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Chugai to Transfer Rice/Lawn Herbicide Business to SDK

CHUGAI PHARMACEUTICAL CO., LTD.
SHOWA DENKO K.K.
June 19, 2001

Chugai Pharmaceutical Co., Ltd. (Chugai) and Showa Denko K.K. (SDK) have agreed on the transfer of the rice/lawn herbicide Grachitor business from Chugai's subsidiary Eiko Kasei Co., Ltd. (Eiko) to SDK's subsidiary SDS Biotech K.K. (SDS) effective June 29, 2001.

Grachitor (cafenstrole), developed by Chugai, is known for its high effect at low doses. In particular, it is used as the key ingredient in 16 different types of rice herbicide formulations, which account for approximately 28% of the Japanese market. Annual sales of Grachitor (for both rice and lawn applications) amount to about ¥2 billion.

The business transfer is part of Chugai's efforts to concentrate its resources on core pharmaceuticals operations. Eiko began withdrawing from its environmental sanitation materials business in April this year. This time, Eiko is going to reorganize and reduce the scale of its agrochemicals business by transferring the Grachitor business. From now on, Eiko will focus on contract manufacture of Varsan insecticide for Chugai.

For SDK, the specialty chemicals business, centering on agrochemicals, is important for the company's growth strategy under its medium-term consolidated business plan. From the time of initial launch of Grachitor, SDK has been supplying most of Chugai's requirements for bulk Grachitor from SDK's plant in Higashinagahara, Fukushima Prefecture, fully utilizing its organic synthesis technology. SDK will continue producing bulk Grachitor.

Following the business transfer, SDS will have three different kinds of rice herbicides as it already has Dymron (main product) and benzobicyclon (placed on the market this year). Substantial marketing synergies are expected from the deal since many formulators are already purchasing various types of products in which Grachitor and Dymron are mixed.

SDS expects to increase its annual sales from ¥13.7 billion in 2001 to ¥18 billion in 2005.

For further information, contact:
Showa Denko K.K. (Phone: 03-5470-3235)
Chugai Pharmaceutical Co., Ltd. (Phone: 03-3273-0881)

[Reference]

Chugai Pharmaceutical Co., Ltd.

Establishment 1925
Capital ¥24 billion
Sales ¥203 billion (consolidated);
¥181.2 billion (non-consolidated)
Ordinary profit ¥29 billion (consolidated);
¥28.5 billion (non-consolidated)
Employees 3,554 (non-consolidated)
Head office Chuo-ku, Tokyo
President Osamu Nagayama
Scope of business Manufacture, sale and import of pharmaceuticals, diagnostics, and medical equipment

Showa Denko K.K.

Establishment 1939
Capital ¥110.4 billion
Sales ¥747 billion (consolidated);
¥365.9 billion (non-consolidated)
Ordinary profit ¥16.6 billion (consolidated);
¥9.8 billion (non-consolidated)
Employees 3,346 (non-consolidated)
Head office Minato-ku, Tokyo
President Mitsuo Ohashi
Scope of business Manufacture and sale of petrochemicals, chemicals, inorganic materials, aluminum and electronic products

Eiko Kasei Co., Ltd.

Establishment 1967
Capital ¥50 billion
Sales ¥6.2 billion
Employees 122
Head office Yabuki-machi, Nishishirakawa-gun, Fukushima Pref.
President Yasuo Tanabe
Scope of business Manufacture and sale of environmental sanitation materials and agrochemicals; contract manufacture of insecticides and agrochemicals

SDS Biotech K.K.

Establishment 1968
Capital ¥732 billion
Sales ¥12.6 billion
Employees 151
Head office Minato-ku, Tokyo
President Takashi Shirai
Scope of business Manufacture, sale and export of agrochemicals, industrial fungicides, and specialty chemicals