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Announcement of Acquisition of Shares in Hotspring Ventures Limited, Operator of "Wahanda", an Online Beauty Reservation Service in Europe

May 01, 2015
Recruit Holdings Co.,Ltd.

Recruit Holdings Co., Ltd. (hereinafter the "Company") has announced that it has decided to acquire shares in Hotspring Ventures Limited (Headquarters: London, England; CEO: Lopo Champalimaud; hereinafter "Hotspring"), an European online hair and beauty marketplace, through the Company's consolidated subsidiary in the U.K. and the wholly owned corporate venture capital company "RGIP LLC" (Headquarters: Chuo-ku, Tokyo; Representative: Kazumasa Watanabe; total investment amount: ¥4.5 billion; hereinafter "RGIP"), and to make it a subsidiary of the Company's group, as outlined below.

The existing management team of Hotspring own a portion of shares of the Company's consolidated subsidiary in the U.K., thereby making them indirectly shareholders in Hotspring. The management team will continue to oversee management of Hotspring together with the Company.

1. Purpose of the acquisition of the shares

Since launching its online beauty appointment booking services in the U.K. in 2012, Hotspring has been operating a consumer marketplace and providing sophisticated salon management software, free of charge, to spas and hair and beauty salons. Led by an excellent management team, with extensive experience in online reservations, Hotspring is currently the market leader in online hair and beauty bookings in Europe, operating in 5 countries (U.K., Germany, Lithuania, Switzerland, and Austria), with approximately 12,000 listed salons as of April 2015.

The opportunity in the European beauty market is high compared to the rest of the world; however, the adoption of online reservations in the beauty industry is still less than 1% in the 5 major EU countries (U.K., Germany, France, Italy, and Spain), which is extremely low compared to the travel market. Hotspring's initial growth shows that online reservations in the beauty market offer a huge opportunity and significant growth can be expected in the future.

The Company, following its investment in Hotspring in July 2014 (through RGIP) and subsequent discussions regarding the EU growth strategy, believes combining Hotspring's marketing capabilities and reservation expertise, with the Company's experience in the beauty industry gained from Hot Pepper Beauty, will create a global leader in the online beauty reservations market. The Company has therefore decided to acquire the shares in Hotspring and make it a subsidiary as its first fully-fledged overseas operation in the beauty field.

2. Background

The Company has a long-term vision to become a group providing the number one global matching platform in each of the verticals in which it operates. That includes being the number one in the Marketing Media business by approximately 2030, and the global number one in the HR business by approximately 2020.

The Company is proactively entering new verticals and expanding existing businesses, through M&A in Japan and overseas, financed by the stable cash flow generated from existing domestic businesses. This transaction will help expand the Company's Lifestyle operations which includes travel, dining and beauty.

3. Outline of subsidiaries acquiring the shares

(1) RGF Beauty UK Ltd.

(1) Name RGF Beauty UK Ltd.
(2) Location Riverbank House, 2 Swan Lane, London EC4R 3TT.
(3) Title and name of the head Chairman: Kazumasa Watanabe
(4) Description of business Special Purpose Acquisition Company
(5) Capital ₤0.01
(6) Major shareholders and shareholding ratio Recruit Holdings Co., Ltd. 100.00%
(Note)

The existing management team of Hotspring is scheduled to hold 10.65% of shares of RGF Beauty UK Ltd. on the date of execution of share acquisition.

(2) RGIP LLC

(1) Name RGIP LLC
(2) Location 8-4-17, Ginza, Chuo-ku, Tokyo
(3) Title and name of the head Representative: Kazumasa Watanabe
(4) Description of business Investment development business and venture capital business
(5) Total investment ¥4.5 billion
(6) Major shareholders and shareholding ratio Recruit Holdings Co., Ltd. 100.00%

4. Outline of transferring subsidiary (Hotspring Ventures Limited)

(1) Name Hotspring Ventures Limited
(2) Location Threeways House, 40-44 Clipstone St., London
(3) Title and name of the head CEO: Lopo Champalimaud
(4) Description of business Operation of "Wahanda", an online reservation service in the beauty business in Europe
(5) Capital ₤14,836.90
(6) Foundation February 14, 2008
(7) Major shareholders and shareholding ratio
Europe Ventures LP 25.25%
Panarea Capital, L.P. 10.86%
Lepe Partners (Wahanda) LP 9.94%
RGIP LLC 8.82%
Lopo Champalimaud 7.80%
(8) Relationships between the Company and Hotspring
Capital relationship The Company holds 8.82% of the total outstanding shares of Hotspring through the Company's wholly owned corporate venture capital RGIP LLC.
Human relationship There is no human relationship to be noted between the Company and Hotspring. In addition, there are no human relationships to be noted between persons associated with the Company or the Company's affiliates and persons associated with Hotspring or Hotspring's affiliates.
Business relationship There is no business relationship to be noted between the Company and Hotspring. In addition, there are no business relationships to be noted between persons associated with the Company or the Company's affiliates and persons associated with Hotspring or Hotspring's associates.
(9) Consolidated financial results and consolidated financial position of the company for the past three years
Fiscal year Year ended December 31, 2012 Year ended December 31, 2013 Year ended December 31, 2014
Consolidated net assets ₤(243) thousand ₤2,858 thousand ₤8,872 thousand
Consolidated total assets ₤2,253 thousand ₤5,525 thousand ₤12,333 thousand
Consolidated net assets per share ₤(32.86) ₤259.31 ₤6.04
Consolidated net sales ₤2,060 thousand ₤2,874 thousand ₤4,309 thousand
Consolidated operating income ₤(2,572) thousand ₤(2,496) thousand ₤(6,435) thousand
Consolidated EBITDA ₤(2,487) thousand ₤(2,404) thousand ₤(6,309) thousand
Consolidated net income ₤(2,601) thousand ₤(2,586) thousand ₤(6,541) thousand
Consolidated net income per share ₤(352.23) ₤(234.62) ₤(4.45)
Dividend per share ₤0.00 ₤0.00 ₤0.00
(Note)

The financial data for the year ended December 31, 2014 is unaudited.

    5. Outline of major sellers of the shares

    (1) Europe Ventures LP

    (1) Name Europe Ventures LP
    (2) Location Pembroke Hall, 42 Crow Lane, Pembroke HM 19, Bermuda
    (3) Reason for foundation, etc. Law of the Bermuda
    (4) Purpose Venture capital investments
    (5) Establishment July 28, 2009
    (6) Total investment ₤100 million
    (7) Investor, investment ratio, and overview of investor Not disclosed due to confidentiality obligation agreement
    (8) Overview of general partner
    Name Europe Partners LP
    Location Bermuda
    Title and name of the head FIL Capital Management Ltd acts as the General Partner of Europe Partners LP
    The Board of FIL Capital Management Ltd is:
    Christopher Brealey; Edmund Wrigley; Allan Pelvang and Neal Turchiaro with Deborah Speight as Alternate Director to all directors
    Description of business Venture capital investments
    Capital Not disclosed due to confidentiality obligation agreement
    (9) Overview of local agent in Japan Not applicable.
    (10) Relationships between the Company and Europe Ventures LP
    Relationships between the Company and Europe Ventures LP The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in Europe Ventures LP. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of Europe Ventures LP.
    Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of Europe Ventures LP, persons associated with the general partner of Europe Ventures LP or affiliates of the general partner of Europe Ventures LP.
    Relationship between the Company and the local agent in Japan Not applicable.

    (2) Panarea Capital, L.P.

    (1) Name Panarea Capital, L.P.
    (2) Location 810 Seventh Avenue, New York, NY 10019
    (3) Reason for foundation, etc. Law of The United States of America
    (4) Purpose Investment in early stage private companies
    (5) Establishment September 8, 2010
    (6) Total investment $50 - 100 million
    (7) Investor, investment ratio, and overview of investor Not disclosed due to confidentiality obligation agreement
    (8) Overview of general partner
    Name Panarea Capital, L.P.
    Location 810 Seventh Avenue, New York, NY 10019
    Title and name of the head Alejandro Zubillaga, Managing Partner
    Description of business Investment in early stage private companies
    Capital Not disclosed due to confidentiality obligation agreement
    (9) Overview of local agent in Japan Not applicable.
    (10) Relationships between the Company and Panarea Capital, L.P.
    Relationship between the Company and Panarea Capital L.P. The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in Panarea Capital L.P. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of Panarea Capital L.P..
    Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of Panarea Capital, L.P., persons associated with the general partner of Panarea Capital, L.P. or affiliates of the general partner of Panarea Capital, L.P.
    Relationship between the Company and the local agent in Japan Not applicable.

    (3) Lepe Partners (Wahanda) LP

    (1) Name Lepe Partners (Wahanda) LP
    (2) Location Cayman Islands
    (3) Reason for foundation, etc. Law of the Cayman Islands
    (4) Purpose Investments
    (5) Establishment December 2, 2013
    (6) Total investment ₤ 3,481,873
    (7) Investor, investment ratio, and overview of investor Cayman Islands
    (8) Overview of general partner
    Name Lepe Partners (2013) GP
    Location Cayman Islands
    Title and name of the head Directors: David Egglishaw, Gavin Davis and Tara Haig
    Description of business Investments
    Capital Not disclosed due to confidentiality obligation agreement
    (9) Overview of local agent in Japan Not applicable.
    (10) Relationship between the Company and Lepe Partners (Wahanda) LP
    Relationship between the Company and Lepe Partners (Wahanda) LP The Company, persons associated with the Company or the Company's affiliates have neither directly nor indirectly invested in Lepe Partners (Wahanda) LP. There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the investors of Lepe Partners (Wahanda) LP.
    Relationship between the Company and the general partner There is no capital, human, and business relationship to be noted between the Company, persons associated with the Company or the Company's affiliates and the general partner of Lepe Partners (Wahanda) LP, persons associated with the general partner of Lepe Partners (Wahanda) LP or affiliates of the general partner of Lepe Partners (Wahanda) LP.
    Relationship between the Company and the local agent in Japan Not applicable.

    (4) Lopo Champalimaud

    (1) Name Lopo Champalimaud
    (2) Address London
    (3) Relationships between the Company and Lopo Champalimaud Not applicable.

    6. Number of shares to be acquired, acquisition cost, and shares held before and after the acquisition

    (1) Number of shares held before the transfer 138,989 shares (Number of voting rights: 138,989, ownership percentage: 8.82%)
    (2) Number of shares to be acquired 1,436,836 shares (Number of voting rights: 1,436,836)
    (3) Acquisition price Shares, etc. of Hotspring ₤112.5 million (approximately ¥20.4 billion)
    Advisory fees, etc. (estimated amount) ¥0.6 billion
    Total (estimated amount) ¥21.0 billion
    (4) Number of shares held after the transfer 1,575,825 shares (Number of voting rights: 1,575,825, ownership percentage: 100.00%)
      (Notes)
    • 1. Number of shares to be acquired includes the total amount of shares of common stock and classified stock, etc. of Hotspring to be acquired by the Company's group.
    • 2. "Shares, etc. of Hotspring Ventures Limited" under acquisition price includes the sum of the respective consideration for common stock and classified stock, etc. of Hotspring to be acquired by the Company's group.
    • 3. The sum of consideration for common stock and classified stock, etc. of Hotspring converted at ¥181.55 to 1 pound and estimated amount of advisory fees, etc. is listed as total acquisition cost (estimated amount).

    7. Schedule

    (1) Date of decision May 1, 2015
    (2) Date of agreement May 1, 2015
    (3) Date of execution of share acquisition May 1, 2015

    8. Future forecasts

    The impact of the acquisition of shares on the consolidated financial results of the Company for the year ending March 31, 2016 is currently under review.