Japan on Wednesday approved a merger between the nation's biggest steelmaker Nippon Steel and third-ranked rival Sumitomo Metal Industries that will create the world's second-largest steel firm.
The tie-up, planned for official launch on October 1, 2012, will create a steel firm second only to world steel giant ArcelorMittal and generate savings in the face of increasingly intense global competition.
The Japan Fair Trade Commission announced on Wednesday that the merger would not be problematic in terms of competition.
Global competition in the steel industry has intensified in recent years with demand spurred by emerging economies such as China, which are undertaking massive construction, infrastructure and manufacturing projects.
Japanese automakers, electronics makers and other companies have also sought to expand production in foreign markets in search of growth, stronger consumer demand and by way of hedging against foreign exchange risks.
Through the merger, the steelmakers will aim to realign and strengthen a global network, namely in China, Brazil, India and Southeast Asian countries.
The new company, Nippon Steel & Sumitomo Metal Corp., "will aim to achieve 60 to 70 million tons in terms of global production capacity by further accelerating its overseas business development," the two firms said in September.
The merger, under the ratio of 0.735 Nippon Steel shares to one Sumitomo Metal share, would be the first in the Japanese steel industry since the creation of the country's number two firm JFE Holdings around a decade ago.