Orbis Statement on Proposed Merger Between Tsuruha and Welcia and Proposed Tender Offer by Aeon

Orbis Investments (“Orbis”) is a global investment group founded in 1989. We are a significant investor in Japanese listed companies, and have been a shareholder in Tsuruha Holdings Inc. (“Tsuruha”) since 2000. As at 28 February 2025¹, funds and mandates managed by Orbis held 9.7% of Tsuruha’s outstanding issued share capital.

As a long-term investor, Orbis seeks to engage in constructive dialogue with investee companies on matters of concern, consistent with Principle 4 of Japan’s Stewardship Code. Where such concerns persist, we may share them publicly if we believe doing so furthers the interests of our clients.

Orbis notes with concern the announcement by Tsuruha of 11 April 2025 regarding the proposed tripartite “Capital and Business Alliance” between Tsuruha, Aeon Co., Ltd (“AEON”), and Welcia Holdings Co, Ltd (“Welcia”), which comprises a proposed share-for-share merger between Tsuruha and Welcia (the “Merger”), followed by a tender offer by AEON for shares of the merged entity (the “Tender Offer”).

Orbis opposes these transactions based on its belief that the proposed terms of each of the Merger and the Tender Offer undervalue Tsuruha and fail to provide a sufficient control premium.

The Merger:

• Tsuruha shareholders will be asked to approve the Merger at Tsuruha’s annual general meeting of shareholders (“AGM”) on 26 May 2025, which will require the approval of two-thirds of those voting in person or by proxy.
• ORBIS PLANS TO EXERCISE ITS 9.7% TSURUHA STAKE TO VOTE AGAINST THE MERGER.
• The Merger is proposed to be effected by a share-for-share exchange between Tsuruha and Welcia, at a ratio of only 4.34 Welcia shares for each Tsuruha share (prior to Tsuruha’s proposed stock split to take place on 1 September 2025). This would result in Tsuruha being the surviving entity, with existing Tsuruha shareholders owning approximately 51% and Welcia shareholders owning approximately 49%.

In Orbis’ view, the proposed Merger substantially undervalues Tsuruha given that Tsuruha:

• is significantly more profitable than Welcia, and
• has a far stronger balance sheet, with substantial net cash and investment securities at 28 February 2025 while Welcia had net debt.

The Tender Offer:

• If the proposed Merger is approved, AEON will own approximately 39% of Tsuruha.
• AEON then plans to make a tender offer in December 2025 for a further 11.9% of Tsuruha’s issued shares at a price of ¥11,400 per share, a 4.6% premium to the closing price on 11 April 2025. If each of the Merger and Tender Offer proceed, AEON will ultimately own approximately 50.9% of the merged Tsuruha entity.
• On 13 March 2024, AEON acquired 6.6m Tsuruha shares, then representing 13.41% of Tsuruha’s outstanding issued share capital, from a fund managed by Oasis Management Company Limited (“Oasis”), at a price of ¥15,500 per share.
• AEON would, under its proposed December 2025 Tender Offer, acquire a controlling position in Tsuruha at a DISCOUNT of nearly 27% to the price at which its 13.41% stake was acquired from Oasis in March 2024.

In Orbis’ view, AEON acquiring only 11.9% in December 2025 to obtain a bare minimum 50.9% controlling position is deeply concerning:

• Japan’s Corporate Governance Code highlights potential conflicts of interest and concerns about minority shareholder rights in companies with a controlling shareholder. The number of subsidiaries listed on the Tokyo Stock Exchange (“TSE”) declined by approximately 25% from 2019 to 2024, and by 12% in 2024 alone. This trend may continue to accelerate given the TSE’s call for companies to take “action to implement management that is conscious of cost of capital and stock price” and the potential for the TSE to encourage improved corporate governance by enhancing disclosure requirements and listing rules.
• Indeed, AEON itself has previously acknowledged the potential for this type of conflict of interest in the context of its recent transaction to acquire sole ownership of its subsidiary AEON DELIGHT CO., LTD.

Orbis believes that AEON should offer to buy 100% of the merged Tsuruha entity for cash at a price greater than the ¥15,500 per share AEON paid for Oasis’ 13.41% stake in Tsuruha to reflect a control premium.

Orbis calls upon Tsuruha shareholders to reject the proposed Merger at the 26 May AGM, and on Tsuruha’s board to allow other interested parties to offer a higher price, accompanied by the opportunity to conduct full due diligence to support their potential bids. Indeed, we believe that a fair price to take control of Tsuruha is likely to be in excess of ¥15,500 per share, and could be around ¥20,000 per share.

Orbis urges Tsuruha, Welcia and AEON to treat all shareholders fairly, and submits that doing so is essential to protect the public interest in maintaining confidence in the efficiency, fairness and integrity of capital markets.

¹ The record date for the purpose of Tsuruha shareholders’ entitlement to vote on the Merger.

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