Japan trade commission approves Nippon Steel-Sumitomo merger

Tokyo: Japan's fair trade watchdog said yesterday it had approved the planned $22.5 billion merger of Nippon Steel and Sumitomo Metal Industries, 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 in October pending shareholder approval in June, as they aim to combine resources and accelerate their expansion into Asian markets, where Japanese manufacturers are shifting supply chains to improve their cost-competitiveness.

The new company will compete with low-cost rivals including Posco of South Korea and Baosteel 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 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.