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The Board of Directors of Benesse Corporation (hereafter, "the Company" or "the purchaser") today announced its decision to acquire shares of common stock in Tokyo Individualized Educational Institute, Inc. (popularly known by the Japanese acronym, TKG; Code: 4745; First Section, Tokyo Stock Exchange; hereafter "the Target Company") via a tender offer bid (hereinafter). Further details regarding this decision are found below.

1.Purpose of the Tender Offer
The Company's purpose in initiating the Tender Offer is to convert the Target Company, a firm listed on the First Section of the Tokyo Stock Exchange (TSE) into a consolidated subsidiary of Benesse Corporation. To this end, the Company will make a Tender Offer that will see it acquire a maximum of 33,610,800 shares (51.50 % of the Target Company's issued and outstanding shares), but no less than 19,287,500 shares (29.55% of its issued and outstanding shares), of the Target Company's common stock. However, pending the actual number of shares of common stock ultimately acquired as a result of the Tender Offer, the Company may instead opt to convert the Target Company into an equity-method affiliate. A resolution to accept the proposed Tender Offer was separately approved by the Target Company's Board of Directors at a meeting held today.

The Company's education business is composed primarily of two operations: extracurricular educational businesses such as Kodomo Challenge, aimed at small children, and Shinkenzemi correspondence courses for students from elementary through high school; and services for schools such as Shinken Simulated Exams, mock university exams for high school students preparing to take entrance examinations.

Today, the environment with respect to Japan's education and entrance examination systems is undergoing massive change. Here, the Company is striving to build a more powerful brand in the education field through actions that include its foray into the university entrance exam prep school business with the acquisition of Ochanomizu Seminar Co., Ltd. This is in addition to offering products and services that more closely reflect diversifying customer needs.

The Target Company, for its part, has been a trailblazer in individualized educational instruction, with numerous learning centers aimed at junior and senior high school students in Tokyo and other major cities nationwide (192 classrooms and 22,850 students as of April 30, 2007). The Target Company's corporate and educational philosophy is expressed in the motto, "If you can dream it, you can do it!" The Target Company is committed to education that fosters self-confidence and a willingness to try hard in students through repeated first-hand experience with success in learning, and by encouraging every child to have both intellectual curiosity and a dream they aspire to. Guided by this philosophy, the Target Company, as a top brand in its field, has developed a strong, locally focused network of directly managed prep schools centered on individualized instruction.

Recognizing early on the above changes in Japan's educational environment, the Company and the Target Company have discussed the possibility of forging capital and business ties (hereafter, "capital and business alliance") that would raise the corporate value of both firms by leveraging the Company's brand power as an education leader and the Target Company's strong and locally entrenched business network. Agreement between the Company and the Company's on the nature of this alliance led to the signing of a capital and business alliance contract (hereafter, "the contract") formalizing their relationship on May 18, 2007. The capital and business alliance will enable both companies to move forward with supplementing their respective operations. In correspondence courses, this alliance will allow the Company to introduce the Target Company's individualized learning program to customers whose needs are not being fully met. The Target Company, meanwhile, will soon be able to offer the Company's educational content to its customers, in a relationship sure to prove highly beneficial for both the Target Company, the Target Company, and their respective customers.

In the interest of developing a close and amicable cooperative relationship following the Tender Offer and promoting the business development of both firms, the contract between the Company and the Target Company has four key provisions on condition on the Tender Offer.
(1)The Company and the Target Company will collaborate on the development of databases, LMS (Learning Management Systems) and other individualized educational services, and will work to promote other business ties between the two firms.
(2)The Company is entitled to nominate no more than half of the candidates for director, and one for corporate auditor, to be elected at the first ordinary general meeting of shareholders of the Target Company (scheduled for August 2007) following the Tender Offer. The Target Company is required to take the proper steps to ensure that the nominees submitted by the Company are eligible for election to these posts.
(3)With respect to specified items in the contract, the Target Company is required to seek the Company's approval, or to discuss the matters in question with the Company in advance.
(4)The Target Company agrees to amend its Articles of Incorporation to change the end of its fiscal year (presently June 1 through May 31) from March 1 to the last day of February from next year.

Incidentally, because the Target Company's shareholders of record as of May 31, 2007 retain the ability to exercise voting rights at this year's general shareholders' meeting, the Company cannot exercise its own voting rights at this year's meeting. Consequently, on condition of the Tender Offer, the Company and the Target Company's president and principal shareholder Shinji Baba have agreed that, regarding shares of the Target Company's common stock to be acquired from Mr. Baba by the Company via the Tender Offer, Mr. Baba will exercise his voting rights as directed by the Company or a designated third party with respect to the exercise of any and all voting rights by the Target Company's shareholders at this year's meeting (refer to note below). These provisions notwithstanding, it is far from certain that the candidates for director and corporate auditor nominated by the Company will be elected, or that a resolution authorizing the fourth provision above will be passed, at this year's shareholders' meeting.

As part of the implementation of the capital and business alliance, the Board of Directors of the Target Company passed a resolution on May 18, 2007 to make 1,522,000 shares (2.33% of the Target Company's issued and outstanding shares) of its 2,372,530 shares of treasury stock (as of April 30, 2007) available for the Tender Offer. With a view to gaining the voting rights accompanying these shares, the Company agreed on May 18, 2007, to acquire the shares of the Target Company's treasury stock. Furthermore, in a separate agreement between the Company and Mr. Baba, the Company has consented to acquire 17,765,500 shares of the Target Company's common stock (27.22% of the its issued and outstanding shares) held by Mr. Baba as part of the Tender Offer. Currently, Mr. Baba holds a total of 24,292,500 shares of the Target Company's common stock, including 3,315,000 shares held by his asset management firm, SB Asset Management Japan (hereafter, SB Asset).

In addition to building a more powerful brand in the education field, the capital and business alliance between the Company and the Target Company is intended to capitalize on the latter's powerful and locally focused business network. The cooperation of Mr. Baba, with his many years of direct involvement in managing the Target Company, will be indispensable to this end. Given these circumstances, the Company has consented in principle to retaining Mr. Baba's services in the capacity of representative director or director of the Target Company for three years following the conclusion of the Tender Offer.

In arriving at the bid price for the Tender Offer of 380 yen per share, the Company gave substantial weight to calculations found in the evaluation report submitted by its financial advisor Nomura Securities Co., Ltd. Particular emphasis was given to the results of the discounted cash flow (or DCF) method, which reflects the Target Company's future earnings capability. In addition to trends in the market value of the Target Company's stock, the decision on Tender Offer price was derived from an assessment of premium value in past cases in which parties other than issuers have attempted a Tender Offer involving share certificates or similar instruments. The prospects of mounting a successful Tender Offer for the Target Company were also among the comprehensive range of factors considered by the Company. Ultimately, the Company's careful analysis, which included discussions and negotiations with Mr. Baba, culminated in a decision by the Board of Directors on May 18, 2007, to pursue the Tender Offer. The Tender Offer price offered was calculated based on the simple average of the closing price of the Target Company's stock on the First Section of the TSE for a period of one month up to May 17, 2007 (286 yen, rounded up to the nearest yen), plus a premium of 32.87% (rounded up to the second decimal place) of this amount.
As previously mentioned, the Company will make a Tender Offer aimed at making the Target Company a consolidated subsidiary by acquiring a maximum of 33,610,800 shares of the Target Company's common stock, or up to 51.50% of its issued and outstanding shares. As for the lower limits of this Tender Offer, this number has been set at 19,287,500 shares, or 29.55% of the voting rights held by all Target Company's shareholders. This figure was derived from various factors, including the number of voting rights needed to move forward with the capital and business alliance, the agreement to subscribe to shares offered by Mr. Baba and the Target Company, and the possibility of conducting a successful Tender Offer.

If the Company should obtain more than 50% of total shareholder voting rights, it plans to convert the Target Company into a consolidated subsidiary. If the Company, as a result of the Tender Offer, acquires more than 40%, but less than 50%, of total shareholder voting rights, and depending on the election of directors nominated by the Company and other conditions, the Target Company may instead become an affiliate of the Company accounted for by the equity method, rather than a consolidated subsidiary. Furthermore, should the Tender Offer conclude with the Company acquiring less than 40% of the Target Company's total shareholder voting rights, The Target Company will not become a consolidated subsidiary and will instead only become an equity-method affiliate. Irrespective of whether or not the Tender Offer results in the consolidation of the Target Company, the Company and the Target Company plan to pursue the capital and business alliance stipulated in the contract. In such an event, the Company will revisit the possibility of converting the Target Company into a consolidated subsidiary at some later date.

The Target Company's shares are currently listed on the First Section of the TSE. The Company's policy is for the Target Company to retain this status following the Tender Offer, as attested by the upper limit placed on the number of shares obtainable through the Tender Offer.

2.Overview of the Tender Offer
(1)Overview of the Target Company (As of November 30, 2006)

1.Name
Tokyo Individualized Educational Institute, Inc.

2.Business lines
[Operation of learning centers focused on individual instruction; other related businesses]

3.Established
May 17, 1994

4.Head office
1-11-8 Tsukuda, Chuo-ku, Tokyo

5. Representative
Shinji Baba, President

6. Capital
642,157,500 yen

7. Principal shareholders (as of November 30, 2006)
Shinji Baba: 32.14%
SB Asset Management Co., Ltd.: 5.08%
Japan Trustee Services Bank, Ltd. (Trust account): 3.39%
Clariden Bank (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.): 2.66%
Japan Securities Finance Co., Ltd.: 2.38%
The Master Trust Bank of Japan, Ltd. (Trust account): 2.19%
Nikko Cititrust and Banking Co., Ltd. (Investment account): 2.16%
The Chase Manhattan Bank, N.A. London (Standing proxy: Kabuto-cho Securities Settlement Department of Mizuho Corporate Bank, Ltd.):1.63%
Prague (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.): 1.38%
The Bank of New York 132741 (Standing proxy: Kabuto-cho Securities Settlement Department of Mizuho Corporate Bank, Ltd.): 0.97%

8. Relationships between the Company and the Target Company
Capital relationships: None applicable
Personnel relationships: None applicable
Business relationships: None applicable
Parties related to Tender Offer: None applicable

(2)Tender Offer period
1. Initial notification period of Tender Offer
May 23, 2007 (Wednesday) to June 19, 2007 (Tuesday) (20 business days)

2. Possibility of extension upon request by the Target Company
Pursuant to Article 27, Paragraph 10-3 of the Securities and Exchange Law, the period of the Tender Offer can be extended to 30 business days (until Tuesday, July 3, 2007) upon the submission of a position statement report by the Target Copmany containing a written request to this effect.

(3)Tender Offer price
380 yen per share of common stock

 
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