Commencement of Consideration of Business Integration of Nippon Steel Corporation and Sumitomo Metal Industries, Ltd.
Today, Nippon Steel Corporation (President: Shoji Muneoka) and Sumitomo Metal Industries, Ltd. (President: Hiroshi Tomono) (collectively, the “Companies”) jointly announced that they have agreed to commence consideration of the integration of their entire businesses (the “Business Integration”), targeted for October 1, 2012. The Companies will, with the spirit of their relationship being based on equality, proceed to consider the Business Integration.
I. Objectives and Background of the Business Integration
1. Objectives
The Companies would, through the Business Integration, accelerate their global strategies and realize a level of competitiveness which is globally outstanding in all aspects, including technology, quality, and cost, by combining their respective resources that each has built up, and generate synergies through consolidation of the superiority area in their respective businesses. By implementing these measures, the Companies, in the midst of drastic changes to the overall business environment, aim to become a truly world-leading comprehensive steel manufacturer.
In addition, through the Business Integration, the Companies aim to better respond to the needs of customers both in Japan and overseas and desire to contribute to further development of the Japanese and global economy and improvement of global society.
2. Background
The Companies have implemented various measures to strengthen each company’s competitiveness since their alliance commenced in 2002, such as the mutual supply of semi-finished steel products and business consolidation of their respective subsidiaries. These measures have produced excellent results. Nevertheless, confronted with the changes in the business environment surrounding the steel industry such as those mentioned below, the Companies have come to share the understanding that it is crucial to further strengthen their mutual relationship:
(i) Expansion of steel demand all over the world, especially in emerging countries;
(ii) Further increase in the need for higher quality and technology arising out of the augmentation of new business areas of steel application, such as those in energy and environment-related sectors;
(iii) Commissioning of newly constructed steel mills in various countries and intensified competition in the steel supply markets globally; and
(iv) Globalization of steel consuming industries and rapid and drastic changes in the markets for procuring raw materials for steel. Under these circumstances, the Companies have decided that the best option for all stakeholders of both Companies, including their shareholders and employees, is for a global top-tier steel manufacturer to be created through the Business Integration, by which more competitive products and services would be provided to meet the
changing needs of customers both in and outside of Japan, and the continuous expansion of the Companies’ corporate value could be sought. The Companies have thus reached today’s agreement.
changing needs of customers both in and outside of Japan, and the continuous expansion of the Companies’ corporate value could be sought. The Companies have thus reached today’s agreement.
II. Goals of the Integrated Company
The new company created by the Business Integration (the “Integrated Company”) would endeavor to realize the following goals, aiming at becoming a world-leading comprehensive steel manufacturer.
1. Promoting and Accelerating the Global Strategies The Integrated Company would establish a system for supplying a variety of products to customers in the world as a comprehensive steel supplier by complementing the business of each Company through the assembly of the Companies’ and their group companies’ respective technologies, manufacturing bases, products that they are strong at, and their sales networks, and by maximizing the synergies of such assembly. Combining the Companies’ domestic and overseas manufacturing sites and collaborating with their respective business partners having manufacturing bases in various countries would enable the Integrated Company to maintain a global system of production, marketing and sales, and R&D activities, which would cover not only Japan, the United States, and European nations, but also China, ASEAN member states, India, Central and South American countries, Middle and Near East countries, and African countries where economic growth is expected.
Furthermore, the Integrated Company would seek and implement measures to reinforce and further expand its global manufacturing and supply system at a faster pace.
2. Maintaining the World’s Most Advanced Technology
Through the integration of the Companies’ technology and R&D activities, the Integrated Company would maximize the potential of steel as a material and ensure that its technologies in the relevant area are always the most advanced. In addition, the Integrated Company would boost its competitiveness so that it can respond to the changing and upgrading needs of customers by combining the advanced technologies of the Companies, including product development capabilities, and capabilities for responding to customers’ need for quality, and by creating synergies.
The Integrated Company would further enhance its capabilities to offer comprehensive proposals to customers, combining proposals relating to both steel and non-steel businesses.
The Integrated Company would also promote further improvement of its technological infrastructure by modernizing its facilities and enhancing the level of technology, and would devote itself to dealing with issues related to raw materials, the global environment, etc., by utilizing the Companies’ technologies to the maximum extent.
3. Securing Cost Competitiveness in Global Competition
The Integrated Company would pursue greater efficiency and reinforcement of its manufacturing bases by integrating the Companies’ respective technologies and advantages in their manufacturing capabilities, implementing measures to strengthen its organization, including innovation of manufacturing processes, and concentrating and re-organizing resources.
The Integrated Company would endeavor to realize the advantages of the Business Integration at an early stage and to reinforce its business infrastructure by creating synergies and promoting measures to strengthen its competitiveness in operations, technologies, facilities, cost, raw materials, procurement, and production site management (with regard to operations, safety, environment, maintenance, etc.), and would seek to secure cost competitiveness not only for itself but for its group as a whole, to withstand the global competition.
Taking advantage of the advanced technologies, financing capacities, and other strengths of the Companies, the Integrated Company would enhance its capabilities in both procurement and technologies for the effective use of raw materials, and would further reinforce its cost competitiveness.
4. Reinforcing Business Infrastructure of Non-Steel Segments
With respect to non-steel business segments, such as engineering, urban development, chemicals, new materials and system solutions, the Integrated Company would seek to produce synergies and strengthen its competitiveness, by enhancing its business infrastructure and further improving its comprehensive capabilities to offer business solutions to customers, and assembling proposals relating to both steel and other business segments.
5. Maximizing Corporate Value and Improving Evaluation from Shareholders and Capital Markets
By implementing the foregoing measures, the Integrated Company would seek to maximize its corporate value and would use its utmost efforts to obtain a high evaluation from shareholders and capital markets by further improving its profitability, promoting the strategic utilization of funds and assets, and building up a stronger financial base.
6. Aggregation of Resources
The Integrated Company would pursue and work diligently towards the earliest accomplishment of the above goals by strongly promoting unification of all employees of the Companies, all group companies, and all partner contracting companies and aggregating the resources of the Companies, while also taking into due consideration closer cooperation with local communities.
III. Outline of Integration Plan; Working Group for Consideration of the Business Integration
The Companies will proceed with the plan for the Business Integration pursuant to the following. Such plan will be subject to approval by the Companies’ respective shareholders and the relevant authorities.
1. Form and Schedule of Integration
(1) Form of Integration
The Companies will aim to form a business holding company by way of a merger.
(2) Schedule (Prospective)
February 3, 2011: Execution of the Memorandum Regarding Consideration of the Business Integration October 1, 2012: Effective date of the merger (date of the Business Integration)
The Companies plan to execute a merger agreement targeted for April 2012 at the latest and hold shareholders’ meetings to approve the merger agreement as soon as possible but no later than at their annual ordinary shareholders’ meetings held in June 2012.
2. Basic Matters (such as company name, headquarters, representative director(s), officers, etc.)
These are to be determined after consultation between the Companies.
3. Integration Ratio
The integration ratio (i.e., the ratio of the share allotment upon the merger) is to be determined upon consultation between the Companies based on an assessment by external institutions.
4. Working Group for Promoting Integration
An “Integration Study Committee” co-chaired by the Presidents of both Companies will be organized and it will commence consideration of the Business Integration.
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