Japan’s biggest steelmaker, Nippon Steel & Sumitomo Metal Corp., said Monday it will buy Nisshin Steel Co., in an attempt to address falling demand and price competition amid China’s economic slowdown.
Nippon Steel, the largest shareholder in Japan’s fourth-largest player Nisshin Steel with a stake of around 8 percent, is planning to increase its holding to somewhere between 51 percent and 66 percent.
Nisshin Steel will become a subsidiary of Nippon Steel around March 2017, but its shares will remain listed on the Tokyo Stock Exchange.
The deal will consolidate the Japanese steel industry into a competition between three major steelmakers with blast furnaces — Nippon Steel, JFE Holdings Inc. and Kobe Steel Ltd.
The two companies have booked more than 6 trillion yen ($49.5 billion) in combined sales. Nippon Steel, the world’s second-largest steelmaker by output after ArcelorMittal S.A., did not say how much it will pay for the acquisition.
Nippon Steel President Kosei Shindo told a press conference that the business environment facing the steel industry is “extremely severe” due to excessive production capacity in Asia and the stalling Chinese economy.