2019_4q_omron_e

37/39 Questioner(4)

(Questioner 4) Thank you. I have 2 questions on AEC. Earlier you talked about synergies with the electronic component business. I suspect there were also synergies with SSB. How would you respond to concerns that there may be synergies that are lost when the AEC business is transferred to Nidec? My second question is related to the cash proceeds from the deal, which you have said will be allocated to growth investments. I get the sense that the investment you are considering is not something that is far off in the future, but instead, that there is, in fact, something that you are very keen to acquire in the near future. If you were considering an investment in three years’ time or five years’ time, the natural choice would be to focus on generating profits first to build up the war chest. I feel like there is something that you want to acquire now for which you need the ￥100bn, and that is why you were in a hurry to sell AEC. Can you comment on this? (Yamada) First, on synergies. We have the OMRON Automotive business and the EMC business for AEC, such as relays and switches. In terms of synergies, EMC has always been responsible for the production of automotive switches and relays, so this will not change after AEC is transferred. EMC will continue to manufacture these products for AEC, so there will be no change in terms of production efficiency for EMC. With regard to the decision to sell the business, the decision to sell was not driven by the need for cash. OMRON already has sufficient cash and also has the ability to borrow funds. So the sale of the business is not because we needed cash. Instead, as I alluded to earlier, we looked at our business portfolio. We also considered what AEC needed to survive and what combinations might be beneficial. Our decision was based on a serious consideration of these issues. Of course, OMRON does have a long- and short-list of M&A candidates, so the primary use of the cash generated by the sale of AEC will be allocated to M&A. But, it is not the case that we needed cash and that is what drove us to sell AEC. We were thinking about the future in making this decision now. (Q) With regard to the first part of the question, were there no potential synergies with SSB? For instance, with the advent of 5G and related investments, I would have thought there would have been synergies as automotive is considered to be one area that would benefit. (Yamada) There probably are some synergies in that area, but there is not much of a connection between the OMRON SSB businesses of roads and railways, and the automotive business. The synergies for SSB would be less with the automotive components business and more with the vehicles instead. We will continue to collaborate with the major Tier 1s or auto OEMs. (Itagaki) Thank you. Please hand a mic to the person in the third row.