Sat, Feb 24, 2007 - Page 5 News List

POSCO eases rules to fight takeovers

AFO AND BLOOMBERG , SEOUL AND TOKYO

South Korea's POSCO, the world's third-largest steelmaker, said yesterday its shareholders have approved a proposal to ease rules on new share sales in an attempt to forestall hostile takeover attempts.

At an annual meeting shareholders also approved a revision to corporate articles. Following the changes, POSCO will be able to sell new shares to strategic partners and double the ceiling on the sale of bonds convertible into stock to 2 trillion won (US$2.12 billion), Yonhap news agency reported.

The revisions may help Posco, the cheapest stock among Asia's four largest steelmakers relative to book value, turn to partners such as Japan's Nippon Steel Corp to repel unsolicited suitors. Posco's been on alert after Mittal Steel Co's US$38.3 billion hostile takeover of Arcelor SA last year and Tata Steel Ltd's US$12 billion acquisition of Corus Group Plc last month.

Steelmaker stocks surged last year as Mittal fueled speculation of further acquisitions in the industry. Shares of Nippon Steel, the world's second-largest steelmaker, jumped 63 percent during last year and POSCO's stock climbed 53 percent.

POSCO's share price has surged recently on speculation that the steelmaker, which is more than 60 percent owned by foreign investors, may become a target for a takeover attempt by Arcelor Mittal, the world's biggest producer.

Denial

A senior Arcelor Mittal executive visited POSCO late last month for talks on cooperation but the Korean firm denied there had been any discussion of a merger or acquisition.

Mittal's acquisition of Arcelor, which formed a company that produces about 10 percent of the world's steel, has led to stronger ties among Asian steelmakers.

Last October, both POSCO and Nippon Steel agreed to spend more than US$900 million to increase stakes in each other to ward off hostile takeover bids. They also agreed in December to jointly negotiate iron ore purchases.

Nippon Steel President Akio Mimura said in December that the company may buy a stake in China's Baosteel Group Corp (寶鋼集團).

Japan's No. 2 steelmaker JFE Holdings Inc, the world's fourth-largest steelmaker, increased its stake in Korea's Dongkuk Steel Mill Co to 15 percent in December after the two companies said they would buy each other's shares to bolster their defenses against the threat of a takeover attempt from overseas.

POSCO said yesterday it expects full-year operating profit to exceed the company's earlier forecast of 5 percent growth, amid strong global demand. Operating profit may exceed the 4.1 trillion won forecast by the Pohang-based company in January, the company said.

Japan's top steelmakers are also set for better than expected profits for the year to this March, with Nippon Steel on track to report record pretax earnings, a Japanese newspaper said yesterday.

Earnings up

Nippon Steel now anticipates a pretax profit of ¥580 billion (US$4.8 billion) for the current fiscal year, up six percent from the previous year, compared with an earlier forecast of a 4 percent fall, the Nikkei reported.

Sales are likely to rise 6 percent from a year earlier to ¥4.15 trillion, buoyed by rising demand for high-grade steel used in automobiles, ships and machinery, the business daily said without naming its sources.

JFE Holdings is meanwhile projected to log ¥500 billion in pretax profit, better than its earlier estimate of ¥490 billion, down 3 percent instead of 5 percent, the Nikkei said.

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