ITOCHU Announces Capital Alliance with Shandong Ruyi Science & Technology Group

August 31, 2011

ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Masahiro Okafuji, President & CEO; hereinafter “ITOCHU”) and ITOCHU (China) Holding Co., Ltd. (headquartered in Beijing, China; Shuichi Koseki, Chairman; hereinafter “ICN”) announced today their agreement to acquire shares in Shandong Ruyi Science and Technology Group (headquartered in Jining, Shandong, China; Qiu Yafu, Chairman; hereinafter “Ruyi”), holding a contract-signing ceremony in Jining, Shandong, China. As a result of this acquisition, Ruyi will become an equity-method associated company of ITOCHU (with an investment ratio of 30%).

Ruyi is one of the major comprehensive textile groups in China. It was founded in 1972 as a state-owned wool textile factory and has made significant strides following its privatization in 2001. It is the only textile company that has been honored by the Chinese government for its advanced technologies recently. Ruyi has achieved consistent growth by expanding its value chain from the original upstream field to the midstream and downstream fields. ITOCHU and Ruyi began trading raw wool from Australia in the 1990s. In the 2000s, the two companies traded high-class wool textiles, an area in which Ruyi excels, with clients in Japan and the United States. Thus, the two companies have established an excellent relationship with each other over many years.

Meanwhile, China has emerged as one of the world’s leading consumer markets due to the expansion of domestic demand backed by strong economic growth and the attendant increase in personal incomes. In this environment, Ruyi has been advancing its strategies to rapidly expand its businesses from export-driven businesses mainly in the upstream field to domestic-demand driven businesses in the downstream field. It has been studying a capital alliance with ITOCHU since last year, based on strong recognition that establishing a system in collaboration with a reliable partner is increasingly important to succeeding in the highly competitive market of China and making its foray into the global market.

ITOCHU has also become deeply aware that Ruyi is an appropriate capital alliance partner due to its broad value chain from the upstream to downstream field, its strategy of emphasizing the creation of added value instead of price competition, and its corporate culture based on the spirit of Confucianism, which was established by Mr. Qiu.

Confirming that their intentions were in accord, the two companies began negotiating the alliance last year, concluding that ITOCHU will participate in the management of Ruyi to accelerate the execution of the strategies of both companies.

ITOCHU will step up its efforts to bolster sales in the domestic Chinese market by making use of Ruyi’s production base to promote its global operation of upstream businesses, improve and utilize its technological capabilities for its garment manufacturing business, and develop brand businesses. ITOCHU has management expertise that it has developed as a global corporation with a track record in China, as well as production and sales networks developed in Europe, the United States, and Asia over many years. ITOCHU will harness these assets for this project, helping to enhance Ruyi’s corporate value.

Following the investment in Shanshan Group Co., Ltd. (headquartered in Ningbo) in East China in 2009, this project will mark a new step for ITOCHU in its vigorous expansion strategy in China, centered on the North China region.

Profile of Ruyi

Corporate name Shandong Ruyi Science & Technology Group Co., Ltd.
Representative Chairman QiuYafu
Head office High Technology Development Zone, Ruyi Industrial Park, Jining, Shandong, China
Established December 28, 2001
Capital 240 million yuans (registered capital: 150 million yuans)
Business Spinning, dyeing, and finishing, sewing garment, purchasing cotton and other materials, processing and selling cotton and other yarns & fabrics, corporate investment and management, and selling its own products
Net sales

14.37 billion yuans (approx. 179.6 billion yen/ result for the fiscal year ended December 2010)