Idemitsu, Showa Shell to merge via share swap

TOKYO: Idemitsu’s founding family will drop its opposition to plans for a merger of Idemitsu Kosan and Showa Shell Sekiyu, paving the way for the Japanese oil firms to combine, the Nikkei reported, sending shares of the two firms soaring.

The family, led by descendants of founder Sazo Idemitsu and which has a little over 28% stake in Idemitsu, has said the two firms are too different for any merger to work, while the Idemitsu management says the combination is necessary to compete in Japan’s shrinking oil products market.

In agreeing to a merger, the family, led by Shosuke Idemitsu, has demanded a pledge to maintain the principles held by founder Sazo Idemitsu and two board seats for family members at the combined company, the Nikkei said on Wednesday, without citing sources.

Idemitsu, which acquired a little over 31% stake in Showa Shell in 2016, agreed to bring on the eldest son of Idemitsu chairman emeritus Shosuke Idemitsu as a director, it added.

An Idemitsu spokesman said nothing has been decided and declined to comment on the report, while spokespeople for the founding family said they could not immediately confirm the report.

The boards of Idemitsu and Showa Shell are set to meet in mid-July to make a final decision on the merger through a stock swap and have the matter up for approval at the extraordinary shareholders’ meeting within a year, the Nikkei added.

Idemitsu management had long been keen to merge its operations with Showa Shell as shrinking gasoline demand in the country pushes the industry to consolidate, but has been locked in a battle with the Idemitsu founding family for about two years.

The combined firm would account for about 30% of domestic gasoline sales, coming second only to JXTG Holdings , which was created last year from JX’s takeover of TonenGeneral Sekiyu and controls about half of domestic oil sales.

Shares in Idemitsu ended up 13.6% at 3,980 yen, while Showa Shell jumped 8.5% after the news, compared with a 0.3% decline in the benchmark Nikkei share average. — Reuters