Japan's JFE, IHI in talks on shipbuilding merger

Japanese steel and engineering company JFE Holdings Inc and heavy machinery manufacturer IHI Corp are planning to integrate their shipbuilding operations, a report said Friday.
The two firms are looking to consolidate their shipbuilding businesses via Universal Shipbuilding Corp, a 50-50 joint venture by JFE and Hitachi Zosen Corp, a move that would create the largest shipbuilder in Japan, the business daily Nikkei reported, without citing sources.
The joint venture would have a total of seven shipyards and plants in Japan and be able to build a wide range of ships, from mainstay commercial vessels to military ships, it said.
JFE recently reached a basic agreement with Hitachi Zosen to increase its stake in Universal Shipbuilding to about 80 percent, it said.
Should JFE and IHI conclude their negotiations successfully, Universal Shipbuilding would be merged with IHI shipbuilding unit IHI Marine United Inc, while Hitachi Zosen was expected to remain a minority shareholder, it said.
Major Japanese shipbuilders are expected to sharply increase their earnings in fiscal 2007 and beyond, with three to four years worth of back orders.
Company officials were not immediately available for comment.