Sep 27 2006
JFE Steel Corporation announced today the signing of a basic agreement with Dongkuk Steel Mill Co., Ltd.1) to strengthen their existing partnership, including through an expansion of their capital ties.
The companies signed a mutual-cooperation agreement in July 1999 and have since deepened their cooperation in many areas, including capital, technology and raw-material sourcing. They have decided to further strengthen and expand their partnership to better meet the booming demand for steel plate in South Korea. In particular, JFE Steel will assist Dongkuk Steel in the enhancement and improvement of its steel plate supply capacity, which will ensure that the combined capacity of the two groups is sufficient.
The companies will finalize details with the goal of signing a separate agreement by the end of the year. Under the basic agreement, JFE Steel will:
- Cooperate in Dongkuk Steel's construction of a plate mill in Dangjin
- Provide manufacturing technology support for production of high-grade steel plate
- Continue to provide stable supplies of slabs for high-grade steel plate production
JFE Steel will acquire Dongkuk Steel treasury shares that will increase its stake from 4.1% to 15%. Meanwhile, Dongkuk Steel will acquire 10 billion yen in shares of JFE Holdings, beginning with an initial acquisition of 5 billion yen by the end of September 2007.
As a result of the expanded investment, Dongkuk Steel will become an equity-method subsidiary of JFE Steel, and JFE Steel will seat an outside director on Dongkuk Steel's board.