Nintendo Announces Plan To Acquire JESNET

What is JESNET? That was my immediate reaction to this news. Basically, it’s a company that has been distributing many of Nintendo’s physical products to retailers in Japan. As part of this agreement, JESNET will accept the assignment of the video game wholesale business from AJIOKA, another company that has worked with Nintendo to distribute products.

The reason for this acquisition is to unify Nintendo’s product development with JESNET’s and AJOIKA’s robust stocking and sales networks to form a supply structure that can meet consumer demand in a timely fashion. Basically, Nintendo would like better control over all facets of its product, from development to shipping. This move is intended to allow for rapid decision making and improved sales. Nintendo says that “These steps are intended to strengthen the overall competitiveness of the Nintendo group and increase its corporate value”.

The deal is set to officially take place on April 3, 2017 when Nintendo buys a majority of stock. It will have 70% of the voting rights. For full details of the acquisition, read the official brief below:

2. Overview of JESNET Subsidiarization (1) Transfer of Stocks

Nintendo will obtain shares on April 3, 2017 (planned) by receiving 53,724 common shares in a third-party allocation of shares performed by JESNET, as well as receiving 6,677 common shares on the same day from multiple current shareholders, excluding J Holdings Co., LTD. Nintendo will hold 60,401 common shares in JESNET (proportion of voting rights: 70.0%), and JESNET will become a consolidated subsidiary of Nintendo.

The current principal shareholder of JESNET, J Holdings Co., LTD will continue to hold common shares in JESNET (proportion of voting rights: 15.0%) and AJIOKA will obtain common shares (proportion of voting rights: 15.0%) in the third-party allocation of shares performed by JESNET on the same day.

(2) Overview of Company Becoming a Subsidiary (JESNET)

1 Name	JESNET Co. Ltd.
2 Location	1-35, 19-chome Kita, Nango-dori, Shiroishi-ku, Sapporo, Japan
3 Representative title and name	Representative Director and President Jou Suzuki
4 Business lineup	Nintendo game systems, game system accessories, game software, card games, other amusement business
5 Capital stock	88 million yen
6 Date of foundation	December 24, 1952
Major shareholders and 7 their stock ownership ratio	J Holdings Co., LTD. 54.5%
8 Connection with Nintendo	Capital relationship	JESNET holds 100,922 shares of Nintendo stock to facilitate the smooth business relationship.
	Personal relationship	No applicable relationship
	Business relationship	Nintendo has transactions handling Nintendo products with JESNET.
9 Operating results and financial conditions (past three years)
Fiscal year	FY ended July 2013		FY ended July 2014	FY ended July 2015
Net assets	8,638 million yen		8,996 million yen	9,128 million yen
Total assets	14,970 million yen		11,987 million yen	15,276 million yen
Net sales	78,363 million yen		65,477 million yen	57,062 million yen
Operating income	1,119 million yen		556 million yen	634 million yen
Ordinary income	1,128 million yen		588 million yen	733 million yen
Net income	652 million yen		380 million yen	383 million yen

(3) Number of Shares Obtained, Value of Shares and Status of Shares Held Before and After the Agreement

1 Number of shares held before the subsidiarization	0 shares (number of votes: 0) (proportion of voting rights: 0%)
2 Number of shares obtained	Common shares: 60,401 shares (number of votes: 60,401) Of which, number received in third-party allocation of shares: 53,724 shares Number received in receipt of shares: 6,677 shares
3 Value of shares	JESNET common shares: 4,530 million yen (note) Note: Total value of allocation of shares and shares held by existing shareholders Advisory fees, etc. (approximate value): 150 million yen Total: 4,680 million yen
4 Number of shares held after the subsidiarization	60,401 common shares (number of votes: 60,401) (proportion of voting rights: 70.0%)

3. Overview of Acceptance of Assignment of Business from AJIOKA (1) Contents of Acceptance of Assigned Business

Video game wholesale business

(2) Operating Results of Assigned Business

AJIOKA has not prepared financial materials specifically for the assigned business; however, this business comprises the majority of AJIOKA’s profit and loss, so the overall operating results for AJIOKA are presented here.

(3) Items and Value of Assigned Business (as of June 30, 2016)

Note: The value above is the book value as of June 30, 2016. It is expected that the value of the assets to be transferred will change by the date of the assignment of business.

	FY ended June 2015	FY ended June 2016
Net sales	41,819 million yen	38,735 million yen
Gross profit	1,754 million yen	1,654 million yen
Operating income	274 million yen	211 million yen
Ordinary income	682 million yen	381 million yen

Assets
Item	Book Value
Inventory	520 million yen
Total	520 million yen

(4) Value of Assigned Business and Method of Payment

The value of the assigned business is 1,000 million yen plus the value of the transferred assets listed above, to be determined after receipt.

The payment method will be cash.

(5) Overview of Transferring Business

1 Name	AJIOKA Co., Ltd.
2 Location	4-31, Sakuragi-cho, Nishio, Aichi, Japan
3 Representative title and name	Representative Director and President Gentarou Ajioka
4 Business lineup	Wholesale sales of computer game software and hardware and electronic parts
5 Capital stock	48 million yen
6 Date of foundation	April 24, 1962
7 Net assets	16,972 million yen
8 Total assets	19,238 million yen
Major shareholders and 9 their stock ownership ratio	Nagoya Small and Medium Business Investment & Consultation Co., Ltd. 46.8%
10 Connection with Nintendo	Capital relationship	AJIOKA holds 77,517 shares of Nintendo stock to facilitate the smooth business relationship.
	Personal relationship	No applicable relationship
	Business relationship	Nintendo has transactions handling Nintendo products with AJIOKA.
	Situations applicable to related parties	No applicable situations for related parties at Nintendo.

4.

Schedule for the Subsidiarization and Acceptance of Assignment of Business

Board of Directors Resolution: August 25, 2016
Agreement Execution Date: August 25, 2016
Planned Date for the Subsidiarization and Acceptance of Assignment of Business: April 3, 2017

(Note) This subsidiarization and acceptance of assignment of business assumes that there will be no cause found to prevent the subsidiarization and acceptance of assignment of business or to issue a cease and

[Source: Nintendo]

Craig Majaski

Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He’s currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.