2 Leading Japanese Shipping Groups Plan to Merge : Government Promotes Restructuring in Industry Experiencing a Prolonged Slump

Japan Line and Yamashita-Shinnihon Steamship, two of Japan’s leading shipping groups, have agreed to merge. The agreement, due to be completed by June 1, is the largest merger deal between Japanese shipping companies since the government led a reorganization of the industry in 1964.

The deal also comes against the background of a lingering slump in the shipping industry and renewed efforts by the government to promote restructuring.

Only one of the six largest companies was substantially profitable in the six months ended Sept. 30. YS, the fifth largest in terms of revenue, had a loss of $32.7 million, and Japan Line, fourth largest, had a nominal $16-million profit. Japan Lines’ cumulative losses total $400 million, while those of Yamashita have reached $221.6 million.

Under the agreement, the two companies will write off large amounts of debt before the merger, resulting in a 50% cut in Yamashita’s equity base and an 80% reduction in that of Japan Lines. The new company, owned on a 50-50 basis, will emerge with a capitalization of $156.8 million and annual sales of $1.4 billion from charter and tanker operations.

Shozo Magoshi, who has just been made president of Yamashita, will become president of the merged group, while Naosuke Yasuda, president of Japan Line, will be chairman.

Magoshi said he expected that the deal would transform the two companies into a group that would be able to compete in world markets. However, some industry analysts suspect it will be difficult for them to do so.

The two companies made an agreement last April to operate liners jointly on the north Pacific route, where they had been losing money. A new company, Japan Liner System, began business two months ago.