Nippon Polyurethane Industry Becomes Tosoh Subsidiary

Essential Move to Advancing Vinyl Isocyanate Operations


Tosoh Corporation announced that it will raise its stake in Nippon Polyurethane Industry Co. Ltd. (NPU) to 51% from the current 35% by acquiring NPU shares held by affiliate, Hodogaya Chemical Co. Ltd. The move further accelerates Tosoh's vinyl-isocyanate strategy and strengthens ties as the Company positions to establish a more competitive presence in the rapidly expanding polyurethane industry of Asia and especially China.

According to Tosoh, NPU, with annual sales of approximately JPY 70 billion (USD 596 million), is a leading supplier of feedstock to the polyurethane industry in Japan and Asia, and maintains the largest production capacities within the Asia Pacific region for several key products, such as MDI , TDI, and isocyanate derivatives. Polyurethanes markets are strong in the Asian region where total annual demand is expected to grow by almost 10%.

Tosoh and NPU achieve cost competitiveness through vinyl isocyanate chain operations. Tosoh supplies essential raw materials such as aniline, carbon monoxide, and chlorine to NPU, and in turn receives hydrogen chloride to supply the production of vinyl chloride monomer (VCM). This exchange increases the competitive power of overall vinyl chain operations. A new NPU 200,000 MT/Y MDI plant, which is slated for completion in October of 2007, is being constructed at Tosoh's Nanyo Complex. In connection with this construction, Tosoh is considering additional expansion of its facilities for production of important MDI precursors such as aniline and carbon monoxide.

In addition to the equity increase in NPU, Tosoh will strengthen ties with Hodogaya Chemical through a share increase from 24% to 33%. Hodogaya will issue ordinary shares on April 19th through a third-party placement, and Tosoh will purchase the allocation. This is expected to support new investments in growth sectors such as electronic materials and improve Hodogaya's financial position. A total of 10.05 million shares will be issued at JPY 620 (USD 5.28).

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