Announcement of Acquisition of HOPES Corporation
Announcement of Acquisition of HOPES Corporation
SHIFT Inc. (“SHIFT,” headquartered in Minato-ku, Tokyo, Japan; Masaru Tange, CEO and Representative Director) announced today that it has entered into a definitive agreement to acquire a 100% equity interest in HOPES Corporation (“HOPES,” headquartered in Chuo-ku, Tokyo, Japan; Kentaro Uehara, Representative Director).
1. Reason for the acquisition
As SHIFT has been expanding its software quality assurance business since 2009, it has served clients in a wide variety of industries, such as financial, retail, logistics and entertainment. Moreover, toward the achievement of its growth strategy “SHIFT 1000,” which aims at ¥100 billion of net sales, SHIFT has been strategically acquiring businesses to expand and enrich its service portfolio. SHIFT has also shifted its corporate branding from “SHIFT as a software testing company” to “SHIFT as a sellable services producer,” to realize ¥100 billion of net sales. As this new catchphrase indicates, SHIFT will commit to bringing success to the businesses of its customers.
As one way to develop its services, SHIFT has been addressing the digital transformation (“DX”)*1 trend. Leading companies in various industries utilize new technologies to be more competitive. In fact, ITR Market View*2 estimates that the enterprise resource planning (“ERP”) software market in Japan grew 9.1% in FY2018 and 13.4% in FY2019, which has been accelerated due to the DX trend, and the growth rate of this market is expected to remain high. In order to bring even more success to the businesses of its clients, therefore, SHIFT now strengthens its ERP services, as one way of promoting DX.
As HOPES boasts a wide array of know-how and experiences in implementing, operating and maintaining ERP, the partnership with HOPES will allow SHIFT to significantly reinforce its ERP services. Due to the growing demand for ERP, obtaining the capabilities to provide seamless services in this area will enrich SHIFT’s service portfolio. Furthermore, the client base of HOPES will be a great addition to SHIFT’s client portfolio.
Joining SHIFT Group, HOPES will be able to expand its client base and its service delivery team. Moreover, HOPES will build an even stronger organizational foundation in collaboration with SHIFT. Having HOPES on board, SHIFT Group will aspire even higher growth and continue to transform itself to be a more comprehensive quality assurance provider and address a wide array of client needs and wants.
*1: “DX (Digital Transformation)” is a trend in which companies aim at transforming their businesses including their daily operations by utilizing latest technologies.
*2: Reference: https://www.itr.co.jp/report/marketview/index.html
2. Overview of HOPES
| (1) Name | HOPES Corporation | |||
| (2) Address | Shinkawa Sanko Building 7F, 1-3-17, Shinkawa Chuo-ku, Tokyo | |||
| (3) Name and title of representative | Kentaro Uehara, Representative Director | |||
| (4) Business | – Improve production and distribution functions – Analyze and improve ERP systems – Design, develop and operate information systems |
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| (5) Capital stock | ¥50 million | |||
| (6) Founded | March 1991 | |||
| (7) Major shareholders and their shareholding ratio(s) | 100% held by an asset management company, which is owned by a director of HOPES | |||
| (8) Relationship between SHIFT and HOPES | Capital relationship | No material capital relationship between SHIFT and HOPES, neither between SHIFT related party/company and HOPES related party/company. | ||
| Personnel relationship | No material personnel relationship between SHIFT and HOPES, neither between SHIFT related party/company and HOPES related party/company. | |||
| Business relationship | No material business relationship between SHIFT and HOPES, neither between related SHIFT party/company and HOPES related party/company. | |||
| (9) Consolidated operating results and financial position of HOPES over the past 3 years (¥ in 000s) | ||||
| Fiscal Year End | December 31st, 2017 | December 31st, 2018 | December 31st, 2019 | |
| Net assets | 712,225 | 820,172 | 974,593 | |
| Total assets | 1,254,411 | 1,398,503 | 1,587,991 | |
| Net assets per share (¥) | 712,225 | 820,172 | 974,593 | |
| Revenues | 3,493,521 | 4,146,541 | 5,069,843 | |
| Operating income | 441,506 | 581,169 | 604,633 | |
| Ordinary income | 442,644 | 583,090 | 700,004 | |
| Net income | 293,864 | 407,947 | 504,421 | |
| Net income per share (¥) | 293,864 | 407,947 | 504,421 | |
| Dividend per share (¥) | 70,000 | 300,000 | 350,000 | |
3. Overview of Seller(s)
SHIFT discloses no seller name(s) and address(es) to respect their rights. SHIFT has no material capital/ personnel relationship with the seller(s) before this acquisition.
4. Number of shares to be acquired, acquisition price, and shareholdings before and after transaction
| (1) Number of shares held by SHIFT before the transfer | None (Number of voting rights: 0) (Percentage of voting rights held: 0.0%) |
| (2) Number of shares to be acquired by SHIFT | 1,000 shares (Number of voting rights: 1,000) |
| (3) Acquisition price*1 | Estimated consideration for common shares: ¥3,050 million Estimated expenses for due diligence, etc: ¥8 million ========================== Total: ¥3,058 millionNote: Deal terms include an acquisition price adjustment mechanism, which is based on the balance sheet as of the closing date. As a result, the final acquisition price may change |
| (4) Number of shares to be held by SHIFT after the transfer | 1,000 shares (Number of voting rights: 1,000) (Percentage of voting rights: 100%) |
Note *1: SHIFT has negotiated the aforementioned acquisition price based on a third party appraisal.
5. Schedule
| (1) Board resolution date | August 25, 2020 |
| (2) Execution date of share purchase agreement | September 7, 2020 |
| (3) Closing date | September 30, 2020 |
Note: On August 25, 2020, the Board of Directors made a resolution to authorize its CEO/Representative Director to decide whether to make the aforementioned acquisition assuming that major terms and conditions are within the range of those authorized by the Board of Directors.
6. Future outlook
SHIFT will disclose an impact on its future financial outlook regarding the aforementioned acquisitions as soon as possible.
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Contact
Tomohiro Oka
Section Manager, Management Administration Division
ir_info@SHIFTinc.jp