Nippon Steel & Sumitomo Metal : Notice regarding the Commencement of the Tender Offer for Nisshin Steel Co., Ltd.’s Shares (Securities Code 5413)

This document is an English translation of the official Japanese version of the Press Release (the "Official Japanese Version"). This English translation was prepared for your reference, to help you understand what is stated in the Official Japanese Version. In the event of any discrepancy between the Official Japanese Version and the English translation, the Official Japanese Version will prevail.

February 2, 2017

To Whom It May Concern,

As previously announced in the press release dated May 13, 2016 (entitled "Notice Regarding Execution of an Agreement to Make Nisshin Steel Co., Ltd. a Subsidiary of Nippon Steel & Sumitomo Metal Corporation, etc. and Implementation of Tender Offer") (the "Press Release at the Time of Contract Execution"), Nippon Steel & Sumitomo Metal Corporation ("NSSMC" or the "Tender Offeror") entered into an agreement dated May 13, 2016 with Nisshin Steel Co., Ltd. (the "Target Company") to make the Target Company a subsidiary of NSSMC by around March 2017 (the "Proposed Transaction")(the "Agreement for the Proposed Transaction, Etc.") and adopted a resolution to acquire the shares of the Target Company's common stock through a tender offer (the "Tender Offer"), subject to the satisfaction of certain conditions, including completion of procedures required under domestic and foreign competition laws.

Thereafter, NSSMC received from the Japan Fair Trade Commission a "Notice Stating That the Japan Fair Trade Commission Will Not Issue a Cease-and-Desist Order" dated January 27, 2017 regarding NSSMC's acquisition of the Target Company's shares (please see the press release dated January 30, 2017 (entitled "Result of Review by the Japan Fair Trade Commission regarding Making Nisshin Steel Co., Ltd. a Subsidiary of Nippon Steel & Sumitomo Metal Corporation")), whereby the conditions, including completion of procedures required under domestic and foreign competition laws, were satisfied. Accordingly, at NSSMC's board meeting held today, it adopted a resolution to commence the Tender Offer on February 3, 2017, and hereby announces as follows.

1. Purpose, etc. of the Purchase

1. Overview of the Tender Offer

   As announced in the press release dated February 1, 2016 (entitled "Commencement of Discussions Regarding Making Nisshin Steel a Subsidiary of Nippon Steel & Sumitomo Metal and Regarding Nippon Steel & Sumitomo Metal Supplying Steel Slabs to Nisshin Steel"), NSSMC and the Target Company entered into a memorandum of understanding on February 1, 2016, pursuant to which the parties would commence discussions (the "Discussions") regarding making the Target Company a subsidiary of NSSMC by around March 2017 and regarding NSSMC's continuous supply of steel slabs (material for steel products) to the Target Company subject to the completion of the Proposed Transaction, and they were engaged in the Discussions thereafter. As a result of the Discussions, as

   stated in the Press Release at the Time of Contract Execution announced on May 13, 2016, the companies reached an agreement on the specific structure of the Proposed Transaction and the conditions for NSSMC's capital contribution to the Target Company, etc. Therefore, based on the resolutions adopted at their respective board of directors' meetings held on May 13, 2016, the companies entered into the Agreement for the Proposed Transaction, Etc. dated the same date. For an overview of the Agreement for the Proposed Transaction, Etc., please see "(3) Material Agreements and Related Matters Regarding the Tender Offer" below.

   Under the Agreement for the Proposed Transaction, Etc., the companies worked to implement NSSMC's acquisition of the Target Company's shares to reach the ownership ratio of 51.00% of the total number of outstanding shares (including treasury shares; hereinafter the same shall apply) of the Target Company by means of a combination of the Tender Offer and a capital increase by third-party allotment, through which NSSMC would subscribe for the Target Company's shares to be newly issued (the "Capital Increase by Third-Party Allotment") (provided that, in connection with the Capital Increase by Third-Party Allotment, NSSMC would purchase only the number of offered shares needed to bring NSSMC's ownership ratio to 51.00% of the total number of outstanding shares of the Target Company upon completion of the purchase; accordingly, if the Tender Offer alone resulted in NSSMC owning 51.00% of the total number of outstanding shares of the Target Company, then NSSMC would not purchase any shares through the Capital Increase by Third-Party Allotment) (the aforementioned transactions, collectively, the "Transaction"). The Tender Offer was planned to be conducted promptly after certain conditions, including, among other conditions, the completion of certain procedures required by domestic and foreign competition laws, were satisfied.

   Following the recent completion of certain procedures required to be completed before the Tender Offer under domestic and foreign competition laws, NSSMC confirmed that the conditions precedent to the implementation of the Tender Offer as specified in the Agreement for the Proposed Transaction, Etc. were satisfied, and at the board of directors' meeting held on February 2, 2017, it adopted a resolution to commence the Tender Offer on February 3, 2017 with a view to allowing NSSMC to make the Target Company its subsidiary. In addition, NSSMC also adopted a resolution to set the payment date for the Capital Increase by Third-Party Allotment as the same date as the commencement date of the settlement for the Tender Offer, assuming that the Tender Offer alone would not result in NSSMC owning 51.00% of the total number of outstanding shares of the Target Company and that NSSMC would make a payment for the Capital Increase by Third-Party Allotment.

   As of today, the Target Company's shares are listed on the First Section of the Tokyo Stock Exchange, Inc. (the "TSE"). Because the purpose of the Transaction is to make the Target Company a subsidiary of NSSMC and the Target Company intends that the Target Company's shares will continue to be listed after the Transaction, the maximum number of shares to be purchased during the Tender Offer (constituting a part of the Transaction) is planned to be 46,896,300 shares, which would make NSSMC's share ownership ratio (meaning the ratio of the number of shares owned by NSSMC in comparison to the total number of outstanding shares of the Target Company; hereinafter the same shall apply) 51.00%, when combined with the number of the Target Company's shares owned by NSSMC as of the submission date of the Tender Offer Statement. If the total number of shares tendered in response to the Tender Offer (the "Tendered Shares") exceeds the maximum number of shares to be purchased, NSSMC will not purchase all or any of the excess portion, and will deliver the shares and will implement other settlement procedures for their purchase using the pro rata method as specified in Article 27-13, paragraph (5) of the Financial Instruments and Exchange Act (Act No. 25 of 1948, as amended; the "FIEA") and Article 32 of the Cabinet Office Ordinance on Disclosure Required for Tender Offer for Share Certificates, etc. by Person Other than the Issuer (Ordinance of the Ministry of Finance No. 38 of 1990, as amended; the "Cabinet Office Ordinance"). On the other hand, no minimum number of shares to be purchased is set for the Tender Offer; therefore, if the total number of Tendered Shares is equal to or less than the maximum number of shares to be purchased, NSSMC will purchase all the Tendered Shares.

   According to the Target Company, as announced in the Press Release at the Time of Contract Execution, at the board of directors' meeting held on May 13, 2016, the Target Company, pursuant to the unanimous approval of its nine directors, excluding Mr. Kenji Minami, adopted a resolution to express an opinion of support for the Tender Offer as of the same day, assuming that the Tender Offer would be conducted, and a resolution to leave to its shareholders the decision as to whether they would tender their shares in the Tender Offer or not, because, as stated above, the Target Company's shares would continue to be listed after the Transaction while the Target Company believed that the proposed purchase price for the Tender Offer (the "Proposed Tender Offer Price") was reasonable. In order to avoid any suspicion of conflicts of interest, among the Target Company's directors as of May 13, 2016, Mr. Kenji Minami did not participate in the deliberations or resolutions regarding the Transaction at the meeting of the board of directors of the Target Company. Mr. Minami previously served as an officer at NSSMC (Nippon Steel Corporation at that time), which is the Tender Offeror and the contemplated subscriber for the shares of the Target Company in the Capital Increase by Third-Party Allotment. However, the Tender Offer was to be launched subject to the satisfaction of certain conditions, as mentioned above, and it was expected that it would be some time before the launch thereof. Therefore, at the meeting of the board of directors of the Target Company mentioned above, the board also adopted a resolution to express a subsequent opinion regarding the Tender Offer after the additional discussions that would take place at the time of the launch of the Tender Offer.

   According to the Target Company's press release dated February 2, 2017 (entitled "Notice regarding Expressing Opinion to Support the Tender Offer for Nisshin Steel Co., Ltd.'s Shares by Nippon Steel

   & Sumitomo Metal Corporation") (the "Press Release by the Target Company"), at the meeting of the board of directors of the Target Company held on February 2, 2017 with the attendance of all directors and the unanimous approval of its nine directors, excluding Mr. Kinya Yanagawa, the Target Company again adopted a resolution to express an opinion in support of the Tender Offer. In addition, as of February 2, 2017, while the Target Company believes that the purchase price for the Tender Offer (the "Tender Offer Price") is reasonable in light of the results of the calculation of its share value as stated in "(II) Valuation report from an independent third-party valuation organization obtained by the Target Company" of "(4) Procedures Performed for the Tender Offer" below, there will be a maximum number of shares to be purchased during the Tender Offer, and the Target Company's shares are intended to continue to be listed after the Transaction. As such, the Target Company has decided to take a neutral position and leave to its shareholders the decision as to whether they will tender their shares in the Tender Offer or not, and has passed a resolution to that effect. The Target Company director, Kinya Yanagawa, had previously worked as an officer of NSSMC, which is the Tender Offeror and the contemplated subscriber for the shares of the Target Company in the Capital Increase by Third-Party Allotment. Therefore, in order to avoid any suspicion of conflicts of interest, Mr. Kinya Yanagawa did not participate, in the deliberations or resolutions regarding the Transaction at the board of directors' meeting.

   In addition, according to the Target Company, as announced in the Press Release at the Time of Contract Execution, the Target Company introduced certain "Fair Rules for the Acquisition of Substantial Shareholdings (Takeover Defense Measures)" on October 1, 2012. After deliberation, in light of the purposes of these rules, the Target Company adopted a resolution at its board of directors' meeting held on May 13, 2016 that, in its judgment, the Tender Offer would contribute to maximizing the Target Company's corporate value and the common interests of its shareholders.

   As stated above, the aim of the Transaction is for NSSMC to acquire the number of the Target Company's shares that would bring its ownership ratio to 51.00% of the total number of outstanding shares in the Target Company, by means of a combination of the Tender Offer and the Capital Increase by Third-Party Allotment. Because of the nature of a tender offer, NSSMC's share ownership ratio after the implementation of the Tender Offer will not be fixed until the settlement is completed; therefore, it is contemplated that if the Tender Offer results in NSSMC owning less than 51.00% of the Target Company's outstanding shares, the Proposed Transaction will be achieved through NSSMC purchasing the Target Company's shares through the Capital Increase by Third-Party Allotment. NSSMC and the Target Company view the Tender Offer and the Capital Increase by Third-Party

   Allotment as a related series of procedures designed to achieve the Proposed Transaction and view the Capital Increase by Third-Party Allotment as a supplement to the Tender Offer.

   According to the Target Company, as stated in the Press Release at the Time of Contract Execution and the Target Company's press release dated May 13, 2016 (entitled "Notice Regarding Offering of Shares to Be Issued through Third-Party Allotment") (the "Press Release Regarding Third-Party Allotment"), at the meeting of its board of directors held on May 13, 2016, the Target Company adopted a resolution to conduct the Capital Increase by Third-Party Allotment with NSSMC as the subscriber. Thereafter, in response to the fact that NSSMC was a Special Subscriber, as defined in Article 206-2, paragraph (1) of the Companies Act, in the Capital Increase by Third-Party Allotment, the Target Company submitted the subscription agreement for shares to be offered in connection with the Capital Increase by Third-Party Allotment (the "Subscription Agreement") as an agenda item for approval at the 4th Annual Shareholders Meeting of the Target Company held on June 24, 2016 (the "4th Annual Shareholders Meeting of the Target Company") pursuant to paragraphs (4) and (5) of Article 206-2 of the Companies Act, and at the 4th Annual Shareholders Meeting of the Target Company, the agenda item was approved and passed as originally proposed. Article 206-2, paragraph (4) of the Companies Act provides that the approval of the shareholders meeting will be required for the subscription for offered shares by the Special Subscriber if shareholders that hold voting rights equal to one-tenth (1/10) or more of the voting rights of all shareholders give notice of their opposition to such subscription. However, given the importance of the Capital Increase by Third-Party Allotment, the Target Company decided that it would be appropriate to obtain the approval of its shareholders for the Subscription Agreement regardless of the existence of such notice of dissent and included it as an agenda item at the 4th Annual Shareholders Meeting of the Target Company. The shareholders' approval was obtained.

2. Purposes of and Background to the Tender Offer, and Post-Tender Offer Management Policies

3. Purposes of and Background to the Tender Offer

4. Business Environment Surrounding the Companies

Although the worldwide demand for steel is expected to grow steadily in the mid- to long-term along with economic and industrial development, recently, production capacity in China has been expanding rapidly and its crude steel production capacity is now estimated to be 1.1 billion tons/year. The decrease in China's demand for steel products due to the recent economic deceleration in China has created approximately 400 million tons/year of excess capacity. Roughly 100 million tons/year of surplus steel products, which is the equivalent of the total annual crude steel production in Japan, have been exported to countries in Southeast Asia and the rest of the world, and as a result, trade protection measures, such as anti-dumping and safe guard measures, have increasingly been taken in a rapid pace around the world. At present, this stagnation of the steel market that had continued until the end of 2016, which was caused by the relaxation of supply-and-demand balance, and the rising prices of raw coal put pressure on the earnings of steel companies around the world. While there are indications that the excess of production capacity in China will be corrected, it will likely take considerable time. In addition, consumption of steel products in Japan is unlikely to significantly increase, considering its declining population. Meanwhile, advanced coastal steelworks in China and Southeast Asia will soon enter full-scale production one after another, and the business environment surrounding the steel business will become even more severe.

Moreover, regarding the stainless steel business in which the respective groups of NSSMC and the Target Company engage, the production capacity of stainless steel manufacturers overseas (particularly in China) has been enhanced, and this has pushed NSSMC and the Target Company and their respective groups out of the global top 10 in terms of scale of stainless crude steel production. As a result, competition in both domestic and overseas markets is intensifying, with stainless steel imports from these overseas stainless steel manufacturers into the Japanese market growing as well.