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Japanese trading houses to team up
By Alex Frew McMillan
TOKYO, Japan (CNN) -- Japanese trading house Nissho Iwai Corp. will merge its operations with Nichimen Corp. under a joint holding company in April 2003, the companies said Wednesday. The move will see the Tokyo-based houses cut their total work force to 17,000 from 21,000, and shed businesses to save 80 billion yen ($646 million) within two years. U.S. investment bank Lehman Brothers is considering investing in the new venture, along with Japanese bank UFJ Holdings and some of the houses' business partners. They will contribute more than 200 billion yen ($1.6 billion) in new capital, the trading houses said. According to local reports, the banks will also send executives to help manage the new business. The No. 6 houseNissho Iwai is Japan's sixth-largest trading house, with Nichimen ranking eighth. The new trading company will have total sales of 7.5 trillion yen ($60.6 billion), which would still rank it sixth. Japan's sprawling trading companies have been restructuring as they try to deal with greater competition for their role as middlemen brokering the shipment and distribution of all kinds of products around the world. Nissho Iwai and Nichimen said they are combining forces during a difficult business environment, in a bid to cut costs and slash their giant debt level, a combined 2.8 trillion yen ($22.6 billion). "Japan's long-term economic stagnation, deflationary pressures and the existence of a credit crunch are making things tougher for us," the companies said in a joint statement. Both companies expect to settle issues such as the name of the new company and its management ahead of extraordinary shareholder meetings in February. Cutting the number of group companiesNissho Iwai deals in numerous products around the world, including industrial machinery, farm goods and consumer goods. It also handles sales and distribution in the automotive and aircraft industries and has a construction arm. Nichimen's top sales generator is its chemicals and energy group, but it also operates in food, forest products, machinery and construction, among others. The reorganization will see the two houses cut their number of businesses to 300 from 430, in a bid to bring total debts below 2 trillion yen. Trading in both companies was suspended on Wednesday ahead of an announcement later in the day. But Nissho Iwai had already leaped 30.95 percent to 55 yen, while Nichimen is up 1.43 percent to 71 yen.
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