Deal Watch: Nippon-Sumitomo Merger Creates World's No.2 Steelmaker

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Includes: AGN, BAC, BIMGF, BJ, MT, NISTY, QBEIF, SMMLY, TEVA
by: Alacra Pulse Check Blog
By Sheena Lee

Deal of the Day: Japan’s Nippon Steel (5401) and Sumitomo Metal Industries (5405) plan to merge to create the world’s second-largest steelmaker.

“The new group has a chance to become very competitive in Asia,” said CLSA analyst Jeremie Capron. “The merged company will have the best product line-up in the industry ranging from construction steel, auto steel sheets, thick plates to seamless pipes. That’s quite unique, and the No.1 company, ArcelorMittal (NYSE:MT) (54140), does not have such a product line-up.” (Reuters)

Based on Sumitomo’s market value and net debt, the deal would be worth about 2 trillion yen ($24.5 billion), according to data compiled by Bloomberg. The statement on the merger, which gave no terms, said it would be completed by October 2012. “It’s all about lowering costs and enhancing margins because while demand for steel is quite strong, one of the problems for steelmakers around the world is rising costs,” said Gavin Wendt, a senior resources analyst at Mine Life Pty in Sydney. “It may give them more leverage when it comes to dealing with the miners when buying iron ore materials.”

Deal Update: ArcelorMittal and Nunavut Iron Ore said that they had acquired an additional 6.2 million shares of the Baffinland Iron Mines (OTC:BIMGF), moving closer to taking control of the company. The latest increase brings their joint stake in Baffinland to 64 percent on a diluted basis, which takes into account the company’s warrants. (DealBook)

Deal Update: BJ’s Wholesale Club (NYSE:BJ) has decided “to explore and evaluate strategic alternatives, including a possible sale of the company.” The retailer has been seen as an attractive candidate for a buyout since July, after Leonard Green acquired a 9.5 percent stake. (DealBook)

Rumor: RANsquawk reports market talk that Teva Pharmaceuticals (NASDAQ:TEVA) may make a bid for Watson Pharmaceuticals (WPI). Watson acquired Teva’s generic pharmaceutical products portfolio in 2008. (Thomson M&A via Alacra Store)

Other Deal Activity:

Russia’s largest lender, state-owned Sberbank (SBER), has signed the deal to buy a major stake in Troika Dialog investment company. Sberbank has long been seeking to diversify its business away from traditional lending and depository operations. (Rianovosti)

Daily deals site Groupon has been aggressively trying to acquire Q&A site Hipster for a number below $10 million, and that’s before Hipster has even formally launched. Hipster is currently raising a seed round in the valuation range of $6 – $8 million. (TechCrunch)

British energy services company John Wood Group (WG) has put its well support division on the block and has hired Credit Suisse to advise on the sale. Sources gave a wide range of valuations for the unit, from as low as $1 billion to above $2 billion. (Reuters)

Bank of America (NYSE:BAC) is close to a deal to sell its Balboa insurance business to Australia’s QBE Insurance Group (OTCPK:QBEIF). (Bloomberg)