Under the deal, Nippon Steel & Sumitomo Metal Corp. would make Nisshin Steel, Japan’s fourth-largest steelmaker, a subsidiary by increasing its stake in the business. Nippon already owns approximately 8 percent of Nisshin Steel, but would increase its holdings to between 51 and 66 percent.

“By bringing together the management resources of both companies and enhancing competitiveness by creating a synergy effect, we will strengthen our position as the best steelmaker with the world’s leading capabilities with the addition of Nisshin Steel,” Nippon Steel president Kosei Shindo said during a news conference announcing the deal, according to the Kyodo news agency.  

The Reuters news service reported that as part of the deal, Nisshin Steel was considering shutting down one of two blast furnaces at its Kure Works in Hiroshima prefecture. Nippon Steel, meanwhile, would supply it with billets.

Reuters said a formal decision on the deal is expected to be made in Mid-May. If it is executed, Nisshin would become a subsidiary sometime in March 2017.