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Takata Corp. And Key Safety Systems Reach Agreement In Principle Regarding Sale Of Substantially All Of Takata’s Assets

Under the agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and operations that relate to the company’s manufacturing and sale of phase-stabilized ammonium nitrate airbag inflators.

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Takata Corp. and Key Safety Systems (KSS), a Michigan-based leader in mobility safety, have reached an agreement in principle to sponsor a restructuring plan for the sale of substantially all of Takata’s global assets and operations to KSS for an aggregate purchase price of approximately ¥175 billion (approximately $1.588 billion USD), subject to certain adjustments at closing.

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Under the agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and operations that relate to the company’s manufacturing and sale of phase-stabilized ammonium nitrate (PSAN) airbag inflators. It is expected that Takata’s PSAN-related operations will be run by a reorganized Takata following the transaction closing and eventually will be wound down. Takata expects to continue to meet demand for airbag inflator replacements without interruption.

By combining substantially all of Takata with KSS, the transaction would form a global safety supply auto parts company with approximately 60,000 employees in 23 countries focused on serving customers and providing superior products and innovation in the rapidly evolving auto safety industry.

Jason Luo, president and CEO of KSS, said, “Takata has deep management talent, a dedicated work force and a long history of exceptional customer service. Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach and exceptional steering wheels, seat belts and other safety products has not diminished. We look forward to finalizing definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and longstanding customers while investing in the next phase of growth for the new KSS.”

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Shigehisa Takada, chairman and CEO of Takata, said, “KSS is the ideal sponsor as we address the costs related to airbag inflator recalls, and an optimal partner to the company’s customers, suppliers and employees. The combined business would be well-positioned for long-term success in the global automotive industry. Throughout this process, our top priorities have been providing a steady supply of products to our valued customers, including replacement parts for recalls, and a stable home for our exceptional employees. This agreement would allow that to continue.”

The proposed structure for the potential transaction is intended to minimize supply chain disruption concerns for Takata’s OEM customers. The companies anticipate a quick and seamless integration, utilizing the combined strengths of their respective management teams to implement a smooth transition.

KSS plans to retain substantially all of Takata’s employees across the world on comparable employment terms as currently provided.

KSS plans to continue to support and utilize Takata’s presence in Japan, and does not intend to shut down any of Takata’s manufacturing facilities there. Furthermore, KSS said it intends to establish an Asia regional headquarters in Tokyo, which should create new jobs in Japan, and plans to retain Takata’s existing non-PSAN supplier contracts to maintain an uninterrupted supply chain. KSS also intends to invest in many of Takata’s other worldwide manufacturing facilities and technology and R&D centers.

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KSS has substantially completed its due diligence, and Takata and KSS are working toward finalizing a definitive agreement in the coming weeks, with an expected transaction close in the first quarter of 2018.

Hideaki Sudo, chairman of Takata’s Steering Committee and partner at Tokyo Fuji Law office, said, “Since February 2016, the Steering Committee has been working diligently, with assistance from our financial and legal advisors, to develop a path forward for Takata that resolves the recall costs and liabilities on a consensual basis in partnership with Takata’s automotive customers. After a rigorous global process, the committee has recommended KSS as the best sponsor candidate based on a variety of factors including strategic fit, valuation and certainty of closing. We are pleased that Takata has accepted such recommendation. We appreciate the cooperation of the affected automotive manufacturers, who have worked closely with us to devise this restructuring plan, which we firmly believe is in the best interests of the company and its stakeholders.”

Civil Rehabilitation and Chapter 11 Proceedings

Excluding recall-related costs and liabilities, Takata reports that it has continued to produce healthy profits and cash flows from its existing businesses. However, Takata has determined that it is in the best interests of the company and its stakeholders to address the recall-related issues in conjunction with the proposed sale. Accordingly, with the expected support of a group of its OEM customers representing more than 80 percent of Takata’s annual sales and KSS as plan sponsor, TKJP and its Japanese subsidiaries have commenced proceedings under the Civil Rehabilitation Act in Japan in the Tokyo District Court. In addition, TKJP’s main U.S. subsidiary, TK Holdings Inc. and certain of its North America affiliates and subsidiaries, filed for Chapter 11 in the United States Bankruptcy Court for the District of Delaware.

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Takata says it intends to use the Civil Rehabilitation Act and Chapter 11 processes to continue to work with its Customer Group and KSS to finalize and execute restructuring support agreements (RSAs) that would include comprehensive terms of the restructuring. The RSAs will reflect the commitment of the Customer Group and KSS to the restructuring transactions to be effectuated pursuant to the Chapter 11 Plan of Reorganization that would be subject to approval of the

Delaware Court, as well as the business transfer to be implemented by the Tokyo Court. The transaction with KSS would also be subject to approval by the Tokyo Court and the Delaware Court, as well as a number of other conditions, including regulatory and other third-party approvals.

It is expected that the proceedings under the Civil Rehabilitation Act in Japan and Chapter 11 process in the U.S. will be completed in the first quarter of 2018. Takata intends to use the Civil Rehabilitation and Chapter 11 processes to address the costs and liabilities related to airbag inflator recalls, including to fund its remaining obligations under the terms of the plea agreement with the U.S. Department of Justice that was announced on Jan. 13, and Consent Orders entered into by Takata with the National Highway Traffic Safety Administration.

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