Nippon Steel Corp. will raise its equity stake in Sanyo Special Steel Co. to some 15 percent from the present 11.2 percent by the end of June as part of the two firms' business and capital alliance aimed at strengthening their competitiveness, the two steelmakers said Tuesday.
The two said they will step up cooperation in production, procurement of raw materials, distribution of products, and research and development.
The deepening alliance is seen by industry insiders as an attempt to forestall the possibility of a hostile takeover bid for Sanyo Special Steel by a foreign firm now that the Netherlands' Mittal Steel Co., the world's largest steelmaker, has made such a bid for Luxembourg-based Arcelor, the second-largest steelmaker.
The planned equity stake increase will enable Nippon Steel to add some of Sanyo Special Steel's earnings to its consolidated earnings.
The steelmakers will swap an equal number of shares in their firms, they said.
Nippon Steel, the third-largest steelmaker, has supported Sanyo Special Steel, based in Himeji, Hyogo Prefecture, since the latter plunged into a crisis in 1965.
Sanyo Special Steel, capitalized at 20.1 billion yen, now has a strong market presence in bearing steel and bearing pipes. It is listed on the Tokyo Stock Exchange's first section.
Sanyo Special Steel expects to quadruple its consolidated net profit in fiscal 2005 from the previous year to 10 billion yen on 134 billion yen in sales, up 24 percent.