Non-binding
g English con
nvenience tra
anslation
p
pursuant
p
to S
Section 27 para.
p
3 sente
ence 1 in con
nnection with
h
Mandatory publication
Section 1
14 para. 3 se
entence 1
of th
he Securities
s Acquisition and Takeov
ver Act (Werrtpapiererwerbs- und Übe
ernahmeges
setz WpÜG)
Joint sta
atement of the Manag
gement Boa
ard and the Superviso ry Board
of
Joyou AG
with its regisstered office
e in Hamburg
g
pursu
uant to Secttion 27 par
ra. 1 of the Securities Acquisition
n and Takeo
over Act (W
WpÜG)
to the volunta
ary public takeover
t
offfer
((cash offer
r)
of
G raceB S.à r.l.
r
enue John F. Kennedy,
46 A, Ave
L-1855 Luxembourrg, Grand Du
uchy of Luxembourg
to the sharreholders of
o Joyou AG
G
dated 6 November 2013
Joyou
J
Share
es: ISIN DE0
000A0WMLD8
8
Tend
dered Joyou Shares: ISIN
N DE000A1X
X3TF9
Non-binding English convenience translation
CONTENTS
CLAUSE
1.
1.1
1.2
1.3
PAGE
GENERAL INFORMATION ON THIS STATEMENT ........................................................... 3
Legal basis of this Statement ................................................................................... 3
Actual basis of this Statement .................................................................................. 3
Publication of this Statement and any additional statements on any changes
in the Takeover Offer.............................................................................................. 4
1.4
Autonomous decision of the Joyou Shareholders ......................................................... 4
2.
INFORMATION ABOUT THE TARGET COMPANY ........................................................... 4
2.1
General information ............................................................................................... 4
2.2
Summary of business and financial information .......................................................... 5
2.3
Shareholder structure ............................................................................................. 5
2.4
Grohe/Joyou Shareholders' Agreement ...................................................................... 5
3.
INFORMATION ABOUT THE BIDDER .......................................................................... 6
4.
INFORMATION ON THE TAKEOVER OFFER .................................................................. 7
4.1
General ................................................................................................................ 7
4.2
Kind and amount of consideration ............................................................................ 7
4.3
Acceptance Period, Additional Acceptance Period ........................................................ 8
4.4
Acceptance of the Takeover Offer ............................................................................. 8
4.5
Stock exchange trading in Tendered Joyou Shares ...................................................... 8
4.6
Settlement of the Takeover Offer ............................................................................. 9
4.7
Completion Conditions ............................................................................................ 9
4.8
Right of withdrawal ................................................................................................ 9
5.
BACKGROUND TO THE TAKEOVER OFFER ................................................................ 10
5.1
Grohe Share Purchase Agreement .......................................................................... 10
5.2
Grohe/Joyou Shareholders' Agreement .................................................................... 10
6.
TYPE AND AMOUNT OF THE CONSIDERATION OFFERED ............................................. 10
6.1
Type and amount of the consideration..................................................................... 10
6.2
Statutory minimum price ...................................................................................... 10
6.3
Fairness opinion ................................................................................................... 11
7.
GOALS PURSUED BY THE BIDDER AND CONSEQUENCES FOR JOYOU AG ...................... 12
7.1
Future business activity of Joyou AG ....................................................................... 12
7.2
Future use of assets of Joyou AG ............................................................................ 13
7.3
Future obligations of Joyou AG ............................................................................... 13
7.4
Management Board and Supervisory Board of Joyou AG............................................. 13
7.5
Employees, terms and conditions of employment and employee representation ............. 14
7.6
Registered office, location of key company divisions of Joyou AG ................................ 14
7.7
Possible structural measures.................................................................................. 14
7.8
The role of the members of the Management Board of Joyou AG within the Grohe Group 14
7.9
Future business activities of the Bidder, LIXIL Group and DBJ ..................................... 14
8.
FINANCING OF THE TAKEOVER OFFER .................................................................... 15
9.
EXPECTED EFFECTS OF THE COMPLETION OF THE TAKEOVER OFFER ON THE ASSETS,
FINANCIAL AND EARNINGS POSITION OF THE BIDDER AS WELL AS OF LIXIL GROUP .... 15
10.
INTERESTS OF MEMBERS OF THE MANAGEMENT BOARD OR THE SUPERVISORY BOARD 15
10.1
Ownership of shares by members of the Management Board and the Supervisory Board. 15
10.2
Cash or non-cash benefits to members of the Management Board or the
Supervisory Board of Joyou AG .............................................................................. 15
10.3
Other interests of members of the Management Board or the Supervisory Board of
Joyou AG ............................................................................................................ 15
11.
INTENTIONS OF THE MEMBERS OF THE MANAGEMENT BOARD AND THE
SUPERVISORY BOARD TO ACCEPT OR DECLINE THE TAKEOVER OFFER ........................ 16
12.
IMPLICATIONS FOR THE JOYOU SHAREHOLDERS ...................................................... 16
12.1
Possible effects for Joyou Shareholders accepting the Takeover Offer .......................... 16
12.2
Possible effects for Joyou Shareholders who do not accept the Takeover Offer .............. 17
13.
RECOMMENDATION BY THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD
TO THE SHAREHOLDERS ....................................................................................... 18
ANNEX: Fairness Opinion
Non-binding English convenience translation
On 6 November 2013 GraceB S.à r.l., with its registered office in Luxembourg, registered in the
Luxembourg Register of Commerce and Companies (Registre de Commerce et de Sociétés) under
the registration number B 179188 (the "Bidder") published pursuant to Section 34 and Section 14
para. 2 and 3 of the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz, the "Takeover Act") the Offer Document pursuant to Section 11 of the
Takeover Act (the "Offer Document") for the voluntary public takeover offer (the "Takeover
Offer") of the Bidder to the shareholders of Joyou AG with its registered office in Hamburg,
Germany ("Joyou AG", "Target Company", or the "Company" and together with its affiliated
companies the "Joyou Group").
The subject of the Takeover Offer is the acquisition of all no-par-value bearer shares of Joyou AG
(ISIN DE000A0WMLD8), each representing a pro rata amount of the share capital (Grundkapital)
of EUR 1.00 per share (together the "Joyou Shares" and each individually a "Joyou Share") and
in each case with all ancillary rights associated with these shares at the time of the Takeover
Offer's settlement (in particular the dividend entitlement) at a purchase price of EUR 12.16 per
Joyou Share in cash.
The Takeover Offer is addressed to all owners of Joyou Shares (together the "Joyou
Shareholders" and each individual "Joyou Shareholder").
The Offer Document is published in German, as well as in a non-binding English translation on the
Internet at http://www.grace-offer.com. Moreover, the Offer Document is available for distribution
free of charge in the Federal Republic of Germany at BNP Paribas Securities Services S.C.A. –
Frankfurt am Main branch, Europa-Allee 12, 60327 Frankfurt am Main, Germany (request per fax:
+49 69 1520 5277 or email: [email protected] upon specification of a
complete postal address). On 6 November 2013 the Bidder published a respective indicative notice
in the Federal Gazette (Bundesanzeiger).
The Offer Document has been provided to the Management Board of Joyou AG (the
"Management Board") on 6 November 2013. The Management Board forwarded the Offer
Document to the Supervisory Board of Joyou AG (the "Supervisory Board") and the employees
of the Joyou Group without undue delay.
On the basis of the unanimous approval by the governing bodies, the Management Board and the
Supervisory Board hereby give the following joint opinion (the "Statement") on the Takeover
Offer.
1.
GENERAL INFORMATION ON THIS STATEMENT
1.1
Legal basis of this Statement
Pursuant to Section 27 para. 1 sentence 1 of the Takeover Act, the Management Board
and the Supervisory Board of the Target Company must issue a reasoned statement on
the Takeover Offer and on each of its amendments. The statement may be issued jointly
by the Management Board and the Supervisory Board of the Target Company. The
Management Board and the Supervisory Board decided to issue a joint statement with
respect to the Takeover Offer. This Statement is issued exclusively under German law.
Moreover, pursuant to Section 27 para. 2 of the Takeover Act, the employees of the
Target Company can submit an opinion on the Takeover Offer to the Management Board.
By the time this Statement was issued, the Management Board had not received any
opinion of the employees of Joyou AG on the Takeover Offer. Joyou AG does not have a
works council.
1.2
Actual basis of this Statement
Unless explicitly stated otherwise, times in this Statement are given in Central European
Time ("CET"). The currency designation "EUR" or "Euro" refer to the currency of the
European Union. Unless stated otherwise, terms such as "at this point in time", "at the
3
Non-binding English convenience translation
date herof", "currently", "now", "at present" or "today" refer to the publication date of this
Statement.
All information, forecasts, estimates, valuations, forward looking statements and
declarations of intent are based on the information available to the Management Board
and the Supervisory Board on the publication date of this Statement based on due efforts
and/or reflect their estimates or intentions at this point in time. This information may
change after the publication date of this Statement. Neither the Management Board nor
the Supervisory Board or Joyou AG assume any obligation to update this Statement,
unless they are obligated to do so pursuant to German law.
Unless explicitly indicated otherwise, the information contained in this Statement about
the Bidder, persons acting in concert with the Bidder and the Takeover Offer are based on
the information contained in the Offer Document and other publicly accessible
information. The Management Board and the Supervisory Board point out that they are
unable to verify the intentions described in the Offer Document or to guarantee their
implementation.
1.3
Publication of this Statement and any additional statements on any changes in the
Takeover Offer
This Statement and any additional statements on any possible changes to the Takeover
Offer are published pursuant to Sections 27 para. 3, 14 para. 3 sentence 1 of the
Takeover Act on the Internet on the website of Joyou AG at
http://www.joyou.de;
copies of it are available for distribution free of charge from Joyou AG, Gasstraße 18, Haus
6A,
22761 Hamburg
and
can
be
requested
under
telephone
number
+49 (0)40 60 91 860. The internet address at which the Statement is published and the
address at which the free-of-charge edition can be requested will be published in the
Federal Gazette.
This Statement is published in German. However, a non-binding English translation, the
correctness of which is not guaranteed, will also be available at the aforementioned
addresses.
1.4
Autonomous decision of the Joyou Shareholders
The Management Board and the Supervisory Board point out that the description of the
Takeover Offer contained in this Statement does not claim to be complete and that solely
the provisions of the Offer Document are decisive for the content, conditions and handling
of the Offer. It is the responsibility of every Joyou Shareholder to take note of the Offer
Document and to take the measures necessary for him or her. The Joyou Shareholders
are themselves responsible for their decisions with regard to the Takeover Offer.
It is explicitly recommended that the Joyou Shareholders read the Offer Document as it
contains information that is important for them.
2.
INFORMATION ABOUT THE TARGET COMPANY
2.1
General information
Joyou AG, Gasstraße 18, Haus 6A, 22761 Hamburg, is a listed stock corporation
(Aktiengesellschaft) with its registered office in Hamburg. The Company is registered in
the commercial register of the local court of Hamburg under HRB 106431.
The share capital of Joyou AG amounts to EUR 23,967,492.00 ("Joyou Share Capital")
and is divided into 23,967,492 no-par-value bearer shares (ordinary shares) with a pro
4
Non-binding English convenience translation
rata amount of the share capital (Grundkapital) of EUR 1.00 per share. The Joyou Shares
(ISIN DE000A0WMLD8) are admitted to trading on the regulated market of the Frankfurt
Stock Exchange (Prime Standard). In addition, they are traded on the regulated unofficial
market (Freiverkehr) of the stock exchanges in Berlin, Düsseldorf, Munich and Stuttgart.
Pursuant to the articles of association, there is an authorised capital of
EUR 11,983,746.00, i.e. in the amount of 50% of the Joyou Share Capital. The
Management Board of Joyou AG is accordingly authorised to increase the Share Capital
with the approval of the Supervisory Board until 15 March 2015 once or several times by
up to EUR 11,983,746.00 in total by issuing new no-par-value bearer shares in return for
cash contributions or contributions in kind.
The members of the Management Board of Joyou AG are Mr Jianshe Cai (Chairman), Mr
Jilin Cai, Mr Zufang Li and Mr Gerald Mulvin. The Supervisory Board comprises Dr Rainer
Simon (Chairman), Mr Johnny Chen and Mr David Haines.
2.2
Summary of business and financial information
The Joyou Group designs, produces and sells faucets and other sanitary products. Under
its own brand "Joyou", the Joyou Group sells in China in its core business bathroom
faucets, kitchen products, shower faucets and other sanitation equipment. The Joyou
Group is also a supplier for international brands and wholesalers in the USA and Europe.
Pursuant to the consolidated financial statements as of 31 December 2012, Joyou AG and
its affiliated companies generated consolidated sales revenues of EUR 329,614,000.00
and profit for the period of EUR 39,795,000.00 after tax. In the first six months of the
financial year 2013, the consolidated sales revenues of the Joyou Group amounted to
EUR 173,747,000.00 and profit for the period after tax amounted to EUR 13,154,000.00.
As of 30 June 2013, the Joyou Group employed 3,272 staff in total.
2.3
Shareholder structure
The shareholder structure known to the Company based on the voting rights
announcements
pursuant
to
Section
21
of
the
Securities
Trading
Act
(Wertpapierhandelsgesetz, WpHG) as of the publication date of this Statement is as
follows:

Grohe Group S.à r.l. holds 1,720,486 Joyou Shares (approx. 7.2% of the Share
Capital).

Joyou Grohe Holding AG, a fully-owned subsidiary of Grohe Group S.à r.l. holds
15,603,158 Joyou Shares (approx. 65.1% of the Share Capital).
Accordingly, from the 23,967,492 Joyou Shares issued in total, 17,323,644 (approx.
72.3% of the Share Capital) are held by Joyou Grohe Holding AG and Grohe Group
S.à r.l., i.e. by the companies of the Grohe Group. The remaining 6,643,848 Joyou Shares
(approx. 27.7% of the Share Capital) are in free float.
2.4
Grohe/Joyou Shareholders' Agreement
The current shareholding of Grohe Group in Joyou AG increased to approx. 72.3% based
on a shareholders' agreement dated 22 March 2013 (the "Grohe/Joyou Shareholders'
Agreement"), pursuant to which the former major shareholders of Joyou AG, Mr Jianshe
Cai and Mr Jilin Cai, Grohe Holding GmbH, Joyou Grohe Holding AG and the shareholders
of Grohe Group S.à r.l. agreed on and implemented the restructuring of the shareholding
structure of Joyou AG and the Grohe Group (see ad-hoc notification and press release of
Joyou AG dated 21 March 2013). As consideration for the transfer of their direct and
indirect shareholding in Joyou AG to Grohe Group S.à r.l., Mr Jianshe Cai and Mr Jilin Cai
received a shareholding in the amount of 12.5% in Grohe Group S.à r.l., which they hold
5
Non-binding English convenience translation
via Cai GmbH, which they jointly own. Both Grohe Group S.à r.l. and Cai GmbH are
parties to the Grohe/Joyou Shareholders' Agreement. (Grohe Group and Joyou Group are
hereinafter jointly referred to as "Grohe/Joyou Group".)
The Grohe/Joyou Shareholders' Agreement contains various provisions which refer both to
the strategy of Grohe/Joyou Group and to the corporate governance rules of Joyou AG
and Grohe Group. Thus, the Grohe/Joyou Shareholders' Agreement provides for a dual
brand strategy as an essential prerequisite to reach the common aim of achieving
worldwide market leadership in the sanitaryware industry. As regards corporate
governance of Joyou AG and Grohe Group S.à r.l., the Grohe/Joyou Shareholders'
Agreement contains the following provisions:

Joyou Grohe Holding AG and Grohe Group S.à r.l. will always vote for a nominee to
the Supervisory Board of Joyou AG proposed by Cai GmbH (see also Section 9.4 of
the Offer Document).

To the extent legally permissible, Grohe Group S.à r.l. and Cai GmbH shall jointly
agree on a nominee to the Management Board of Joyou AG prior to any proposal
for a respective appointment of the nominee (see also Section 9.4 of the Offer
Document).

Certain resolutions of the general shareholders' meeting of Joyou AG will only be
adopted by Joyou Grohe Holding AG and Grohe Group S.à r.l. with the consent of
Cai GmbH; for example, resolutions on a domination and profit transfer agreement,
a delisting of Joyou AG or a squeeze-out of minority shareholders of Joyou AG. As
regards a delisting or a squeeze-out, such consent shall not be unreasonably
withheld and is not required in certain cases of a new listing of shares in Joyou AG
or certain of its subsidiaries on a regulated market in Asia (see also Section 9.7 of
the Offer Document).

Joyou Grohe Holding AG and Grohe Group S.à r.l. will not support any proposals
from freefloat shareholders as to the distribution of dividends at the level of Joyou
AG (see also Section 9.1 of the Offer Document).

Mr Jianshe Cai and Mr Jilin Cai will become members of the Executive Committee of
Grohe AG responsible for Chinese business operations. Furthermore, Mr Jianshe Cai
will become a member of the Board of Directors of Grohe Group S.à r.l (see also
Section 9.8 of the Offer Document).
Moreover, the Grohe/Joyou Shareholders' Agreement provides that each acquirer of Grohe
Group S.à r.l. must accede to the Grohe/Joyou Shareholders' Agreement and assume
certain obligations under the Grohe/Joyou Shareholders' Agreement of the existing
owners of Grohe Group S.à r.l., which at this point in time withdraw from the Grohe/Joyou
Shareholders' Agreement.
3.
INFORMATION ABOUT THE BIDDER
Detailed information on the Bidder and its existing and future shareholder structure are
set out in Section 6 of the Offer Document.
The Bidder is a limited liability company (société à responsabilié limitée) incorporated and
organised under the laws of the Grand Duchy of Luxembourg, having its registered office
in Luxembourg, the Grand Duchy of Luxembourg, registered with the Luxembourg
Register of Commerce and Companies (Registre de Commerce et des Sociétés) under
registration number B 179188. The Bidder has its business address at 46A, avenue John
F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.
6
Non-binding English convenience translation
The business objective of the Bidder is the acquisition, holding and disposal of interests in
the Grand Duchy of Luxembourg and/or in foreign companies and undertakings, as well as
the administration, development and management of such interests.
The Bidder's financial year starts on 1 January and runs until 31 December. The Bidder's
registered share capital currently amounts to EUR 12,500.00 and is divided into 12,500
shares, each with a voting right and with a nominal amount of EUR 1.00.
The sole shareholder of the Bidder is GraceA k.k., a stock corporation (kabushiki kaisha)
incorporated and organised under the laws of Japan, having its registered office in Tokyo,
Japan, registered with Tokyo Legal Affairs Bureau (Sumida Branch), under registration
number 0106-01-045017 ("GraceA"). Sole shareholder of GraceA is currently LIXIL
Corporation, a stock corporation (kabushiki kaisha) incorporated and organised under the
laws of Japan, registered with Tokyo Legal Affairs Bureau (Sumida Branch), under
registration number 0106-01-028126 ("LIXIL Corporation"). Sole shareholder of LIXIL
Corporation is LIXIL Group Corporation, a stock corporation (kabushiki kaisha)
incorporated and organised under the laws of Japan, having its registered office in Tokyo,
Japan, registered with Tokyo Legal Affairs Bureau (Sumida Branch), under registration
number 0106-01-004914 ("LIXIL", together with its subsidiaries the "LIXIL Group").
The shares in LIXIL are admitted to trading on the Tokyo Stock Exchange.
According to the Offer Document, LIXIL Group is a leading building materials and housing
equipment group. Its business comprises of the segments (i) metal building material, (ii)
plumbing fixtures, (iii) other building materials and equipment, (iv) distribution and retail
and, (v) housing, real estate and other.
Following the fulfilment or waiver of all Completion Conditions, Development Bank of
Japan, Inc. ("DBJ") will become a shareholder of GraceA. DBJ is a stock corporation
(kabushiki kaisha) incorporated and organised under the laws of Japan, having its
registered office in Tokyo, Japan. Currently, sole shareholder of DBJ is the State of Japan.
DBJ is a financial institution that provides both loans and direct investments to corporates
and is fully capitalised by its current sole shareholder, the State of Japan. It is mainly
active in Japan, but also has presences in New York, United States of America, Singapore,
Republic of Singapore, and London, United Kingdom.
Based on aforesaid investments, LIXIL Corporation and DBJ will each hold half the voting
rights in GraceA. More detailed information about the Bidder and its shareholding
structure following the fulfilment or waiver of the Completion Conditions can be found in
Annex 1 to the Offer Document.
4.
INFORMATION ON THE TAKEOVER OFFER
4.1
General
The Takeover Offer is a voluntary public takeover offer (cash offer) pursuant to Section 29
of the Takeover Act for the acquisition of the Joyou Shares.
The Offer can be accepted by all domestic and foreign Joyou Shareholders pursuant to the
provisions of the Offer Document and the respectively applicable legal provisions. The
Takeover Offer is subject to German law, in particular to the provisions of the Takeover
Act.
4.2
Kind and amount of consideration
The Bidder offers to acquire all Joyou Shares at a purchase price of
EUR 12.16 per Joyou Share
(the "Offer Price").
7
Non-binding English convenience translation
4.3
Acceptance Period, Additional Acceptance Period
Information on the Acceptance Period is provided in Section 5 of the Offer Document.
Joyou Shareholders can submit their Joyou Shares for sale and thus accept the Takeover
Offer from 6 November 2013 until 4 December 2013, 24:00 (Frankfurt am Main local
time) (the "Acceptance Period").
Under the following circumstances, the Acceptance Period will automatically be extended:

The Bidder can amend the Takeover Offer up to one business day before
expiry of the Acceptance Period (i.e. by the expiry of 3 December 2013,
24:00). In the event of an amendment of the Takeover Offer within the last
two weeks before expiry of the Acceptance Period, the Acceptance Period
will be extended by two weeks (Section 21 para. 5 of the Takeover Act) and
is then expected to end on 18 December 2013, 24:00 (Frankfurt am Main
local time).

If during the Acceptance Period of the Takeover Offer a third party submits a
competing offer and if the Acceptance Period for the Takeover Offer made
under this Offer Document expires prior to expiry of the acceptance period
for the competing offer, the Acceptance Period under this Takeover Offer is
extended until the expiry of the acceptance period of the competing offer
(Section 22 para. 2 of the Takeover Act).

In the event that Joyou AG convenes an extraordinary general meeting
(außerordentliche Hauptversammlung) in connection with the Takeover
Offer after the Offer Document has been published, the Acceptance Period
shall be ten weeks from the date of publication of the Offer Document
without prejudice to any extension of the Acceptance Period mentioned
above (Section 16 para. 3 of the Takeover Act). In this case, the Acceptance
Period would be expected to end on 15 January 2014, 24:00 (Frankfurt am
Main local time).
Joyou Shareholders who have not accepted the Takeover Offer within the Acceptance Period may still accept the Takeover Offer pursuant to Section 16 para. 2 sentence 1 of the
Takeover Act within two weeks after publication of the results of the Takeover Offer by the
Bidder pursuant to Section 23 para. 1 sentence 1 no. 2 of the Takeover Act (the
"Additional Acceptance Period"), provided that the non-fulfilment of the Completion
Conditions set out in Section 13.1 of the Offer Document, which have not been waived,
has not become final by that time.
4.4
Acceptance of the Takeover Offer
Any actions to be taken and statements to be made by Joyou Shareholders in order to
accept the Takeover Offer, as well as the legal consequences of the acceptance of the
Takeover Offer are described in Section 11 of the Offer Document.
4.5
Stock exchange trading in Tendered Joyou Shares
According to Section 11.8 of the Offer Document, the Bidder intends to arrange for the
admission of the shares for which the Takeover Offer has been accepted within the
Acceptance Period or within the Additional Acceptance Period respectively (the "Tendered
Joyou Shares") to stock market trading on the regulated market of the Frankfurt Stock
Exchange (Frankfurter Wertpapierbörse) under ISIN DE000A1X3TF9 as of the third
trading day following the commencement of the Acceptance Period.
Trading in the Tendered Joyou Shares on the regulated market of the Frankfurt Stock Exchange is expected to end
8
Non-binding English convenience translation

after regular stock exchange trading hours on the second trading day on the
Frankfurt Stock Exchange preceding the day of expiry of the Additional
Acceptance Period; or

after regular stock exchange trading hours on the day the fulfilment of the
Completion Conditions, as far as these have not been waived, is published,
whichever is the later date.
The date as of which trading ends shall be published by the Bidder without undue delay
via an electronically operated information dissemination system within the meaning of
Section 10 para. 3 sentence 1 no. 2 of the Takeover Act or in the Federal Gazette
(Bundesanzeiger).
Any person acquiring Tendered Joyou Shares will assume all rights and obligations arising
as a result of the acceptance of the Takeover Offer.
Joyou Shares not tendered
ISIN DE000A0WMLD8.
4.6
for
sale
will
continue
to
be
traded
under
Settlement of the Takeover Offer
Section 11.6 of the Offer Document contains information regarding settlement of the
Takeover Offer, in particular as regards the transfer of the Tendered Joyou Shares to the
Bidder and the payment of the Offer Price.
4.7
Completion Conditions
The Takeover Offer will only be completed and implemented if the requirements for the
completion of the Takeover Offer described in Section 13 of the Offer Document (the
"Completion Conditions") are fulfilled or have been validly waived before the end of the
Acceptance Period.
In particular, the completion of the Takeover Offer is conditional upon merger control
clearance in the EU, the United States of America, Russia and China. The necessary
regulatory approvals and procedures, in particular the merger control procedure in the
respective countries, are described in Section 12 of the Offer Document.
The Takeover Offer will lapse as described in Section 11.9 of the Offer Document if any of
the necessary merger control clearances has not been granted by 26 June 2014 and the
fulfilment of the respective Completion Condition has not been validly waived. In such a
case the agreements which have come into existence as a result of acceptance of the
Takeover Offer will cease to exist and will not be completed. The already tendered Joyou
Shares will be re-booked.
4.8
Right of withdrawal
Information on the requirements for any potential right of withdrawal and its exercise by
Joyou Shareholders who accepted the Takevoer Offer are contained in Section 16 of the
Offer Document.
Joyou Shareholders who accepted the Takeover Offer during the Acceptance Period may
withdraw from the agreements concluded by accepting the Takeover Offer at any time
before the expiry of the Acceptance Period if and to the extent the Takeover Offer is
amended pursuant to Section 21 of the Takeover Act or a competing offer is submitted
and the respective Joyou Shareholder accepted the Takeover Offer prior to the
amendment of the Takeover Offer or the publication of the Offer Document for the
competing offer.
9
Non-binding English convenience translation
5.
BACKGROUND TO THE TAKEOVER OFFER
The background to the Takeover Offer is described in Section 8 of the Offer Document.
5.1
Grohe Share Purchase Agreement
With the voluntary Takeover Offer now presented, the Bidder avoids the obligation to
launch a mandatory offer pursuant to Section 35 of the Takeover Act as a result of the
future obtainment of indirect control over Joyou AG.
LIXIL participated in a tender process for the acquisition of Grohe Group S.à r.l. and
concluded a share purchase agreement on 26 September 2013 relating to the acquisition
of 87.5% of shares in Grohe Group S.à r.l. ("Grohe Share Purchase Agreement").
Following the completion of the Grohe Share Purchase Agreement, the Bidder will
concurrently with the acquisition of the shares in Grohe Group S.à r.l. indirectly also
acquire approx. 72.3% of Joyou Shares. The remaining 12.5% of shares in Grohe Group
S.à r.l. will still be held by Cai GmbH, and therefore indirectly by Mr Jianshe Cai and Mr
Jilin Cai, even after the completion of the Grohe Share Purchase Agreement.
Provided that the Grohe Share Purchase Agreement is completed, the Bidder and the
shareholders then controlling the Bidder (GraceA, LIXIL Corporation and LIXIL as well as
DBJ and the State of Japan) will acquire indirect control over Joyou AG within the meaning
of Section 29 para. 2 of the Takeover Act. Due to the voluntary Takeover Offer now
submitted and the releasing effect of the voluntary Takeover Offer pursuant to Section 35
para. 3 of the Takeover Act, the Bidder and the abovementioned companies are released
from the obligation to make a mandatory offer for Joyou Shares which would otherwise
arise at the time of acquiring control.
5.2
Grohe/Joyou Shareholders' Agreement
At the time of completion of the Grohe Share Purchase Agreement, the Bidder will accede
to the Grohe/Joyou Shareholders' Agreement (see Section 2.4 of this Statement).
6.
TYPE AND AMOUNT OF THE CONSIDERATION OFFERED
Information regarding the consideration offered is provided in Section 10 of the Offer
Document.
6.1
Type and amount of the consideration
The Bidder offers the Joyou Shareholders a consideration in the amount of EUR 12.16 per
Joyou Share in cash.
6.2
Statutory minimum price
Pursuant to Section 31 para. 1 of the Takeover Act and Section 31 para. 7 of the Takeover
Act in conjunction with Sections 3 to 5 of the of the Takeover Act Offer Regulation
(Angebotsverordnung), the consideration offered must correspond to the statutory
minimum price, which means that with respect to the Joyou Shares the consideration
must correspond to the higher of the following prices:

the volume-weighted average domestic stock exchange price of the Joyou
Shares during the last three months before the Bidder's decision to make
the Takeover Offer was published on 26 September 2013 (see Section
6.2(a) below); or

the highest consideration granted or agreed by the Bidder, a person acting
in concert with the Bidder, or their subsidiaries for the acquisition of Joyou
Shares or the right to acquire the Joyou Shares within the last six months
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before the publication of the Offer Document on 6 November 2013 (see
Section 6.2(b) below).
(a)
Stock exchange price
Pursuant to Section 5 of the of the Takeover Act Offer Regulation, the consideration
must be at least equal to the volume-weighted average domestic stock exchange
price of Joyou Shares during the last three months prior to the publication of the
decision to make the Takeover Offer in accordance with Section 10 para. 1
sentence 1 in conjunction with Section 29 para. 1 and Section 34 of the Takeover
Act by the Bidder on 26 September 2013. The relevant average price pursuant to
Section 5 of the Takeover Act Offer Regulation was notified by the German
Securities Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht "BaFin") to be EUR 12.16 per Joyou Share as at (and including) 25 September
2013.
Historically, the performance of the share price of Joyou has varied. According to
the Offer Document, the average stock exchange price in the last 24 months before
the day of the publication of the decision to make the Takeover Offer by the Bidder
amounted to EUR 9.54. The volume-weighted average domestic stock exchange
price of Joyou Shares during the last 12 months prior to the day of the publication
of the decision to make the Takeover Offer by the Bidder amounted to EUR 10.97.
The average stock exchange price in the six months period from 26 March 2013
until 25 September 2013 amounted to EUR 11.72. The average stock exchange
price in the last month before the day of the publication of the decision to make the
Takeover Offer by the Bidder amounted to EUR 12.72. The highest price in this
period was EUR 13.00 on 25 September 2013.
(b)
Pre-acquisitions
Pursuant to Section 4 of the of the Takeover Act Offer Regulation, the consideration
must be at least equal to the highest consideration granted or agreed upon by the
Bidder, persons acting in concert with the Bidder or their subsidiaries for the
acquisition of Joyou Shares or the right to acquire Joyou Shares within the last six
months prior to the publication of the Offer Document on 6 November 2013, i.e.
from 6 May 2013 until 5 November 2013. According to the Offer Document, neither
the Bidder nor persons acting in concert with the Bidder, nor their subsidiaries
acquired Joyou Shares or entered into agreements which entitle them to acquire
Joyou Shares within the meaning of Section 4 of the Takeover Act Offer Regulation
within the relevant time period. Therefore, a minimum consideration pursuant to
Section 4 of the of the Takeover Act Offer Regulation does not exist for Joyou
Shares.
(c)
Valuation
In as far as the Management Board and the Supervisory Board are able to verify
this fact based on the information available, the Offer Price for the Joyou Shares
thus corresponds to the provisions of Sections 31 para. 1 of Takeover Act in
conjunction with para. 3 et seq. of the Takeover Act Offer Regulation regarding the
statutory minimum price.
6.3
Fairness opinion
For the purpose of assessing the adequateness of the consideration, Network Corporate
Finance GmbH & Co. KG, Goethestraße 83, 40237 Düsseldorf, Germany ("Network"),
commissioned by the Management Board and in the function of an independent expert
third party, has submitted a statement on whether the offered purchase price of
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EUR 12.16 per Joyou Share is adequate from a purely financial perspective (the
"Fairness Opinion"). The Fairness Opinion is annexed to this Statement.
(a)
Company valuation
For the purposes of drawing up the Fairness Opinion, Network carried out a
valuation. The valuation was drawn up based on the provisional business results for
the 2013 financial year and the Company's budget and the analyses of scenarios
derived from it. In the process, the so-called "discounted cash flow" (DCF) method,
which is based on a discounting of expected payment flows, was primarily used.
In addition, an analysis of the valuation of comparable companies was drawn up
based on a comparison of relevant key ratios and the market value. In the process,
the so-called "public peer multiples" method was used, which is based on
determining the financially relevant valuation key ratios of companies from the
same business segment listed on the stock exchange with regard to a comparison
of their market value with expected turnover, profits and financial position.
In addition, a multiples approach was also used with regard to preceding M&A
transactions, which is based on a comparison of prices that were paid in previous
M&A transactions for comparable companies. The last valuation method, however,
was used only for control purposes in order to confirm the results of the first two
valuation methods.
In all valuations, the value of Joyou AG was determined on a stand-alone basis, i.e.
potential synergy effects from the takeover planned by the Bidder and the
associated cooperation were not taken into account.
In addition, Network reviewed the most recent analysts' reports of various
investment banks, which quoted the price targets for a period between twelve and
eighteen months. The price targets cited in the reports consistently exceed the
purchase price being offered by more than 30%.
(b)
Result of the Fairness Opinion
In summary, Network's Fairness Opinion comes to the conclusion that the purchase
price of EUR 12.16 per Joyou Share in cash offered by the Bidder in the Offer
Document does not represent an adequate consideration for the share of Joyou AG
from a financial perspective.
The Management Board and the Supervisory Board explicitly embrace the
presented results of the Fairness Opinion and the underlying company valuation by
Network.
7.
GOALS PURSUED BY THE BIDDER AND CONSEQUENCES FOR JOYOU AG
The intentions and goals pursued by the Bidder are described in Section 9 of the Offer
Document. The statements of the Management Board and the Supervisory Board in this
Section of the Statement with regard to the intentions of the Bidder relate to the
aforementioned Section of the Offer Document. The Management Board and the
Supervisory Board have no reason to doubt the intentions of the Bidder described therein.
7.1
Future business activity of Joyou AG
According to the Offer Document, LIXIL sees good development potential in the global
sanitary products market and faucets in particular. It is the strategic goal of LIXIL to
combine Grohe Group and LIXIL Group, to coordinate their business activities with the
activities of Joyou Group and to create a leading provider for bathroom solutions.
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The Bidder has no intentions to change the business activity of Joyou Group. Joyou Group
shall continue and further develop its current business strategy as an independent
company and the Bidder intends to support Joyou Group in following its chosen business
direction.
The dual brand strategy of Grohe Group and Joyou Group shall be pursued in order to
enable the development of these groups into one of the worldwide market leaders in the
sanitaryware industry.
The Bidder has, under the Grohe Share Purchase Agreement, undertaken to assume, as of
the closing of the Grohe Share Purchase Agreement, certain rights and obligations under
the Grohe/Joyou Shareholders' Agreement.
The Management Board and the Supervisory Board welcome the intention of the Bidder to
retain Joyou Group and Grohe Group as independent joint stock corporations and to
support the development of the two groups into one of the worldwide leaders in the
sanitaryware industry. Furthermore, the Management Board and the Supervisory Board
welcome the fact that the Bidder will accede to the Grohe/Joyou Shareholders'
Agreement, as they consider the Grohe/Joyou Shareholders' Agreement to be an essential
prerequisite for the ongoing stable development of Joyou Group and Grohe Group in
pursuing the strategy of achieving worldwide leadership in the sanitaryware industry.
7.2
Future use of assets of Joyou AG
The Bidder has no intention to, and does not intend to cause Joyou AG to, divest parts of
the current business operations or assets of Joyou AG.
This is welcomed by both the Management Board and the Supervisory Board.
7.3
Future obligations of Joyou AG
The Bidder has no intentions which would result in an increase of Joyou AG's current
indebtedness outside the ordinary course of business. To the Bidder's knowledge, the
consummation of the Takeover Offer will not impact the existing financing agreements of
Joyou Group.
The Management Board and the Supervisory Board welcome that the Bidder has no
intentions which would result in an increase of Joyou AG's current indebtedness outside
the ordinary course of business. Furthermore, the Management Board and the Supervisory
Board share the Bidder's view that the consummation of the Takeover Offer will not
impact the existing financing agreements of Joyou Group. In fact, the Management Board
and the Supervisory Board believe that the integration of Joyou Group into the wider
Grohe Group and the LIXIL Group will result in more favourable financing conditions for
Joyou Group in the future as compared to the past.
7.4
Management Board and Supervisory Board of Joyou AG
The Bidder intends to support the current business strategy of the Management Board and
views Joyou AG's Management Board as a strong and experienced management team,
which will be a key factor for the combined operations.
Moreover, in accordance with the Grohe/Joyou Shareholder Agreement, the bidder does
not intend to work towards a change of the composition of the Management Board or the
Supervisory Board of Joyou AG. The Takeover Offer will therefore not have a direct impact
on the composition of the Supervisory Board of Joyou AG.
The Management Board and the Supervisory Board welcome the fact that the Bidder does
not intend to work towards a change of the composition of the Management Board of
Joyou AG.
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7.5
Employees, terms and conditions of employment and employee representation
The Bidder intends to respect the rights of the employees of Joyou Group and to not take
any action aimed at amending the existing collective terms within Joyou Group.
Furthermore, the Bidder has no intention to take any action that could lead to a significant
reduction of the current workforce of Joyou Group, a material change in the employment
terms or the conditions of the employee representatives and representation bodies. Also,
the Bidder has no intention to initiate dismissals due to operational reasons
(betriebsbedingt) within Joyou Group.
This is expressly welcomed by the Management Board and the Supervisory Board.
7.6
Registered office, location of key company divisions of Joyou AG
There is no intention on the part of the Bidder to relocate the registered office of Joyou AG
in Hamburg, Germany, or the central functions of Joyou AG in Nan'an, People's Republic of
China. The Bidder does not intend to carry out any measures that will lead to the
cessation of the main activities or the closure of any significant site of Joyou Group.
This is welcomed by the Management Board and Supervisory Board of Joyou AG.
7.7
Possible structural measures
The Bidder has no intentions to carry out structural measures, such as the conclusion of a
domination and/or profit transfer agreement, a squeeze-out of minority shareholders or a
delisting. This is also done in light of the provisions of the Grohe/Joyou Shareholders'
Agreement (see Section 2.4 of this Statement).
This is welcomed by the Management Board and Supervisory Board of Joyou AG.
7.8
The role of the members of the Management Board of Joyou AG within the Grohe Group
It was agreed in the Offer Document that the present Chairman and Chief Executive
Officer of Joyou AG, Mr Jianshe Cai, will be invited to be part of the management of Grohe
Group and, in particular, assume responsibility for the Chinese operations of Grohe Group.
It was also agreed that the present Deputy Chairman and Chief Operating Officer of Joyou
AG, Mr Jilin Cai, will be invited to join the management of the Chinese operations of Grohe
Group.
For the avoidance of doubt, the Management Board and the Supervisory Board point out
that the agreement that Mr Jianshe Cai or Mr Jilin Cai shall become members of the Board
of Directors of Grohe Group S.à r.l. arises from the Grohe/Joyou Shareholders' Agreement
and not from any agreement of Messrs. Cai with the Bidder or LIXIL. Mr Jianshe Cai and
Mr Jilin Cai are already members of the Executive Committee for the Asia business of
Grohe Group, which has been established by the Management Board of Grohe AG. The
future responsibilities of Messrs. Cai within Grohe Group are explicitly welcomed by the
Management Board and the Supervisory Board of Joyou AG, as the interests of Joyou
Group may now be integrated in a more direct and immediate way into the decision
making process of the responsible governing bodies within Grohe Group.
7.9
Future business activities of the Bidder, LIXIL Group and DBJ
Beyond the objectives described in the Offer Document, neither the Bidder nor LIXIL nor
DBJ plan to change their business activities in consequence of the Takeover Offer, in
particular with regard to the location of material parts of the business and the registered
seat of the Bidder, LIXIL and DBJ, the use of their assets, their future obligations, their
employees and employee representatives, as well as the members of their management
bodies and the terms and conditions of employment.
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The Management Board and the Supervisory Board agree with the Bidder that there is, in
principle, no reason to change the business activities of the Bidder, LIXIL or DBJ in
consequence of the Takeover Offer.
8.
FINANCING OF THE TAKEOVER OFFER
The financing of the Takeover Offer by the Bidder is described in Section 14 of the Offer
Document.
In the Offer Document, the Bidder declared that all necessary measures have been taken
to ensure that the Bidder has the necessary financial funds to fully fulfil its Offer at the
time the consideration becomes due. In particular, the Bidder has received an equity
commitment letter from LIXIL and DBJ in this respect.
With its letter dated 24 October 2013, BNP Paribas S.A., Frankfurt am Main branch,
Germany, confirmed pursuant to Section 13 para. 1 clause 2 of the Takeover Act that the
Bidder has taken the necessary measures to ensure that the funds required to fulfil the
Takeover Offer in full are available at the time that the claim becomes due (the "Equity
Commitment Letter"). The letter from BNP Paribas S.A. is attached to the Takeover
Offer Document as Appendix 7.
The Management Board and the Supervisory Board have no reason to doubt the
statements of the Bidder regarding the financing of the Takeover Offer or the
appropriateness of the Equity Commitment Letter of BNP Paribas S.A..
9.
EXPECTED EFFECTS OF THE COMPLETION OF THE TAKEOVER OFFER ON THE
ASSETS, FINANCIAL AND EARNINGS POSITION OF THE BIDDER AS WELL AS OF
LIXIL GROUP
Section 15 of the Offer Document contains information on the expected effects of the
completion of the Takeover Offer on the net assets, financial and earnings position of the
Bidder and LIXIL Group.
The Management Board and the Supervisory Board have no reason to doubt the
statements of the Bidder regarding the effects of the completion of the Takeover Offer on
the assets, financial and earnings position of the Bidder and LIXIL Group.
10.
INTERESTS OF MEMBERS OF THE MANAGEMENT BOARD OR THE SUPERVISORY
BOARD
10.1
Ownership of shares by members of the Management Board and the Supervisory Board
At the time of publication of this Statement, no member of the Management Board and no
member of the Supervisory Board holds any Joyou Shares.
10.2
Cash or non-cash benefits to members of the Management Board or the Supervisory
Board of Joyou AG
No member of the Management Board or the Supervisory Board of Joyou AG was granted
cash or non-cash benefits by the Bidder in connection with the Takeover Offer, nor have
any of these been promised to a member of the Management Board or the Supervisory
Board of Joyou AG.
10.3
Other interests of members of the Management Board or the Supervisory Board of Joyou
AG
As aforementioned, the members of the Management Board, Jianshe Cai and Jilin Cai will
also hold functions within Grohe Group in accordance with the Grohe/Joyou Shareholders'
Agreement (see Section 7.8 of this Statement). As described earlier, this was already
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agreed in March 2013 in the Grohe/Joyou Shareholders' Agreement and is not in any way
associated with the Takeover Offer or the acquisition of Grohe Group by the Bidder.
Messrs. Cai, in their own opinion, are not subject to particular interests with respect to the
Takeover Offer of the Bidder. Currently, there are no agreements according to which
Messrs. Cai will also become part of the management of LIXIL Group after the Takeover
Offer.
The member of the Management Board of Joyou AG Mr Gerald Mulvin is also member of
the Management Board of Grohe Group. The member of the Supervisory Board of Joyou
AG Mr David Haines is the CEO of Grohe Group. Both Mr Mulvin and Mr Haines are of the
opinion that they are not subject to particular interests with respect to the Takeover Offer
of the Bidder. Currently, there are no agreements according to which Mr Mulvin or Mr
Haines will also become part of the management of LIXIL Group after the Takeover Offer.
Apart from that, the members of the Management Board and the Supervisory Board are
not subject to other interests which could affect their statement on the Takeover Offer of
the Bidder.
11.
INTENTIONS OF THE MEMBERS OF THE MANAGEMENT BOARD AND THE
SUPERVISORY BOARD TO ACCEPT OR DECLINE THE TAKEOVER OFFER
The members of the Management Board and the Supervisory Board of Joyou AG do not
hold Joyou Shares and have therefore no intentions to accept or reject the offer.
12.
IMPLICATIONS FOR THE JOYOU SHAREHOLDERS
The following information is intended to support the Joyou Shareholders in the
assessment of the consequences of an acceptance or non-acceptance of the Takeover
Offer. The information listed below contains factors that the Management Board and the
Supervisory Board consider relevant in connection with such a valuation, but does not
claim to be a complete list of all factors that a Joyou Shareholder may possibly see as
relevant. The Joyou Shareholders must make their own judgement, taking into account
their personal circumstances.
The Management Board and the Supervisory Board also point out that they cannot give
any assessment of the fiscal consequences for the individual Joyou Shareholder including
the question of whether the acceptance or non-acceptance of the Takeover Offer could
result in fiscal disadvantages (in particular with regard to tax obligations for any capital
gain) for Joyou Shareholders.
The Management Board and the Supervisory Board recommend the Joyou Shareholders
that, if required, they obtain financial, legal and tax advice before making a decision on
whether to accept the Offer, taking into account their particular situation.
12.1
Possible effects for Joyou Shareholders accepting the Takeover Offer
The Joyou Shareholders who accept the Takeover Offer will no longer be Joyou
Shareholders. They should take the following into account:

Joyou Shareholders who accept the Takeover Offer will no longer benefit
from a favourable performance of the Company, or a favourable
performance of the Joyou Shares. However, they will also not incur any
losses in the case of a negative performance of the Joyou Shares.

A substantial period of time may lapse from the acceptance of the Takeover
Offer until the completion and payment of the purchase price to the Joyou
Shareholders accepting the Offer (see Section 11.6 of the Offer Document).
This applies in particular in light of the fact that the completion of the
Takeover Offer is subject to the Completion Conditions described in
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Section 13 of the Offer Document and Section 4.7 of this Statement. A
substantial period of time may lapse before these Conditions are completed,
the time period, however, running no longer than until 26 June 2014.
Nevertheless, Joyou Shareholders who accept the Takeover Offer are bound
to their declaration of acceptance for this period and can only withdraw
under the conditions described in Section 16 of the Offer Document.
12.2

Until the completion of the Takeover Offer, the sale of the Tendered Joyou
Shares via the stock exchange still remains possible, see Section 4.5 of this
Statement.

By law or based on established case law, compensation payments are in
principle to be paid to minority shareholders in the event of particular
structural measures. This applies in particular in the event of the conclusion
of domination or profit transfer agreement, in the event of a delisting or
squeeze-out, or in the event of conversions. These compensation payments
are fundamentally based on the value of the Company at the point in time of
the respective structural measure and are subject to judicial control. They
can be higher or lower than the Offer Price of EUR 12.16. If such structural
measures are realised after the Takeover Offer has been carried out, the
Joyou Shareholders who submit their Joyou Shares for sale are not entitled
to such compensation payments or any additional payments. This also
applies if these compensation payments are higher than the Offer Price.
Possible effects for Joyou Shareholders who do not accept the Takeover Offer
The effects on Joyou Shareholders who do not accept the Takeover Offer are described in
Section 17 of the Offer Document.
Joyou Shareholders who intend not to accept the Takeover Offer remain Joyou
Shareholders. They should take the following into account:

Joyou Shares for which the Takeover Offer is not accepted, will continue to
be tradable during the entire Acceptance Period and after implementation of
the Takeover Offer.

Joyou Shareholders who do not accept the Takeover Offer therefore
participate in a positive or negative performance by the Company or a
positive or negative performance of the Joyou Shares.

The implementation of the Takeover Offer could lead to a reduction of the
free float of Joyou Shares. Depending on the acceptance rate, increased
illiquidity of trading or substantial fluctuations in the share price may result
from a lower free float in the event of a high acceptance rate. This could
result in sale or purchase orders not being executed at all or not in a timely
manner. In addition, the declining liquidity of the Joyou Shares could result
in lower market prices and greater fluctuations in the share price than in the
past. It is therefore possible that investors who reject the Takeover Offer
will be unable in future to sell their Joyou Shares at a price above the Offer
Price, or to sell them at all.

In Section 9.7 of the Offer Document, the Bidder declared that there are no
intentions to conclude a domination and profit transfer agreement, to delist
Joyou AG or to pursue a squeeze-out. Such structural measures would in
principle also only be possible with the approval of Cai GmbH (see
Sections 2.4 and 5.2 of this Statement). However, this is no guarantee for
such structural measures not being carried out in future. The compensation
payable to Joyou Shareholders in the case of such structural measures could
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be above or below the Offer Price. The amount of such recurring
compensation payments to be paid in the case of a domination and profit
transfer agreement will be determined by reference to the circumstances
existing at the time of adoption of the relevant resolution in the general
meeting of Joyou AG and its theoretical amount cannot be predicted at this
point in time.

Following the implementation of the Takeover Offer, the Bidder may hold
the necessary voting majority to pass (with certain restrictions) important
structural measures at the general meeting of Joyou AG. This includes for
example the election and dismissal of supervisory board members,
amendments to the articles of association, increases of the share capital, the
exclusion of subscription rights, measures under transformation law as well
as the dissolution and liquidation of Joyou AG. However, some of these
measures could only be passed with the approval of Cai GmbH. According to
German law, only some of the aforementioned measures would require an
offer by the Bidder to the outside shareholders to acquire their shares in
exchange for an appropriate compensation or to grant a guaranteed
dividend, in each case on the basis of a valuation of Joyou AG. As such
enterprise valuation would have to be based on the circumstances existing
at the time of adoption of the relevant resolution in the general meeting of
Joyou AG for the relevant measure, the amount of such compensation
payments cannot be predicted at this point in time, and any consideration
offered may be equal to the Offer Price but may also be higher or lower.
The current market price of the Joyou Shares is influenced by the existence of the
Takeover Offer. It is uncertain whether the market price of the Joyou Shares will retain its
current level after the expiry of the Acceptance Deadline or whether it will be below or
above it. It is therefore possible that investors who reject the Takeover Offer will be
unable in future to sell their Joyou Shares at a price above the Offer Price.
13.
RECOMMENDATION BY THE MANAGEMENT BOARD AND THE SUPERVISORY
BOARD TO THE SHAREHOLDERS
The Management Board and the Supervisory Board assess the implementation of the
declared strategic goals of the Bidder to be positive overall for the Joyou Group and in the
interest of the Company, its shareholders, the Joyou Group, employees and creditors. The
Management Board and the Supervisory Board share the Bidder's view that increased
cooperation between Grohe/Joyou Group and LIXIL Group offers substantial potential for
synergy.
In particular, the Management Board and the Supervisory Board welcome the Bidder's
intention, as set out in the Offer Document, of allowing Joyou Group to continue to act as
an independent company, of not intending to change the structure of the Managing Board
and the Supervisory Board of Joyou AG, not wanting to influence sites and not wanting to
take any measures that could impact the employees of the Joyou Group.
The strategic objectives described in the Offer Document, however, do not depend on
whether the shareholders of Joyou AG accept or reject the Takeover Offer. In particular, a
more in-depth collaboration between LIXIL Group and Grohe/Joyou Group is also possible
with only a low rate of acceptance.
Furthermore, the Management Board and the Supervisory Board do not consider the Offer
Price to be adequate, as set out in Section 6.3 of this Statement.
On the whole, the Management Board and the Supervisory Board therefore
recommend to the Joyou Shareholders not to accept the Takeover Offer.
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The Management Board and the Supervisory Board, however, explicitly point out that the
trade in Joyou Shares has in the past twelve months been characterised by low liquidity
and considerable price fluctuations, and shareholders who materially include these risks in
their investment decisions should consider this circumstance when making their decision
on the acceptance of the Takeover Offer.
In addition, the Management Board and the Supervisory Board point out that in light of
the current circumstances on the capital market, which are still influenced by the impact
of the financial market crisis and of the very high debt levels in various states, the further
performance of the Joyou Share price is very difficult to predict. Also, the current
weakening of the Chinese economic growth and the overall uncertain outlook for the
Chinese and overall economy worldwide could also have a negative influence on the
economic development of Joyou Group. Negative developments on the capital markets
and/or the real markets might negatively influence the Joyou Share price, which could
remain at a level below the Offer Price for an extended period of time.
In this regard, the Management Board and the Supervisory Board point out that a sale of
the Joyou Shares outside of this Takeover Offer, for instance, via the stock exchange,
could also be considered instead of accepting the Takeover Offer, in particular, since the
stock exchange price at the point in time of this Statement is considerably higher than the
Offer Price.
Overall, each Joyou Shareholder should make his or her own decision, taking into account
the overall circumstances, his or her individual circumstances and his or her personal
assessment of the possibilities with regard to the future development of the value and the
share price of the Joyou Shares.
Subject to the applicable statutory regulations, the Management Board and the
Supervisory Board do not assume any responsibility for the event that the acceptance or
non-acceptance of the Takeover Offer should subsequently result in negative economic
consequences for a Joyou Shareholder.
Signatures to follow on the next page.
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Frankfurt am Main, 18 November 2013
Joyou AG
The Management Board
[signature]
__________________
Jianshe Cai
(Chairman)
[signature]
__________________
Jilin Cai
[signature]
__________________
Zufang Li
[signature]
__________________
Gerald Mulvin
The Supervisory Board
[signature]
__________________
Dr Rainer Simon
(Chairman)
[signature]
__________________
Johnny Chen
20
[signature]
__________________
David Haines