2006

Capital and Business Alliance between Daiei, Inc. and Aeon Co., Ltd.

Oct. 13. 2006
Marubeni Corporation


Marubeni Corporation (“Marubeni”) and Daiei, Inc. (“Daiei”) are pleased to announce that Marubeni, Daiei and Aeon Co.,Ltd(“Aeon”) agreed today to commence negotiations on a capital and business alliance between Daiei and Aeon.

Daiei has steadily been promoting structural reform and implementing measures to strengthen business capabilities under a program run by the Industrial Revitalization Corporation of Japan. In August, Marubeni became Daiei’s largest shareholder, and a new management system commenced on October 6. Since then, Marubeni and Daiei have been endeavoring to enhance Daiei’s business capabilities and improve its financial standing to swiftly establish a new Daiei .

We have also been considering the need to form a capital and business alliance with a business partner specializing in retail distribution to expedite our efforts to further strengthen the business base of Daiei and enhance corporate value. Therefore Daiei and Marubeni have been discussing the issue with candidate partners and as a result, we decided that Aeon was the most suitable partner so that we can respect each other’s goodwill and keep Daiei independent, and at the same time, motivate employees and newly create the assortment of goods and sales floors to satisfy Daiei’s customers. Daiei and Aeon will share infrastructure and know-how and pursue synergy, to raise the efficiency of Daiei’s operations and expand its business.

The three companies will discuss the following issues to enter into a capital and business alliance by March 2007. We appreciate the continuing support of customers and business partners.

Issues

1.
Items to be studied: the three companies will promptly establish a Business Alliance Exploratory Committee and discuss a business alliance between Daiei and Aeon, in the following:
(1) Jointly procuring national brand products and jointly developing private brand products
(2) Sharing information and logistics systems and developing common systems
(3) Jointly procuring indirect consumable materials, fixtures, etc.
(4) Providing and sharing know-how to improve the efficiency of back office operations

2.
 Share transfer:
(1) Discussing a transfer of about 15% of Daiei Preferred Shares held by Marubeni
(2) Discussing a transfer of about 20% of the Maruetsu stock held by Daiei
Share transfers will be discussed based on the assumption that Daiei and Aeon agreeon a business alliance.

3. 
Deadline: March 31, 2007 (exclusive negotiating rights)

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