(Disclosure Update) Notice on the Deepening of Strategic Business Alliance between Daio Paper Corporation and Hokuetsu Corporation

Overview of the Deepening Strategic Business Alliance

Daio Paper Corporation and Hokuetsu Corporation, based on the Basic Agreement on Strategic Business Alliance concluded on May 15, 2024, are working to enhance corporate value aiming for a combined operating income increase of approximately 5 billion yen in fiscal year 2026. This alliance aims to establish an equal capital relationship between the two companies and to expand the scope of specific initiatives. Both companies share recognition of challenges such as declining domestic paper demand, high raw material and fuel prices, and shortages of logistics drivers, and are promoting structural reforms and transforming their business portfolios.

Changes in Capital Relationship and Future Policy

Currently, Daio Paper's voting rights ratio in Hokuetsu Corporation is 1.4%, and Hokuetsu Corporation's voting rights ratio in Daio Paper is 24.8%, but after implementing their respective transactions, both will be adjusted to below approximately 20%. Daio Paper is expected to be excluded from Hokuetsu Corporation's equity-method affiliates. Both companies have agreed not to transfer or additionally acquire each other's shares without the written consent of the other party. In the medium term, they plan to reduce the voting rights ratio to around 5–10%, with specific methods and timing to be determined through future discussions.