SHIFT: To Absorb DICO in Dec 2026 to Boost Localization

DICO, a wholly owned subsidiary of SHIFT group since July 2021, develops and plans games and operates a localization business. Demand for LQA (Linguistic Quality Assurance) has expanded as games and software expand overseas. The spread of generative AI has sharply increased needs for AIPE (AI Post Edit), where humans edit AI translations. SHIFT has observed customer requirements changing to reduce translation time and cost while maintaining quality.

To respond, SHIFT will bring its project management expertise built through software quality assurance into the localization business and strengthen cross-sell proposals including LQA. Strengthening cross-sell proposals for the localization business including LQA is the main purpose of this integration. SHIFT also plans to integrate localization resources from KINSHA, which was reorganized into SHIFT in December 2025, to improve assignment efficiency. Consolidating back-office functions is also intended to boost management efficiency. Responding to the generative AI shift is key to the group's competitiveness.

This reorganization is an absorption-type merger with SHIFT as the surviving company and DICO as the absorbed company, with an effective date of December 1, 2026. The board resolution date is August 25, 2026, and the merger agreement is scheduled to be signed on September 1, 2026. Since DICO is a 100% owned subsidiary, the merger consideration is nil.

Because SHIFT qualifies as a simplified merger under Article 796, Paragraph 2 of the Companies Act, the company will not hold a shareholder meeting to approve the merger. This reflects the judgment that integrating a wholly owned subsidiary does not materially affect shareholder interests. There are no stock acquisition rights or bonds with stock acquisition rights to be addressed. After the merger, there will be no changes to SHIFT's name, head office, representative, business, capital, or fiscal year end. A simplified merger without a shareholder meeting enables rapid restructuring.

In the most recent fiscal year ended August 2025, SHIFT recorded revenue of 83,181 million yen, operating profit of 11,567 million yen, and net profit of 9,229 million yen, maintaining high profitability. DICO posted revenue of 712 million yen and operating profit of 16 million yen, but recorded a net loss of 26 million yen. Net assets were 34,376 million yen for SHIFT and 450 million yen for DICO; total assets were 65,227 million yen and 524 million yen, respectively.

DICO's business is less than 1% the size of SHIFT, and the near-term impact on consolidated results is expected to be minimal. However, by absorbing DICO's LQA and AIPE operations, SHIFT aims to expand its service lineup in the entertainment segment. This is a small but strategic integration.

SHIFT expects the impact of this merger on its earnings and financial position to be minimal, but will promptly disclose any material impact if the business environment changes significantly. Investors and job-seeking students should note that demand for DICO's LQA and AIPE services is expanding as AI spreads, while DICO alone was in the red.

By integrating its project management capabilities honed through software testing with KINSHA's resources, SHIFT aims to improve localization profitability and expand cross-selling. LQA linked to game development requires managing large volumes of information, an area where SHIFT's strengths can be leveraged.

Going forward, the extent to which improved assignment efficiency and back-office cost reductions contribute to profit will be a focus. The impact of generative AI evolution on translation unit prices also warrants attention. The room for localization profitability improvement will test whether SHIFT can push its entertainment segment into the next growth phase.