NSK Moves To Acquire Amatsuji Steel Ball

NSK Ltd. (Japan; TSE1: 6471) announced a USD $359.7 million tender offer for all 20.44 million outstanding shares of Amatsuji Steel Ball Manufacturing Co. Ltd. (Japan; TSE2: 6475) which it does not already own. Amatsuji is already 26.6% owned by NSK, and NSK accounts for almost half of AKS sales. If the tender offer, running through January 19, 2006, is successful, it will allow NSK to absorb Amatsuji and control it as a wholly-owned subsidiary. NSK and Amatsuji have had a direct relationship since 1988. NSK also said the acquisition of Amatsuji will move it toward more vertical integration, allowing it to better control its component costs to compete against low-cost Asian rivals. Founded in 1920 as a bicycle bearing manufacturer, Amatsuji went public in 1933 and reoriented itself as a high-quality producer of balls for bearings and other close-tolerance applications. Those "other" applications now include machine tools, CV joints, ball point pens, fuel injectors, and other precision ball needs. The AKS product line includes chrome steel balls (78% of sales), stainless steel balls (8%), Carbon steel balls (4%), nylon, brass and ceramic balls (5%) and machinery parts (5%). Amatsuji has two AKS ball factories, two in Osaka and one built in 2003 in Poland, AKS Precision Ball Polska z.o.o. article: Amatsuji/AKS will build new bearing ball plant in Poland In addition, there are three locally-operated joint ventures: Nitto Steel Ball, AKS Hambai, and Sakai Amatsuji, all in Osaka. In all, the company employs almost 800 people. With NSK, Amatsuji operates three direct joint ventures: NSK-AKS Precision Ball Indonesia in (Cibitung, Bekasi, Indonesia); NSK-AKS Precision Ball Europe Ltd. (Peterlee, U.K.); NSK-AKS Precision Ball Co. (Clarinda, Iowa). All are next door to sister NSK bearing factories, and the factory in Indonesia recently doubled its output. NSK's public offer for Amatsuji represents approximately a 34% premium over its average closing price over the past three months, even though the stock is up 50% for the year.