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Mitsubishi Motors Corporation (MMC) and AB Volvo (Volvo) have for some time been building a relationship of cooperation and trust in the areas of truck and bus development and sales. The objective of such cooperation is to ensure their ongoing development into the 21st century by mutually solidifying the basis of their operations and by strengthening competitiveness. MMC and Volvo believe such cooperation will help them to succeed in the international marketplace which will grow increasingly competitive in the future. The two companies recently reached a basic agreement on a capital tie-up for the purpose of further strengthening their cooperative relationship as mutually preferred partners for the development, manufacture, and sale of trucks and buses worldwide. A Letter of Intent (LOI) to this effect will be exchanged today.
Through this agreement, the collaboration between MMC and Volvo will strengthen. In the truck and bus business the total scale of production and sales of these two companies plus Scania, with which Volvo is currently cooperating, will be the largest in the world.
In addition, the two companies will jointly focus their energies on aggressively developing the leading technology in the market place, including for the environment and safety, which will be the most important issues in the 21st century.
On the basis of this memorandum the two companies will establish the details of a formal agreement, which they plan to conclude in mid-December of this year.
The following is an outline of the agreed contents:
| 1. |
Capital tie-up |
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(1)
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Volvo will acquire new shares issued by MMC so that Volvo will
own 5% of the shares of MMC. To that end, MMC will issue new shares
(48,516,000) to Volvo, in the form of a third-party allocation
of new shares, based on the LOI.
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(2)
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MMC plans to purchase from time to time, the issued and outstanding
shares of Volvo up to a maximum of 5% of the total from the market,
by the end of 2002, based on the LOI.
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| 2. |
The formation of a new truck
and bus subsidiary, and the taking of a capital stake in the newly
formed subsidiary. |
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(1)
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As the first step towards the formation of a new truck and bus
subsidiary, MMC will establish an internal division for its truck
and bus business as of April 1, 2000.
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(2)
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The next step will be the establishment of a new subsidiary by
MMC by the end of 2001, and the transfer to that subsidiary of
its operations relating to the development, production, and sale
of trucks and buses.
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(3)
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Volvo intends to acquire up to19.9% of the shares of this new
subsidiary.
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| 3. |
The dispatch of non-management
board members to the new subsidiary. |
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MMC will dispatch one or two non-management board members to
Volvo's truck and bus subsidiary and Volvo will dispatch one or
two non-management board members to the new truck and bus subsidiary.
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