March 15, 2018

Company name:

Nippon Steel & Sumitomo Metal Corporation

Representative:

Kosei Shindo, Representative Director and President

Code number:

5401

Contact:

Public Relations Center

Telephone:+81-3-6867-2135, 2146, 2977, 3419

Commencement of Discussions Regarding Making Sanyo Special Steela Subsidiary of Nippon Steel & Sumitomo Metal and Other Matters

Nippon Steel & Sumitomo Metal Corporation announced the subject of the title.
Please refer to the following pages for details.

March 15, 2018
Nippon Steel & Sumitomo Metal Corporation
Sanyo Special Steel Co., Ltd.
Commencement of Discussions Regarding Making Sanyo Special Steela Subsidiary of Nippon Steel & Sumitomo Metal and Other Matters
This is to announce that Nippon Steel & Sumitomo Metal Corporation (President: Kosei Shindo;“NSSMC”) and Sanyo Special Steel Co., Ltd (President: Shinya Higuchi; “Sanyo Special Steel”) havecommenced discussions (the “Discussions”) to explore opportunities to make Sanyo Special Steel a subsidiaryof NSSMC (the “Proposed Transaction”) and to strengthen the special steel businesses of both companies.
The target date of the Proposed Transaction is March 2019. The special steel businesses of both companies
currently focus on markets in Asia, but NSSMC’s planned acquisition of Ovako AB (a manufacturer of special
steel the headquarters of which are located in Sweden. "Ovako"), which NSSMC intends to close in the firsthalf of 2018, will help the companies to work toward a global business promotion system, with opportunities ofenhanced cooperation among NSSMC, Sanyo Special Steel, and Ovako.
Regarding the acquisition of Ovako by NSSMC, please refer to the press release published today by
NSSMC entitled “Regarding Acquisition of Shares in Ovako (Making It a Subsidiary).”
Matters such as the specific method of the Proposed Transaction, the shareholding ratio of NSSMC inSanyo Special Steel and other matters are yet to be discussed, and such matters will be publicly disclosed if an
when an agreement is reached.

Furthermore, Sanyo Special Steel will continue to be a listed company after it

becomes NSSMC’s subsidiary.
1.

The Goal of the Discussions
Special steel is used as a material in critical parts for various industries such as those that manufacture
automobiles and industrial machinery, and it is expected that demand for it shall continue to grow steadily.
In order to respond to the globalization of both their domestic and foreign clients and meet the various
needs of their clients, beginning with the automobile industry, regarding the manufacture and sale ofspecial steel, both companies have agreed to commence the Discussions regarding the Proposed
Transaction with the goal of strengthening their fundamental businesses and technological capabilities andprogressing toward making adjustments and other such changes with an eye toward global businessdevelopment, each bringing their management resources to bear in the endeavor.
Both companies intend to consider the matter in detail, including cooperation with Ovako.

2.

Prospects (Provisional)
NSSMC and Sanyo Special Steel will immediately commence the Discussions and, if and when anagreement is reached, plan to execute a definitive agreement, with the target date being August 2018.
After this, upon execution, both companies plan to consummate the Proposed Transaction, with the targetdate being March 2019 after obtaining approvals by domestic and overseas competition authorities andother required procedures are taken.
Tentative timeline, assuming successful negotiations:

3.

(1)

August 2018 (Target):Execution of the definitive agreement(2)March 2019 (Target):Sanyo Special Steel becoming NSSMC’s subsidiary

Method of the Proposed Transaction and Related Matters(1)

Method of the Proposed Transaction
The following methods are contemplated: NSSMC’s acquisition of ordinary shares issued ordisposed by Sanyo Special Steel by way of third-party allotment, NSSMC’s acquisition of SanyoSpecial Steel’s ordinary shares by tender offer under the Financial Instruments and Exchange Act(Act No. 25, 1948), reorganization procedures under the Companies Act (Act No. 86, 2005), acombination of the foregoing, or other methods.

Both companies plan to discuss the method ofthe Proposed Transaction, including other methods, which will be set forth in the definitive
agreement.
(2)

Shareholding Ratio after the Proposed Transaction (Percentage of Voting Rights Held)Currently, the shareholding ratio of NSSMC in Sanyo Special Steel after the Proposed
Transaction (percentage of voting rights held) is envisaged to be greater than 51%, but bothcompanies plan to discuss the ratio, which will be set forth in the definitive agreement.
Furthermore, Sanyo Special Steel will continue to be a listed company after becomingNSSMC’s subsidiary.

(3)

Acquisition Price and Related Matters
The acquisition price (in total) and the type of consideration (cash, securities and others) for
NSSMC’s acquisition of Sanyo Special Steel’s ordinary shares through the series of transactions
described in (1) and (2) above is yet to be determined.

Both companies plan to discuss thesematters and provide them in the definitive agreement.

If NSSMC decides to choose cash as

consideration, NSSMC intends to use its funds on hand or funds to be borrowed from outsidesources.
4.

Forecasts of Effects on Financial Performance
The effect on financial performance for the current term of NSSMC and Sanyo Special Steel isinsignificant. The effects on both companies’ financial performance for subsequent terms are unknown.

(Reference)

Consolidated Financial Forecasts for the Current Term and Consolidated Performance for thePrevious Term

(1) NSSMC(Unit: million yen)
Consolidated

Consolidated

Consolidated

Consolidated

sales

operating profit

ordinary income

current profit

5,700,000−300,000

180,000

4,632,890

114,202174,531130,946

Consolidated
financial forecastsforthecurrentterm (term endingin March,2018)
Consolidated
financialperformance for theprevious term
(termendinginMarch,2017)(2) Sanyo Special Steel(Unit: million yen)
Consolidated

Consolidated

Consolidated

Consolidated

sales

operating profit

ordinary income

current profit

150,000

11,80011,8007,800

138,680

11,685

11,736

7,784

Consolidated
financial forecasts
forthecurrent

term (term endingin March,2018)
Consolidated
financialperformance for theprevious term
(termendinginMarch,2017)(Exhibit: Reference materials) Outline of both NSSMC and Sanyo Special Steel(Contact Information)
NSSMC Public Relations Center

Tel +81-3-6867-2135, 2146, 2977, 3419

Sanyo Special Steel General Affairs Department

Tel +81-79-235-6003
End of document

[Reference Materials]

Overview of NIPPON STEEL & SUMITOMO METAL CORPORATION and Sanyo Special Steel Co., Ltd.

Trade NameNIPPON STEEL & SUMITOMO METAL

Sanyo Special Steel Co., Ltd.

CORPORATION
Description of Business

1.

Activities

Steelmaking and steel fabrication (Manufacturing

1.

and sales of steel products)
2.

special steel products)

Engineering and Construction

3.

Chemicals

4.

New materials

5.

System solutions

Date of Establishment

April, 1950 *1

Head Office Location

6-1, Marunouchi 2-chome,

Specialty Steel (Manufacturing and sales of2.

Powders3.

Formed and Fabricated Materials

January, 1935

3007, Nakashima, Shikama-ku, Himeji, Hyogo
Chiyoda-ku, Tokyo
Name and Title of theKosei Shindo

Shinya Higuchi

Representative Director and President

Representative Director and President

4,632.8 billion yen

138.6 billion yen

419.5 billion yen

20.1 billion yen

950,321,402

167,124,036 *3

7,261.9 billion yen

183.4 billion yen

Date of Fiscal Year End

March 31

March 31

Number of Employees

92,3092,598(24,822 on a non- consolidated basis)(1,266 on a non-consolidated basis)

Representative
Net Sales(Consolidated basis)(FY 2016)
Capital(FY 2016)
Number of OutstandingShares(FY 2016)
Total Assets(Consolidated basis)(FY 2016)(FY 2016)
Main Customers

Main Banks

Sumitomo Corporation

Marubeni-Itochu Steel Inc.

NIPPON STEEL & SUMIKIN BUSSAN CORPORATIONMITSUI & CO., LTD

Metal One Corporation

Metal One Corporation

Sumitomo Mitsui Banking Corporation

Sumitomo Mitsui Banking Corporation

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Mizuho Bank, Ltd.

Mizuho Bank, Ltd.

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Major Shareholders andJapan Trustee Services Bank, Ltd.(TrustOwnership PercentageAccount)*2

The Master Trust Bank of Japan, Ltd. (Trust

4.1%

NIPPON STEEL & SUMITOMO

14.5%

METAL CORPORATION
3.4%

Company's Kyoeikai Association

6.4%

(FY 2016)

Account)
Nippon Life Insurance Company

2.6%

NSK Ltd.

4.5%

1.9%

Japan Trustee Services Bank,

4.3%(Standing Proxy: The Master Trust Bank ofJapan, Ltd.)
Sumitomo Corporation

Ltd.(Trust Account)
Japan Trustee Services Bank, Ltd. (5 Trust

1.8%

Account)
Mizuho Bank, Ltd.

The Master Trust Bank of Japan,4.1%Ltd. (Trust Account)
1.7%(Standing proxy: Trust & Custody Services

Sumitomo Mitsui Banking

3.4%

CorporationBank, Ltd.)
Sumitomo Mitsui Banking Corporation

1.5%

Mizuho Bank, Ltd.

2.2%

Meiji Yasuda Life Insurance Company

1.5%

GOVERNMENT OF NORWAY

2.1%(Standing proxy: Trust & Custody Services(Standing proxy: Citibank, N.A.)

Bank, Ltd.)The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1.4%

Marubeni-Itochu Steel Inc.

1.9%

Japan Trustee Services Bank, Ltd. (1 Trust

1.4%

DFA INTL SMALL CAP

1.7%Account)

VALUE PORTFOLIO(Standing proxy: Citibank, N.A.)*1

On October 1, 2012, Nippon Steel Corporation merged with Sumitomo Metal Industries, Ltd. by way of an absorption type merger, and changed its
trade name to Nippon Steel & Sumitomo Metal Corporation.

*2The figures indicate the proportion of the number of shares held to the total number of outstanding shares.

*3

Sanyo Special Steel Co., Ltd. implemented a reverse share split by making every 5 shares into 1 share, with the effective date of October 1, 2017. As
such, the number of outstanding shares is 33,424,807 shares.

<Operating Results and Financial Position for Past 3 Years>
NIPPON STEEL & SUMITOMO METAL CORPORATION

Sanyo Special Steel Co., Ltd.

(Consolidated Basis)(Consolidated Basis)

Fiscal Year

2014

2015

2016

2014

Net Assets

3,547.0 billion yen

3,009.0 billion yen

3,291.0 billion yen

113.6 billion yen

113.1 billion yen

123.1 billion yen

Total Assets

7,157.9 billion yen

6,425.0 billion yen

7,261.9 billion yen

202.2 billion yen

179.8billion yen

183.4 billion yen

3,263.03 yen

3,074.28 yen

3,340.21 yen

699.51 yen

696.69 yen

759.36 yen

5,610.0 billion yen

4,907.4 billion yen

4,632.8 billion yen

171.4 billion yen

149.1 billion yen

138.6 billion yen

Operating Income

349.5 billion yen

167.7 billion yen

114.2 billion yen

9.1 billion yen

12.1 billion yen

11.6 billion yen

Ordinary Income

451.7 billion yen

200.9 billion yen

174.5 billion yen

9.7 billion yen

11.5 billion yen

11.7 billion yen

214.2 billion yen

145.4 billion yen

130.9 billion yen

6.5 billion yen

7.4 billion yen

7.7 billion yen

234.82 yen

158.71 yen

147.96 yen

40.60 yen

46.00 yen

48.29 yen

5.5 yen18.0 yen

45.0 yen10.0 yen

12.0 yen

12.5 yen

Net Assets per Share
Sales

2015

2016

Net Income
attributable to ownersof parent
Net Income per ShareDividend per Share<Relationship between Party Companies>
As of September 30, 2017, NSSMC held 24,527 thousand shares (*1) representing 15.3% of Sanyo Special Steel Co.,
Ltd.’s voting rights.
Capital Ties
As of September 30, 2017, Sanyo Special Steel Co., Ltd. held 577 thousand shares representing 0.1% of NSSMC’svoting rights.
A Representative Director and President, a Director, Member of the Board Senior Managing Executive Officers, andPersonnel Ties

two Directors, Member of the Board Managing Executive Officers of Sanyo Special Steel Co., Ltd. are people fromNSSMC, and a Corporate Auditor of Sanyo Special Steel Co., Ltd. is NSSMC’s Executive Officer.

Business Ties

NSSMC and Sanyo Special Steel Co., Ltd. mutually trust one another in regards to the production of steel materials.

Status Applicable to theN/A
Related Parties*1

Sanyo Special Steel Co., Ltd. implemented a reverse share split by making every 5 shares into 1 share, with the effective date of October 1, 2017.

As such, the number of shares held by NSSMC is 4,905 thousand shares.