Nippon Steel to buy Sweden's Ovako

Tokyo

NIPPON Steel & Sumitomo Metal Corp on Thursday said it will buy Sweden's Ovako which makes speciality steel used in industries including wind power generation and robotics, a move that gives Japan's biggest steelmaker a manufacturing base in Europe.

The purchase, its second international foray announced this month, also gives Nippon Steel a sales network in Europe besides adding 780,000 tonnes of annual output to the Japanese company's roughly 45 million tonnes.

Nippon Steel said on March 2 that it would boost investment, including mergers and acquisitions to 600 billion yen (S$7.4 billion) over the next three years to expand overseas.

On the same day, it said it would join ArcelorMittal SA, the world's largest steelmaker, to bid for Essar Steel India Ltd, which was placed in bankruptcy court last year.

Terms will not be disclosed for the takeover of Ovako, which is owned by Triton, an investment management firm that focuses on medium-sized European companies.

The purchase will "strengthen and expand our global business and further strengthen our technology, product quality and product development capability for special steel (while) securing a base of manufacture and sales in Europe," Nippon Steel said in a statement.

Ovako, which started producing steel in the 17th century, had sales of 921 million euros (S$1.5 billion) and assets of 743 million euros in 2017, Nippon Steel said. The Japanese company is forecasting 5.7 trillion yen in sales in the year through March.

Nippon Steel also said on Thursday that it had started talks with Sanyo Special Steel Co to increase its stake in the smaller Japanese company from 14.5 per cent to more than 51 per cent and make it a subsidiary.

However, the method for increasing the stake and final terms have not been decided. Raising its holding to at least 51 per cent by buying shares from the market would cost Nippon Steel about 29 billion yen.

Nippon Steel shares closed 0.2 per cent lower at 2,403.50 yen on Thursday before the announcement, while Sanyo shares ended trading 2.8 per cent higher at 2,393 yen. REUTERS