Koyo Seiko, Toyoda Machine Reveal Merger Details

The boards of Koyo Seiko Co., Ltd. (Japan) and Toyoda Machine Works (TMW, Japan) have met and formally agreed to merge their two companies as previously announced. Doing so, they have released many of the merger's details. The new company also now has a name, JTEKT Corporation (Japan). The name JTEKT is formed from a combination of the "J" of "joint," "joy," and "Japan" and the ancient Greek word "tekton," which meant one possessing superior technical skills. The final "KT" also can stand for the first initials of Koyo and Toyoda. The companies said the new name, "is meant to convey the strong belief of both companies that by fusing their knowledge and experience, a new company with the technical capability to achieve dramatic manufacturing innovation in Japan and throughout the world based on highly reliable and advanced technology will be formed, and that such technical capability will enable the new company to gain the favor of both society and customers." JTEKT will have offices in Osaka and Nagoya. Originally, the merger was to take place April 1, 2006, but it has been moved up to January 1, 2006, because, "it was judged that an earlier carrying out of the merger would be in the interest of both shareholders and customers." The ownership of JTEKT will be primarily Koyo, it being roughly twice the size of Toyoda, and in exchange for Koyo Seiko shares. But because there are fewer Toyoda shareholders and with more equity per share, they will receive a higher proportion of Koyo shares for their Toyoda -- 0.76 Koyo shares for each Toyoda share. Daiwa Securities and Nomura Securities consulted on and calculated the distribution independently. By that method, Toyoda is valued at approximately $1.4 billion. All Koyo and Toyoda brand names will remain unchanged in their various marketplaces under the new organization. All operations of both companies are tentatively slated continue as-is, with no jobs lost. Koyo was established in 1935 and, depending on the method used, is usually noted as the world's sixth largest bearing manufacturer. The company not only produces bearings, but steering systems and other automotive-related products stemming from the bearing business. Toyoda was established in 1941 as a machine tool manufacturer and has remained primarily in that business, with some operations now also focusing on automotive components and electronic controls. Both companies have long and very close ties to Toyota Motor Corp. Toyota owns almost 23% of Koyo Seiko, and almost 24% of Toyota Machine Works. A deputy director from Toyota Motor Corp. has been named a managing officer of JTEKT. Kohshi Yoshida, currently President of Koyo Seiko, will be named President of JTEKT once it is properly formed and beginning to build operations.