TDK Corporation and Epcos AG announced the signing of a Business Combination Agreement (BCA). The purpose of the agreement is to combine Epcos with TDK’s activities in the electronic components field.

As a first step, TDK will launch a public tender offer for all outstanding shares of Epcos and will offer Epcos' shareholders EUR 17.85 in cash per share. The offer price represents a 52 percent premium over the three-months average closing share price on the Frankfurt Stock Exchange (Xetra) prior to the date of this announcement and a 29 percent premium over the closing price (Xetra) on July 30, 2008. Based on the number of EPCOS shares outstanding, this offer would value Epcos at approx. EUR 1.2 billion equity value.

The offer document is expected to be published after approval by the German Federal Financial Supervisory Authority (BaFin – Bundesanstalt für Finanzdienstleistungsaufsicht) during August 2008. The offer is subject to certain conditions, including a 50 percent plus one share minimum acceptance threshold on a fully diluted basis, and regulatory approvals. TDK expects the offer to close by October. It is intended that the all-cash transaction will be financed by a bridge loan.

Following the successful completion of the public tender offer, TDK will immediately begin the process of carving out its relevant passive components business. The objective is to combine this business with EPCOS’ business under a new company, provisionally named TDK EP Components KK. This corporate separation is subject to the approval of TDK’s general shareholders’ meeting.

The parties have agreed that the Board of Directors of the new company will consist of three representatives from TDK and two from Epcos and will oversee the management of the combined passive components businesses of TDK and Epcos. Basic structural changes within Epcos will require the support of all new company Board Members.

The new company Board of Directors is committed to Epcos’ employees and customers and will preserve Epcos’ existing headquarters. The well-established TDK and Epcos brands will continue to be used in the future.