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3/9 Acquisition of Kyokuto Electric

The next topic is the acquisition of shares of Kyokuto Electric Co., Ltd. and consolidation of the company into the Group. The company, headquartered in Osaka, manufactures safety breakers and power leakage circuit breakers. It also engages in the EMS business. It is the leading manufacturer of leakage protection plugs and leakage protection relays, dominating domestic market shares of 75% to 100%. In April, Kyokuto Electric petitioned the Osaka District Court to commence civil rehabilitation procedures. The company, which had operated in Japan and overseas, fell into trouble as it was hit by COVID-19 this year after its Chinese business had been sluggish since last year. As Kaga Electronics had outsourced its EMS business related to onboard automotive products for part of its customers to Kyokuto, the Company entered a sponsorship agreement with Kyokuto in August. Thereafter, on November 2, we acquired 100% of shares of the new Kyokuto Electric, which was established through a corporate split the same day after separating the old Kyokuto Electric’s unnecessary businesses, such as the Chinese business. Kyokuto Electric is now our consolidated subsidiary. The purposes of the acquisition are described here. In particular, the second point, establishing an EMS base in western Japan, is very important. Kyokuto has plants in Tottori, western Japan. By having Kaga EMS Towada Co., Ltd. in eastern Japan and Kyokuto in western Japan, Kaga Electronics will establish a system to be able to meet the need of a broad range of customers that are oriented toward production in Japan.