April 13, 2001

Consolidation of Entire Business between Kawasaki Steel and NKK

Kawasaki Steel Corporation ("KSC") and NKK Corporation ("NKK") jointly announced today that the two firms have entered into a Memorandum of Understanding expressing their intention to combine their entire operations, following the approval of this agreement by the board of directors of both companies. The two firms are committed to initiating the consolidation process as outlined.

1. Background of the Business Consolidation

In April 2000, KSC and NKK entered into an Agreement of Mutual Cooperation for the Operations (transportation, maintenance and procurement) of four steel works in Japan. Since then, KSC and NKK have been endeavoring to expand the scope of this mutual cooperation through various joint-programs for cost reduction. During these efforts, drastic changes have been taking place, such as the global consolidation of major industries and the expansion of globally-integrated procurement policies. In order to provide customized high quality products and related services worldwide and expand business under the circumstances above, KSC and NKK agreed that consolidation is the best strategy.
With steel and engineering as core business, the consolidated company will be committed to establishing a strong earnings base and enhancing shareholders' value.

2. Objectives of the Business Consolidation

KSC and NKK will realize top-tier competitiveness in the world through strong customer base, advanced technology and state-of-the-art steel works and manufacturing plants with the highest efficiency, and create an ever-challenging and innovative corporate culture. By doing so, KSC and NKK will pursue the following:
(1)Strengthening further the capabilities to respond to global customer requirements in the fastest manner
(2)Enhancing credibility from shareholders and capital markets in the world
(3)Providing employees with more challenges and opportunities
(4)Contributing to local communities and environment conservation

3. Outline of the Consolidation

KSC and NKK will consolidate, on the basis of equal partnership and in mutual trust, the entire business, including subsidiaries and affiliates, subject to regulatory and shareholders' approval.
(1)Basic Structure and Schedule
[1st Step]
By October 2002, the two firms will plan to jointly establish a Holding Company ("Holding") and become respectively a 100% subsidiary of the Holding by the "stock-for-stock exchange" method. The Holding goes public on the Tokyo Stock Exchange, and consequently KSC and NKK go private through this exchange.
[2nd Step = Final Stage]
By April 2003, full integration is expected to be completed under the Holding to form new entities on the basis of business segment.
(2)Name, place of head office, representative board members of the Holding, etc.
These basic issues will be determined later.
(3)Share Exchange Ratio
"Stock-for-stock" exchange ratio to form the Holding will be determined by both companies, taking into consideration "fairness opinions" from independent professional institutions.

4. Synergy Effects of the Business Consolidation

KSC and NKK will continue their efforts to accomplish the various targets of each company's mid-term management plan, and will do their best to realize in the fastest manner the expected synergy effects from business consolidation, not only in the steel business but also in the engineering business and so forth.
(1) Building solid business base by strengthening further the capability to respond to global customer requirements

  • Combining R&D resources to develop more variety of product lines and to enhance the speed of product development
  • Optimizing the production allocation, and reducing a lead-time by developing revolutionary Supply Chain Management systems
  • Providing the best services to customers by expanding and integrating worldwide networks
(2) Becoming a "global leader" of cost-competitiveness
  • Reducing production and transportation costs by optimized production allocation
  • Reducing procurement costs through volume discount and unified specifications
  • Saving the capital expenditure through integrating capex programs and optimized utilization of common facilities
  • Reducing the overhead and related expenses
(3) Re-organizing business
  • Restructuring all the business lines, including subsidiaries and affiliates, for more efficient operations
(4) Improving financial conditions
  • Reducing debts by improving cash flow
  • Slimming down assets such as fixed assets and working capital
  • Centralized management of fund-raising and short-term investment for more efficient cash management and lower financing costs in all subsidiaries and affiliates

5. Preparation for the well-organized Business Consolidation

The Consolidation Preparation Committee (CPC) will be established and co-chaired by the CEOs of KSC and NKK to drive forward the consolidation. CPC will have various subcommittees to carry out the smooth integration of entire business.

KSC and NKK are committed to working together, even prior to the completion of the business consolidation, through any practicable joint programs for customer satisfaction.

For Kawasaki Steel Corporation
   Tetsuo Oki (Mr.)
   Manager (Investor Relations), Accounting & Budget Control Department
   Kawasaki Steel Corporation
   Phone # 81-3-3597-3296 Fax # 81-3-3597-3602
   email te-oki@kawasaki-steel.co.jp

For NKK Corporation
   Shinji Okutsu (Mr.)
   Manager (Public Relations), Corporate Secretariat Department
   NKK Corporation
   Phone # 81-3-3217-2140 Fax # 81-3-3214-8436
   email shinji_okutsu@ntsgw.tokyo.nkk.co.jp


Copyright 2001 JFE Holdings Inc., Terms and Conditions