The Yomiuri Shimbun reported that Nippon Steel & Sumitomo Metal Corp, a new company that will be launched Monday from the merger of Nippon Steel Corp. and Sumitomo Metal Industries, Ltd, is expected to sell part of its 6.9% stake in Kobe Steel Ltd.

The matters of how the shares will be sold and the number will be discussed from October. It is highly likely Kobe Steel will buy back the shares from the company.

The newly merged company is expected to maintain its alliance with Kobe Steel. The latter firm's moves are likely part of preparations for industry reorganization in the future, as the company is expected to pursue a higher degree of management freedom and stronger relations with major steelmakers both at home and abroad.

Nippon Steel, Sumitomo Metal and Kobe Steel formed capital and business tie-ups in 2002 through a cross-shareholding agreement. The merged company will now be the top shareholder in Kobe Steel.

Kobe Steel is said to have requested that the firm reduce its investment ratio to below 3.8 percent, the percentage of shares currently held by its top shareholder, Nippon Life Insurance Co. Kobe Steel, which owns 0.8 percent of the shares in Nippon Steel and 2.3 percent of Sumitomo Metal's shares, also may sell part of its stock holdings.

The three way alliance was formed partly to compete against JFE Holdings Inc., which was created through the merger of NKK Corp. and Kawasaki Steel Corp.

The cross-shareholding was strengthened in 2008 by increasing the investment amounts as a defensive measure against a takeover attempt by ArcelorMittal, the world's biggest steel manufacturer.

Source - The Yomiuri Shimbun

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