The Gas Review reports that Koike Sanso Kogyo and Taiyo Nippon Sanso have begun negotiations over a comprehensive business tie-up, which would see the establishment of a new company in the cutting & welding field.

Nissan Tanaka, a consolidated subsidiary of Taiyo Nippon Sanso (TNSC), and Koike Sanso Kogyo will combine their departments which handle the development and manufacture of welding and cutting machines, while the deal will also see a mutual holding of capital.

The new venture will be established as of 1st October, with Koike Sanso Kogyo set to acquire Nissan Tanaka stock and TNSC to acquire Koike Sanso Kogyo stock. Finer details such as the capital of the new company and the investment ratio of both parties are yet to be decided, with the management team, number of employees and number of shares to be acquired also still in deliberation.

Competitors with merged interests
Koike Sanso Kogyo and Nissan Tanaka have been competitors in the welding and cutting machines business for some time now, though it should also be noted that TNSC is actually the third largest shareholder in Koike Sanso Kogyo anyway, owning 5.3% of its stock.

That’s not where the interests between the two entities end either. Personnel from TNSC have been stationed at Koike Sanso Kogyo on a regular basis in the past, while there has also been a tie-up concerning medical gases and the medical sector.

Furthermore, the close of last year is believed to have seen a close relationship built concerning collaboration in the fields of gas manufacturing and distribution.

Talks over the latest merger, for the welding & cutting business, are thought to have began at the end of last year too – and reached a relatively swift agreement. Both parties have overseas business operations in the US, China, France and Thailand between them and have seen business directly hit by the global economic slump, with the common sense of danger and market concern seen as a direct factor in the merger.

The fused development capabilities of the two companies, as well as synergetic effects which will improve cost reduction, are cited as big benefits of the agreement.

The ratio of stock held between the two parties is still in negotiation, while a possible grasp for ownership in not inconceivable, and the Gas Review notes that the future moves of the two majors ‘should be closely watched’.