Japan watchdog approves Nippon Steel-Sumitomo merger
TOKYO (Reuters) - Japan's fair trade watchdog said on Wednesday it had approved the planned $22.5 billion merger of Nippon Steel (5401.T) and Sumitomo Metal Industries 5405.T, clearing the way for the creation of the world's No.2 steelmaker.
The Japan Fair Trade Commission said it had approved the merger on condition the firms make minor adjustments in two domestic business sectors to ensure fair competition.
The steelmakers will merge on October 1, 2012, pending shareholder approval in June, as they aim to combine resources and accelerate their expansion into Asia's growth markets, where Japanese manufacturers are shifting supply chains to improve their cost-competitiveness.
The new company will compete with low-cost rivals including POSCO (005490.KS) of South Korea and Baosteel (600019.SS) of China.
"The merger is not anticompetitive if the two firms implement measures they offered to do in certain business areas," the watchdog said.
Under a proposal by the two companies, Sumitomo Metal Industries will sell part of its sales business of low-end magnetic steel to trading house Sumitomo Corp (8053.T). Nippon Steel and Sumitomo Metal will also make efforts to lower entry barriers for new entrants in the gas transmission pipeline sector.
In the planned merger, stakeholders of Sumitomo will get 0.735 Nippon Steel share for each Sumitomo share, the two firms said in September.
The new firm, to be called Nippon Steel & Sumitomo Metal Corp, will target global output of 60-70 million metric tons a year by accelerating overseas expansion.
That compares with the world's biggest steelmaker ArcelorMittal's (ISPA.AS) 90.6 million metric tons production in 2010.
Nippon Steel and Sumitomo announced their intention to merge in February and filed the application with the watchdog on May 31.
The steelmakers have also submitted merger applications to the competition watchdogs of around 10 countries, which is necessary to operate overseas. They have already received approval from the United States, Germany, Norway, Russia and Brazil, while they are awaiting approval from others including China and India.
(Reporting by Yuko Inoue, Osamu Tsukimori, Yuka Obayashi; Editing by Chris Gallagher)
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