Japan’s government will submit a bill to encourage takeovers and boost global competitiveness, coming just a day after Nippon Steel Corp and Sumitomo Metal Industries Ltd said they plan to merge to create the world’s second-largest steelmaker.
A ruling Democratic Party of Japan (DPJ) panel yesterday approved a proposal to simplify the process companies go through in making tender offers and to speed up Fair Trade Commission decisions on mergers, according to a document distributed to reporters. Japanese Prime Minister Naoto Kan’s Cabinet will approve the bill next week and submit it to parliament, panel leader Hitoshi Goto said.
“We want to avoid any delays with this,” Japanese Trade Minister Banri Kaieda said yesterday.
The legislation is Kan’s latest -effort to jumpstart an economy that may have contracted last quarter and is weighed down by soaring welfare costs and the world’s largest public debt. Kan is pushing a debate on raising the nation’s sales tax to help offset falling revenue.
Mergers between Japanese companies were valued at US$63 billion in the past 12 months, compared with US$102 billion for China and US$661 billion in the US, according to data compiled by Bloomberg, using criteria that both target and acquirer were from the same country.
Under the terms of the DPJ bill, a company would be able to take over a firm and make it a subsidiary without holding a shareholders’ meeting if more than 90 percent of investors respond to a tender offer, shortening the merger process by three months.
“The Kan administration has started focusing on a growth strategy,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute. “This is a part of their efforts, and their seriousness is now being tested.”
Chief Cabinet Secretary Yukio Edano yesterday said the government welcomes the steelmaker merger plan.
“The FTC will make a decision according to the law, but I hope they take quick action based on various social and economic factors,” Edano said.
In the steelmaker merger, based on Sumitomo’s market value and net debt, the deal would be worth more than ￥2 trillion (US$24.5 billion), according to data compiled by Bloomberg.
Thursday’s announcement of the accord, which may be Japan’s biggest non-bank takeover, said it would be completed by October next year.
Japanese steel shares yesterday soared on the steel merger plan, which would create a steel giant second only to the world’s biggest, ArcelorMittal, based in Luxembourg.
At the Friday closing bell, Sumitomo Metal shares were 16 percent higher at ￥224, with Nippon Steel up nearly 10 percent at ￥313.
Their domestic rivals also got a boost, with Japan’s No. 2 firm JFE Holdings up 2.12 percent at ￥2,742 and Kobe Steel 2.77 percent higher at ￥222.
Traders said the plan boosted prospects for consolidation generally in the under-pressure Japanese economy, with the Nikkei index closing 1.08 percent higher buoyed by a raft of positive earning reports.
Nippon Steel expects sales of ￥4.1 trillion and to produce 34.7 million tonnes of crude steel in the year to March, while Sumitomo Metal on Friday said it expects sales of ￥1.4 trillion with 13.5 million tonnes.
Sumitomo Metal revised its full-year forecast for net profit down nearly 60 percent — from ￥60 billion to ￥25 billion — blaming a slow recovery of the sales environment.