Shin-Etsu Chemical Co., Ltd. (Head Office: Tokyo; President: Chihiro Kanagawa), has initiated procedures aiming at making CIRES, S.A. (Head Office: Portugal; President: Ricardo Manuel Simões Bayão Horta), its affiliated company manufacturing and selling PVC in Europe, a wholly-owned Shin-Etsu Chemical subsidiary company.

CIRES was established in 1960 in Estarreja, Portugal through a joint venture among Portuguese local companies, Shin-Etsu Chemical and Mitsui & Co. Among Japanese chemical companies, Shin-Etsu Chemical’s participation in this venture was quite an early example of overseas advancement and since then for nearly half a century CIRES has been carrying out the manufacturing of PVC and sales of the product mainly in the Southern European markets of Portugal and Spain. After starting its operation with an annual production of about 3,000 tons, CIRES implemented repeated expansions, and at present, its production capacity has expanded to about 200,000 tons annually.

The objective of making CIRES a wholly-owned Shin-Etsu subsidiary is that by unifying it with Shin-Etsu Chemical, CIRES’s business operations can be speeded up, and it can expand its business as a manufacturer playing a part in the PVC business in Europe. In the future, as a 100%-owned subsidiary of Shin-Etsu, CIRES will strive to strengthen its profitability by working to further improve its manufacturing technologies and sales power that have been nurtured up to the present.

The procedures to make CIRES a wholly-owned Shin-Etsu subsidiary will be done through Shin-Etsu International Europe B.V. (SEIE), a Shin-Etsu Group business base in Europe. (The present capital share ratio of CIRES is: 47.86% held by stockholders including Portuguese local companies, 26.07% by SEIE and 26.07% by Mitsui Group) The first step, was taken on December 9, 2008, when SEIE signed a contract with INEOS Chlor Vinyls Holdings B.V., one of the present CIRES shareholders, to purchase all of the CIRES shares owned by that company (26.23% of CIRES’ issued shares). Then, after obtaining the approval of the relevant competition authorities and other agencies of the related countries, starting with those of Portugal, SEIE’s shareholding ratio of CIRES stock will become 52.31%.

After obtaining majority ownership of CIRES stock with voting rights as a result of the above-mentioned transaction, SEIE, in accord with Portuguese law, will go forward with a takeover bid for all of the remaining shares of CIRES with the aim of making it a wholly-owned Shin-Etsu subsidiary company. At this point, the start of the takeover bid is anticipated to be March of 2009. The necessary funds to obtain all of the shares of CIRES are estimated to be about €19 million (about ¥2.2 billion).

Shin-Etsu Chemical’s PVC business with its tri-polar PVC production system, consisting of Shintech Inc. in the U.S. at its core together with its production facilities in Europe and Japan, has been providing stable supplies to Shin-Etsu’s worldwide customers. To meet the growing demand for PVC in Europe, in 2006, Shin-Etsu Chemical expanded the production capacity of Shin-Etsu PVC in The Netherlands to 450,000 tons annually, and is following this step by making CIRES a wholly-owned subsidiary company. In this way, the Shin-Etsu Group is further strengthening its PVC business foundation in Europe.

The future demand for PVC in Europe is expected to show strong growth in such application fields as window frames, which require heat-insulating properties as an energy-saving measure.

Outline of CIRES

Business trend of CIRES in the past two fiscal years.
                                                                       Unit: Thousands of Euros