TOKYO | Tue Nov 15, 2011 8:00am EST
(Reuters) – Nisshin Steel Co (5407.T) and Nippon Metal Industry Co (5479.T) said on Tuesday they aim to merge by October next year, forming Japan’s second-largest stainless steel maker with a combined market capitalization of 121 billion yen ($1.57 billion) at current share prices.
The companies are consolidating as the industry confronts a shrinking domestic market and tough competition from larger, lower-cost competitors elsewhere in Asia, such as South Korea’s POSCO (005490.KS).
They aim to set up a holding company but gave no further details of the merger plan.
Nisshin Steel is by far the larger of the two with market capitalization of 107.4 billion yen, and already holds a 5 percent stake in Nippon Metal Industry.
Shares in the two firms jumped on Monday after a media report of the merger plan, which Nisshin declined to confirm at the time, although their share prices fell back again on Tuesday. The merger announcement came after Tuesday’s market close.
Nisshin Steel ended at 108 yen on Tuesday, down 6.9 percent from the day before and a 1.8 percent fall from last Friday, before the media report. Nippon Metal Industry ended at 73 yen, down 6.4 percent on the day but up 5.8 percent from Friday.
The merged company would be Japan’s second-largest stainless steel producer after Nippon Steel Corp (5401.T), Japan’s largest steel maker and a 9 percent owner of Nisshin Steel.
Nippon Steel and Sumitomo Metal Industries (5405.T) announced in February their plans to merge to form the world’s second-largest steelmaker.
Nisshin Steel President Hideo Suzuki said in an interview early this year that consolidation was crucial if Japan’s stainless steel sector was to survive against bigger Asian rivals .
Nisshin also owns 15 percent of Spain’s Acerinox (ACX.MC), the world’s leading stainless steel producer.
($1 = 76.950 Japanese Yen)
(Reporting by Junko Fujita and Edmund Klamann; Editing by Edwina Gibbs and Joseph Radford)
Jacqueline Tongko 