English TopNews Releases2003Reorganization of Polyethylene Business

Japan Polychem Corporation
Japan Polyolefins Co., Ltd.
May 21, 2003

Japan Polychem Corporation (Head Office: Chiyoda-ku, Tokyo; President: Etsujiro Kouge) and Japan Polyolefins Co., Ltd. (Head Office: Minato-ku, Tokyo; President: Koh Matsushita) have reached to a basic agreement today to integrate the polyethylene businesses and form a new joint venture company as from September 1 this year. The two companies also agreed that Mitsubishi Shoji Plastics Corporation (Head Office: Shinagawa-ku, Tokyo; President: Kazumasa Furukawa) would invest to the new joint venture company.

The business environment of today’s polyethylene business in Japan has become increasingly severe due to the establishment of supergiant manufacturers abroad by large-scale mergers, scheduled stepwise tariff reduction towards 2004, and start of new large-size facilities in Asia and the Middle East. Therefore, it is an urgent necessity for the domestic polyethylene industry to further reinforce the competitiveness.

Under these circumstances, Japan Polychem and Japan Polyolefins have come to a common recognition that it is indispensable to integrate their businesses to create higher value with higher efficiency in every business activity such as production, sales and R&D of polyethylene business, through pursuit of synergy effects of products and technologies and promotion of rationalization with optimal production system, and have made a decision to integrate. In addition, since it is particularly important to strengthen the competitiveness in sales and distribution and to respond to the overseas markets in polyethylene business, the two companies had requested Mitsubishi Shoji Plastics to participate in the newly integrated company. Since Mitsubishi Shoji Plastics had judged that it would further its competitiveness as a trading company specialized in synthetic resins to become deeply involved in and contribute to the new company rather than only to continue to provide agency function for transaction, the basic agreement was reached among the three companies today.

While the parent companies plan to reach final agreement after thoroughly reviewing the conditions for integration, they are determined to make their respective expected contributions and promote an early achievement of integration benefits after the new company is established. Through these efforts, the parent companies aim to develop the new company to have a strong presence in the market.

[Outline of A New Polyethylene Company (plan)]

[Outline of Parent Companies]

Japan Polychem Corporation

Japan Polyolefins Co., Ltd.

Mitsubishi Shoji Plastics Corporation

[Details of Polyethylene Business of Concerned Companies]

• *1Japan Polyolefins Corp. was established by integrating PE and PP businesses of Showa Denko K.K. and Nippon Petrochemicals Co., Ltd.
  (Shareholders: Showa Denko K.K.-65%, Nippon Petrochemicals Co., Ltd.-35%)
  (Japan Polyolefins Co., Ltd. integrated its PP business with Basell Group [former Montell Group] and separated the business as Sun Allomer Ltd. [former Montell SDK Sunrise])
• *2Japan Polychem Corp. was established by integrating sales departments of Mitsubishi Chemical Corp. and Tonen Chemical Corp.
  (Shareholders: Mitsubishi Chemical Corp.-50%, Tonen Chemical Corp.-50%)
• *3Japan Polychem Corp. acquired PE and PP manufacturing departments of Mitsubishi Chemical Corp. and Tonen Chemical Corp.
  (Shareholders: Mitsubishi Chemical Corp.-65%, Tonen Chemical Corp.-35%)
• *4Mitsubishi Chemical Corp. will acquire the shares of Tonen Chemical Corp. in Japan Polychem Corp. (Plan)
• *5Japan Polychem Corp. and Japan Polyolefins Corp. will integrate their PE business and establish Japan Polyethylene Corp. (Plan)
  Mitsubishi Shoji Plastics Corp. will acquire 8% of the shares of Japan Polyehtylene Corp. (Plan)