News Release

Matsushita Electric Works and Air Water to collaborate in bath business

May 17, 2006

Osaka, May 17, 2006 – Matsushita Electric Works, Ltd. (Matsushita Electric Works) and Air Water Inc. (AWI) have reached general agreement on working together in the domestic bath business.

Under the agreement, 80% of the shares of Air Water Emoto, a member company of the Air Water group engaged in the domestic fittings and appliances business, and all the shares of bath systems and bath units manufacturer, Air Water Chemical Co, Ltd.(Air Water Chemical), will be transferred to Matsushita Electric Works Bath & Life Co., Ltd., a wholly-owned subsidiary of Matsushita Electric Works, on October 1, 2006. This will bring about the merger of domestic bath operations conducted by Matsushita Electric Works and by AWI as the two companies seek to consolidate and strengthen their manufacturing and sales organizations and to create a more effective supply structure.

Background to share transfer

Over the past several years new housing starts have been sluggish and this has impacted the domestic bath market. While companies engaged in the industry have shifted the focus of their sales activities to home improvements and have been working to strengthen further the marketability of their products, their cost competitiveness and their supply and installation services organizations they continue to face very trying market conditions. Further, in addition to the need to make housing as pleasant to live in as possible, there is a growing need for companies to be able to offer one-stop solutions in terms of full-line domestic fittings and appliance services that encompass burglary and fire prevention and other facets of home security, energy saving and other environmental considerations, the full switch-over to electrical appliances and the ubiquitous requirements of today’s information-oriented society. Addressing these needs has become a major challenge for the industry.

Aim of share transfer

Given the current state of the domestic bath market and the growing need for full-line domestic fittings and appliance services, Matsushita Electric Works and AWI have decided to merge their respective operations relating to domestic baths, a core element of the residential housing environment. Through this collaboration, the two companies are aiming to further rationalize the manufacturing and sales structures in the targeted operations, to work to establish a more efficient supply structure in order to establish a competitive presence in the market for total bathroom systems, individual bath units and related products and to expand and grow that business on an ongoing basis.

By merging its operations with Air Water Emoto, which has a closely focused sales force with a strong track record in selling to sales outlets and domestic fitting and appliance installation contractors, Matsushita Electric Works will strengthen its sales in the home improvement market. Further, using Air Water Chemical’s manufacturing technology to build up an optimized production structure will allow Matsushita Electric Works to strengthen its management and financial base. The share transfer is also expected to generate synergies as a result of the closer ties with the AWI group which enjoys a competitive edge in terms of direct sales to consumers through its LP gas business.

For AWI, the merger will enable it to offer both bathroom space and total-home space solutions. By entrusting the operations of Air Water Emoto and Air Water Chemical to Matsushita Electric Works, which has an extensive and diverse sales infrastructure throughout Japan, AWI will ensure the smooth succession of the tradition, technology and know-how it has built up trough its domestic fittings and appliances business and enable further growth of this business. AWI will continue to hold 20% of Air Water Emoto stock and through the restructuring resulting from its collaboration with Matsushita Electric Works will aim to grow the business. Air Water Emoto will continue its current collaborative ties.

Date of share transfer

October 1 2006 (plan)

Share transfer mechanism

The 80% of Air Water Emoto shares held by AWI and all the shares of Air Water Chemical will be transferred to Matsushita Electric Works Bath & Life.

The transfer of the shares of the two AWI affiliate companies will be conducted on October 1, 2006. Preceding the actual transfer, on August 10 AWI will acquire all Air Water Emoto’s shares through a stock swap and become the full parent company.

Details of collaboration between Matsushita Electric Works and AWI

Lines of business:
Manufacture, sales and installation of bath systems, bath units and other domestic bathroom fittings and appliances.
Main products:
Bath systems, bath units and other bathroom fittings and appliances.

Impact on consolidated results

Details of the impact the share transfer will have on the consolidated results of Matsushita Electric Works and AWI will be released as soon as the impact has been determined.

(For reference purposes only)
AWI bath operations down the years

AWI has grown and expanded its domestic fittings and appliances and its bath business over a period of 40 years that started with the launch of Japan’s first domestically produced glass fiber bath for indoor use, the Hokusan Bath-all, by AWI’s forerunner Hokusan Co., Ltd. in 1963. The bathroom division was split from AWI in 2001 to create Air Water Living Co., Ltd. In April 2004 this was merged with Emoto Industries Co., Ltd. and thereafter has conducted business as Air Water Emoto and established a solid track record mainly in the Northern Japan region. Air Water Emoto has forged strong links with house builders while at the same time building up a closely focused sales structure on the strength of its competitive edge in home improvements. With its eye firmly set on future growth in the home improvements market, the company is aggressively adding to its product portfolio and opening up showrooms through ties with Yamaha Livingtec Corporation, Chofu Seisakusho Co., Ltd. and other leading companies in the sector.

CONTACT: S. Kishi and J. Ishino
Public Relations, Air Water Inc.
20-16, Higashi Shinsaibashi 1-chome,
Chuo-ku, Osaka 542-0083
TEL: 06-6252-5411 / FAX: 06-6252-3965

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