Nisshin Steel, Nippon Metal Industry Target 13 Billion Yen of Merger Synergy

Nisshin Steel and Nippon Metal Industry announced on Monday they signed basic agreement for their merger into new holding company created in October 2012. The share transfer rate is 0.1 share of Nisshin Steel and 0.056 shares of Nippon Metal Industry for a common stock of the holding company, Nisshin Steel Holdings. Nisshin Steel’s president Toshinori Miki leads the new company as president and CEO with chairman and director Hideo Suzuki, who is chairman and director of Nisshin Steel, and vice president Hiroshi Yoshimura, who is president of Nippon Metal Industry. The new company integrates the stainless steel production into Shunan plant of Nisshin Steel while Kinuura plant stops stainless making operation. The new company integrates the stainless sales into Nisshin Steel. The new company targets annual 13 billion yen of synergy in recurring profit in fiscal 2016 ending March 2017.

The new holding company controls the operating companies of Nisshin Steel and Nippon Metal Industry. The firm tries to improve the competitiveness of the stainless business targeting one of world top stainless makers.

The new company maximizes capacity and feature of tandem hot rolling mill at Kure works of Nisshin Steel and steckel hot rolling mill of Kinuura. The new stainless operation will optimize the cold rolling operations by using the both mills of the operating companies. The firm also shuffles stainless pipe operation, headquarters functions, transportation and offshore operations for better efficiency.

They expect 7 billion yen of synergy from production phase in the targeted 13 billion yen of total synergy. The synergy is 2.5 billon yen from sales phase, 1 billion yen from offshore operations and 2.5 billion yen from other phases. They expect better products mix by combining Nisshin Steel’s contract business and Nippon Metal Industry’s spot sales business while they expect better quality by utilizing their facilities.