20-F: SYLA Technologies Announces Share Exchange Agreement with CUMICA Corporation

SYLA Technologies enters into a share exchange agreement with CUMICA Corporation, set to make CUMICA the wholly-owning parent company of SYLA by June 1, 2025.

Summary

• SYLA Technologies Co., Ltd. and CUMICA Corporation have entered into a Share Exchange Agreement on December 2, 2024, with the goal of CUMICA becoming the wholly-owning parent company of SYLA.
• Under the agreement, for each share of SYLA, shareholders will receive 110 common shares of CUMICA.
• Holders of SYLA's stock acquisition rights will receive corresponding stock acquisition rights of CUMICA, with the number calculated based on Exhibit 1 of the agreement.
• The effective date of the Share Exchange is planned for June 1, 2025, but may be changed upon mutual agreement.
• Both companies will hold general meetings of shareholders on February 14, 2025, to approve the agreement.
• SYLA will cancel all treasury shares at the Record Time.
• CUMICA and SYLA will manage their businesses with due care until the Effective Date.
• CUMICA will not distribute any surplus with a record date prior to the Effective Date, except for distributions recorded on November 30, 2024 (no more than 2 yen per share) and May 31, 2025 (no more than 2 yen per share).
• SYLA will not distribute any surplus with a record date prior to the Effective Date, except for a distribution recorded on December 31, 2024 (no more than 450 yen per share).
• The agreement can be amended or terminated if there are material changes to either party's financial or operating condition.
• The agreement is governed by the laws of Japan, and the Tokyo District Court has exclusive jurisdiction over disputes.
• SYLA ADSs are scheduled to be delisted on May 29, 2025.
• CUMICA shares to be allotted to SYLA shareholders will continue to be listed on the Tokyo Stock Exchange Standard Market.

Sentiment

Score: 7

Explanation: The document outlines a strategic business combination that is generally viewed positively by the market. The terms of the agreement appear fair, and the transaction is expected to create synergies and enhance shareholder value. However, there are some risks and uncertainties associated with the transaction, such as regulatory approvals and potential integration challenges.

Positives

• The Share Exchange is expected to provide synergy effects for SYLA as a wholly-owned subsidiary of CUMICA.
• CUMICA shares to be allotted to SYLA shareholders will continue to be listed on the Tokyo Stock Exchange Standard Market, ensuring liquidity.
• The Share Exchange is expected to contribute to the interests of both CUMICA and SYLA shareholders.

Negatives

• SYLA ADSs are scheduled to be delisted on May 29, 2025, which will prevent trading on the U.S. Nasdaq stock market.
• SYLA shareholders who hold CUMICA shares constituting less than one unit (less than 100 shares) as a result of the Share Exchange will not be able to sell such shares less than one unit on a financial instruments exchange market.

Risks

• Enforcing rights under U.S. federal securities laws may be difficult since the issuer is located in Japan and officers/directors reside outside the U.S.
• The financial information is excerpted from financial statements prepared in accordance with foreign accounting standards that may not be comparable to U.S. companies.
• Shareholders may receive less than one unit of CUMICA shares, which may not be easily sold on the market.
• Investors who hold SYLA ADSs as of the effective date will not receive CUMICA Shares in the Share Exchange, but rather, the CUMICA Shares allocated to the Depositary Bank in the Share Exchange (with respect to SYLA Shares represented by the SYLA ADSs) will be sold on the market etc. by the Depositary Bank, and the proceeds from such sale will be delivered to such investors in accordance with the provisions of the deposit agreement related to the SYLA ADSs, in accordance with the percentage of SYLA ADSs held and after predetermined fees and expenses have been excluded.

Future Outlook

The Share Exchange is expected to be completed by June 1, 2025, pending shareholder and regulatory approvals. CUMICA will become the wholly-owning parent company, and SYLA will become a wholly-owned subsidiary.

Industry Context

This announcement reflects a trend of consolidation and strategic alliances within the technology and real estate sectors, particularly in Japan, where companies are seeking to enhance their market position and operational efficiency.

Comparison to Industry Standards

• Comparable transactions include share exchange agreements in the technology and real estate sectors, such as SoftBank's acquisition of Vodafone Japan in 2006.
• The exchange ratio of 110 CUMICA shares for each SYLA share is within the range calculated by StandbyC using the DCF method (93.75 228.61) and PwC (97.55 118.04).

Stakeholder Impact

• SYLA shareholders will receive CUMICA shares, which will continue to be listed on the Tokyo Stock Exchange Standard Market.
• SYLA ADS holders will have their ADSs delisted and will receive proceeds from the sale of CUMICA shares by the Depositary Bank.
• Employees of both companies may experience changes as a result of the integration.

Next Steps

• CUMICA and SYLA will hold their general meeting of shareholders respectively on February 14, 2025 or the date separately agreed by the parties whereby CUMICA and SYLA shall each request to adopt resolutions for approval of this Agreement and matters necessary for the Share Exchange.

Key Dates

Keywords

Share Exchange, CUMICA, SYLA Technologies, Merger, Acquisition, Stock Acquisition Rights, Shareholders, Delisting, Japan