Brazil watchdog greenlights Vallourec, Nippon Steel deal

Brazil's antitrust body Cade has authorized Japan's Nippon Steel and Sumitomo Metals (NSSMC) to increase its stake in French steel tube maker Vallourec.

The transaction involves converting bonds held by NSSMC into Vallourec shares, news service Agência Estado reported on Tuesday.

NSSMC's stake in the firm will increase to 15%, it added.

The watchdog's decision follows Vallourec's rights issue and convertible bond sale in April aimed at raising about 1bn euros (US$1.14bn).

Vallourec said at the time it would use proceeds of the issue – which raised 480mn euros – to help finance its strategic initiatives that it had outlined earlier in the year.

Vallourec announced in February a global restructuring aimed at enhancing its competitiveness through the creation of two production hubs in Brazil and China, among other measures.

At the time, Vallourec said it was rationalizing its Brazilian operations into a single production hub. The decision will lead to the closure of two blast furnaces and one steel mill in 2016-18, to concentrate all steel production at the company's Jeceaba facility in Minas Gerais state.

NSSMC, an integrated steel producer, is present in more than 15 countries, including Brazil and Mexico, and holds a stake in Brazilian steelmaker Usiminas.