If you simply calculate P/E multiple based on actual results stated in the disclosure materials, it may appear at first glance to be a relatively expensive level compared to out company’s P/E multiple. On the other hand, the P/E mulitple based on the projected earnings after the consolidation starts will be more favoravly priced than our company’s P/E multiple.

In this M&A, we have factored in the cost synergies that are expected to be realized promptly after consolidation (e.g., reduction of executive compensation for the retiring owner, elimination of head office rent and company housing burden, and liquidation of recently closed stores). We assume that, due to these effects, the target company’s net income will be at a different level after consideration than its past performance.

Besides, the above valuation is based solely on a conservatively assumed cost reduction and does not factor in the upside of sales. On the other hand, as our M&A track record has shown, we assume that the P/E multiple will consequently decline to a more undervalued level as profitability improves due to synergy creation.

(page 18 of “FY2026/1 2Q Earnings Presentation” disclosed on September 12, 2025)