Tencent and Sony Interactive Entertainment collectively acquire 30.34% of FromSoftware – Gematsu

1. Objectives and reason for the Allocation to a Third Party

The Kadokawa Group advocates a “global media mix with technology” as the fundamental strategy that combines the stable creation of intellectual property (IP) composed of a variety of portfolio content mainly in the publishing, video, gaming sectors , web services and education as well as deploying such intellectual property globally through the extensive use of technology, seeking to achieve sustained growth and enhance business value in medium and long term perspectives. FromSoftware is the driving force behind the game industry as it has continuously created world famous works, such as Sekiro: Shadows Die Twice and Ring of Elden, leveraging its advanced game IP development strength. With an eye on the continued expansion of the Game business, the Group views improving capabilities for the creation, development and deployment of game intellectual property as one of its highest priorities. In accordance with this policy, the Company has decided to require FromSoftware to implement the provision of funds through a third-party allocation to Sixjoy and SIE, the intended recipients, for the reasons described below.

Tencent acquired the capital of Guangzhou Tianwen Kadokawa Animation and Comics Co., Ltd., a consolidated subsidiary of the Company, in 2016, and the two companies jointly promoted their media mix strategy targeting the Chinese market. In addition, the Company, Sixjoy and Tencent Japan have entered into a capital and business alliance agreement from October 2021 to strengthen their strategic alliance in anime and game fields. Tencent and its subsidiaries and affiliates ( hereinafter, the “Tencent Group”) are a global Internet group that provides communication, social, gaming, digital content, advertising, financial technology and cloud services, and operates the main communication platform and social of the Internet industry. in China.

Sony and its subsidiaries (hereafter “Sony Group”) and the Company have developed a collaborative business relationship in a wide range of areas related to Sony Group’s worldwide Direct-to-Consumer (DTC) business operations, branded hardware and games business. . In February 2021, the company made a third-party award with Sony as the beneficiary with the aim of strengthening its long-term relationship with the Sony Group, creating new intellectual property for the company and maximizing the use of his existing intellectual property in the anime. and playgrounds.

Through the implementation of the fund acquisition, FromSoftware will aim to proactively invest in the development of more powerful game IP for itself to strengthen FromSoftware’s development capabilities and seek to establish a framework which enables the expansion of its own publication’s reach into the rapidly growing global market. In addition to these objectives, for an increase in the number of users in the global market for the intellectual property of games that FromSoftware creates and develops, FromSoftware has decided to proceed with the attribution of third parties to Sixjoy within the Tencent group, which has the strength of its capabilities to develop and deploy mobile games and other network technologies in the global market, including China, and SIE within the Sony Group, which has the strength of its capabilities to deploy IP in games, videos and various other media in the global market simultaneously and separately.

2. Overview of assignment to third parties

• Payment deadline: From September 7, 2022 to September 12, 2022
• Number of new shares to be issued: 3,179 common shares
• Issue price: 11,450,000 yen per share
• Capital to acquire: 36,399,550,000 yen
• Method of subscription or allocation (programmed subscriber): By allocation to a third party (Sixjoy 1,703 shares, SIE 1,476 shares)
• Shareholding ratio after issue:
  • Kadokawa Corporation: 69.66%
  • Sixjoy Hong Kong Limited: 16.25%
  • Sony Interactive Entertainment Inc.: 14.09%

(Note) The payment related to the 3rd party award, which is expected to be made on September 7, 2022, may take place on another day during the above payment period due to the procedures required for international payments, between other factors.

3. Use of capital (Total contributed capital: 36,399,550,000 yen)

• Specific use of funds:
  • To enhance FromSoftware’s abilities to create and develop game intellectual property.
  • For establishing a framework that expands the reach of FromSoftware’s own publishing in the global marketplace.

4. Description of the Subsidiary Subject to Capital Increase

• • Title: FromSoftware, Inc.
  • Location: 2-26-2 Sasazuka, Shibuya-ku, Tokyo
  • Title / Name of Representative: Hidetaka Miyazaki, Deputy Director and President
  • Company content:
    • Planning, development, sales of game software.
    • Internet content planning and development.
  • Capital: 268,500,000 yen

• Creation date: November 1, 1986
• Main shareholders and their shareholding ratios:
• Relationship between the listed company and the company concerned:
  • Capital Relations The Company owns 100% of the outstanding shares of the Company.
  • Social relations Two Company managers are seconded to the company concerned.
  • Business relationships The Company and the company concerned have business relationships.

5. Overview of scheduled subscribers

• Title: Sixjoy Hong Kong Limited
• Location: 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong
• Title / Name of Representative: Wang Zheng, director; Ai Ximin, director; Byun Jung-won Elizabeth, director; and Tse Cheuk Yin Tiffany, director
• Company content: Licensing and publishing of mobile games.
• Capital: 1,000 Hong Kong dollars
• Creation date: February 28, 2011
• Main shareholders and their shareholding ratios:
  • Tencent Holdings Limited:
• Relationship between the listed company and the company concerned:
  • Important relationships:
    • The company concerned holds 9,724,400 shares (ratio of ownership of voting rights: 6.86%) of the capital of the Company (Note 1).
  • Relations with staff:
  • Business Relationships:
    • The Company and Tencent Group have had a strategic partnership in the publishing industry through a joint venture in Guangzhou, China since 2016. In addition, the Company, Tencent Japan and the awardee Sixjoy have entered into an agreement commercial alliance on October 29. , 2021 to strengthen their strategic alliance in the animation industry.

(Note 1): This element is based on the report to major shareholders submitted by Sixjoy on November 16, 2021.

(Note 2): In the share subscription agreement that the Company and FromSoftware entered into with Sixjoy, the Company and FromSoftware received a representation and warranty from Sixjoy that it is not an antisocial force and that it has no connection with anti-social forces. The Company has also commissioned JP Research & Consulting, Inc.

(Address: 3-7-12 Toranomon, Minato-ku, Tokyo; Representative: Keisuke Furuno, Representative Director), an independent research organization, to conduct an investigation. The report they produced states that there are no facts to indicate that Sixjoy is involved with anti-social forces. Based on the above, the company has determined that Sixjoy, Tencent, their executives and major shareholders have no relationship with anti-social forces.

• Title: Sony Interactive Entertainment Inc.
• Location: 1-7-1, Konan, Minato-ku, Tokyo
• Title / Name of Representative: Jim Ryan, Managing Director and President
• Company content:
  • Planning, development and sale of hardware, software, content and network services for PlayStation.
  • Planning, development and sale of “toio”, software and content.
• Capital: 110,000,000 yen
• Creation date: April 1, 2010
• Main shareholders and their shareholding ratios:
• Relationship between the listed company and the company concerned:
  • Important relationships:
    • Sony, the parent company of the company concerned, holds 2,844,950 shares (ratio of ownership of voting rights: 2.01%) of the capital of the Company (at the end of March 2022).
  • Relations with staff:
  • Business Relationships:
    • The Company engages in transactions such as the sale and purchase of finished products and services with Sony and its affiliates.

(Note) In the share subscription agreement entered into with SIE, the Company and FromSoftware have received a representation and a guarantee from SIE that it and its directors are not an antisocial force and that they have no relationship with anti-social forces with reference to the share subscription agreement. Sony, the parent company of SIE, is listed on the Tokyo Stock Exchange. By confirming its basic position for the elimination of anti-social forces and the establishment of relevant systems for this purpose, which were qualified as matters concerning internal control systems in the corporate governance report that Sony submitted on the Tokyo Stock Exchange, Inc. on July 5, 2022 the company determined that Sony and its executives had no ties to anti-social forces.

6. Timing of allocation to third parties

• Resolution of the board of directors and the general meeting of shareholders of FromSoftware: August 31, 2022
• Date of the Share Subscription Agreement Concerning the Allocation to the Third Party: August 31, 2022
• Payment deadline: From September 7, 2022 to September 12, 2022

(Note) Payment of this award to third parties is scheduled for September 7, 2022.

7. Future prospects

The Company believes that the Allocation to Third Parties will contribute to the medium and long-term improvement of the value of the Group’s business, while the impact of the Allocation to Third Parties on the consolidated financial results of the Company for the year ended March 31, 2023 is expected, at the time of writing this report, to be minor. When it is necessary to disclose information, the Company will promptly provide the information.