absorption-type Split) and Other Changes Accompanying the Transfer of the Personal Care Business

Shiseido Company, Limited (the “Company”) has launched a fundamental business transformation and has positioned premium skin beauty as its core business, aiming to become a global leader in this field by 2030. As a part of these efforts, the Company has been continuously revisiting its business portfolio.
The Company recognizes that its Personal Care business, comprising such global brands as TSUBAKI and SENKA (the “Business”), requires enhanced marketing investment to grow its potential and foster further growth, and concludes that these goals will be best achieved under a new business model. Therefore, the Company has determined to transfer the Business and participate in its operation as a shareholder of the company which will manage the Business after the transfer.
Specifically, the Business will be transferred from the Company and its wholly owned subsidiaries, to be succeeded by a newly established company (the “New Company”), whose shares will be subsequently transferred to Oriental Beauty Holding Company, Limited (“OBH”), financed by funds advised by CVC Asia Pacific Limited and its affiliates (collectively, “CVC”) (the “Transaction”). Following the Transaction, the Company will provide cooperation aimed at further growth and development of the Business as a shareholder of the company which will operate the Business after the transfer, including the New Company and OBH. It is hereby notified that the Company has executed a legally binding agreement pertaining to the above (the “Agreement”).

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Background and Objectives of the Transaction

In fiscal 2020, the Shiseido Group was significantly affected by an uncertain and extremely challenging business environment, caused by the global spread of COVID-19, and outlined its new medium-term strategy “WIN 2023” in August. Along with plans for a fundamental transformation, we have positioned premium skin beauty as our core business and aim to become a global leader in this field by 2030. In addition, we are shifting our priorities from top-line growth to profitability and cash-flow management. Our goal is to achieve an operating margin of 15% in 2023 through a reduction of cost of goods and selling, general and administrative expenses.
Shiseido’s Personal Care business dates back the establishment of Shiseido Trading Co., Ltd. in 1959, and over those 60 years it was a cradle of brands whose advertisements and copies are still remembered by consumers, such as TSUBAKI and SUPER MiLD. It has a long history of offering brands and products with high added value in Japan, China, and other Asian countries and regions, and enjoys the trust and support of many consumers. Based on the current business environment and the above strategy, the Company was considering a number of various strategic options for further growth and development of the Business, and as a result has determined that a spin-off of the Business will promote further development of its brands and employees, bolster investment into its growth, resulting in flexible strategies attuned to the mass business segment, nurturing of human resources capable of fast decision-making and value creation, and benefits for its consumers and business partners.
In selecting candidates for the transfer, the Company prioritized a partner that would understand the personal care business model and that could strategically invest in its brands, business, organization and people in order to maximize the potential of the Business and realize its further growth, as well as a partner that the Company could trust. After a careful consideration of multiple candidates, the Company selected CVC as the most suitable partner for the transfer. Established in 1981, CVC is a private equity firm with 23 offices around the world. It has an extensive track record in the business growth and value creation for investee companies. We believe that the New Company will see rapid development through a refinement of its management system, aided by CVC’s professionals with vast global experience in the cosmetics and retail industries, and leverage its growth potential due to aggressive investment backed by CVC’s resources, with a possibility of going public in the future.
The Company intends to support the transition by acquiring 35% of the shares of K.K. Asian Personal Care Holding, a wholly owning parent of OBH, and by cooperating with CVC in the operation of the Business.

Details of the Transaction Procedures

The part of the Business operating in Japan will be transferred from the Company and its wholly owned subsidiaries Shiseido Japan Company, Limited (“SJ”) and FT Shiseido Company, Limited (“FTS”) to the New Company with an effective date before October 1, 2021 through absorption-type corporate splits (the “Company Splits”; Note 1), followed by a transfer of all of the outstanding shares of the New Company to OBH on the same date (planned; the “Share Transfer”). The overseas parts of the Business will be transferred from the Company’s subsidiaries operating in 10 countries and regions to OBH subsidiaries (the “Succeeding Subsidiaries”) through asset transfers in accordance with local laws (the “Asset Transfers”; Note 2).
Following the Share Transfer, on the same date (planned) the Company will acquire 35% of the shares of K.K. Asian Personal Care Holding, the wholly owning parent company of OBH (the “Share Acquisition of Holding Company”), and will cooperate with CVC to operate the Business. After the Share Transfer, the Business will be excluded from the scope of consolidation of the Company.
Obtaining clearance from relevant authorities based on domestic and international competition laws is a prerequisite for carrying out the Transaction. Since the Company Splits are a simple absorption-type split carried out between the Company and its wholly owned subsidiaries, some of the disclosure items and details have been omitted.