Japan moves to help steelmakers avoid takeovers http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-08-25T065342Z_01_T227188_RTRIDST_0_MINERALS-JAPAN-STEEL.XML&rpc=66&type=qcna
Fri Aug 25, 2006
By Yuko Inoue
TOKYO, Aug 25 (Reuters) - Japan's trade ministry, worried about Mittal Steel's rapid growth, is exerting its influence to help the country's steel companies avoid hostile takeovers.
The Ministry of Economy, Trade and Industry is stepping up pressure on the country's anti-monopoly watchdog to ease competition rules in order to allow more consolidation among Japanese steelmakers.
At the same time, it is urging steelmakers to adopt "poison pills" to ward off hostile takeover attempts.
"Japanese steelmakers, along with other basic materials producers, are a linchpin for the strength of Japanese carmakers and other manufacturers," Hisayoshi Ando, METI's director of the iron and steel division, told Reuters.
"We need to set up appropriate defence lines, in accordance with international rules, and stay on alert against hostile takeover attempts.
"We are ready to support possible alliances among steelmakers or their alliances with user companies, if that's reasonable in maintaining an edge in Japanese manufacturing."
The move reflects growing concern among Japanese steelmakers and business people that Mittal (MT.N: Quote, Profile, Research) (ISPA.AS: Quote, Profile, Research) (MTBL.BR: Quote, Profile, Research), the world's biggest steelmaker -- which last month grabbed No. 2 Arcelor (CELR.PA: Quote, Profile, Research) in a $32.3 billion hostile bid -- could turn its eyes to Nippon Steel Corp. (5401.T: Quote, NEWS, Research), JFE Holdings Inc. (5411.T: Quote, NEWS, Research) or other Japanese companies.
Nippon Steel and JFE have products that the new Arcelor-Mittal group lacks, such as shipbuilding plates and pipes used in oil drilling, which are seeing booming demand.
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Japanese automakers, shipbuilders and construction machinery makers, among others, rely on custom-made steel, just-in-time delivery and sophisticated services provided by Japanese steelmakers to maintain product quality. Lightweight, thin and high-strength sheet steel and parts used in Japanese car bodies and engines have helped boost their fuel efficiency.
"What will happen to Japan's carmakers and other manufacturers if their current steel supply links are disrupted due to a hostile takeover?" Yasuo Inubushi, president of Kobe Steel Ltd (5406.T: Quote, NEWS, Research), told reporters last month. "I hope the government will seriously consider the relevance."
Despite the pressure from METI, which once had power to force industry realignments, Japanese steel makers currently show little interest in merging with one another, as they are enjoying record earnings.
Still, the emergence of Arcelor-Mittal, three times bigger than its closest rival Nippon Steel, has already forced Japan's top steelmaker to shift its strategy.
Nippon Steel President Akio Mimura, previously focused on strengthening upscale products, now says the company must expand its volume to cope with global realignments and make the industry more balanced.
Nippon Steel has cross-shareholdings with Sumitomo Metal Industries Ltd. (5405.T: Quote, NEWS, Research), Kobe Steel and South Korea's POSCO (005490.KS: Quote, Profile, Research), among others.
METI called on Japan's Fair Trade Commission in May to ease rules for mergers. The current rules make a merger of top Japanese steelmakers impossible. The commission is expected to ease its rules for business consolidation by the end of March 2007.
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