ArcelorMittal, the world's largest steel company, said on Thursday it signed a memorandum of understanding with Nippon Steel for a global strategic alliance and expansion of current joint business ventures in North America.
ArcelorMittal said the two companies had worked on the alliance since the formation of ArcelorMittal in July 2006. The two companies agreed that ArcelorMittal will assume the obligations taken on by Arcelor relating to the alliance.
The two companies will continue to discuss the expansion of the automotive sheet steel business and will enter a definitive agreement when a final plan has been decided.
A fund manager in Tokyo said the impact of the agreement on the Nippon Steel shares was neutral.
"Even ArcelorMittal finds it hard to thwart Nippon Steel , with its market cap of $50 billion," said Masaki Iso, chief investment officer at Yasuda Asset Management Co. "Still, the pact apparently does not rule out the possibility of ArcelorMittal launching a hostile bid for it."
The market had been focusing on whether the agreement contained a clause that would preclude such a bid.