Nippon Steel Corp. and Sumitomo Metal Industries Ltd.'s plan to create the world's second-largest steelmaker is aimed at gaining leverage over raw material purchases and metal pricing as costs soar.
Based on Sumitomo's market value and net debt, the deal would be worth more than ¥2 trillion. Thursday's announcement of the accord, which may be Japan's biggest nonbank takeover, said it would be completed by October 2012.
Steelmakers in Japan, the world's second-biggest producer of the alloy, are seeing profits squeezed while market leader China encourages consolidation to create globally competitive companies.