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TonenGeneral to Buy Mitsui Oil in $242 Million Retail Expansion

TonenGeneral Sekiyu K.K. (5012), a Japanese oil refiner partly owned by Exxon Mobil Corp. (XOM), agreed to buy Mitsui Oil Co. to expand its retail sales.

The Tokyo-based refiner will acquire an 89.9 percent stake in Mitsui Oil, it said today in a statement. The unit of Mitsui & Co. has about 270 gas stations and jointly owns the Kyokuto Petroleum Industries Ltd. refining venture with TonenGeneral. The transaction, valued at 24.9 billion yen ($242 million), is set to be completed Feb. 4 after it gets approval from Japan Fair Trade Commission, TonenGeneral said.

Japanese refiners, hurt by declining demand for oil products, are under pressure to restructure to better compete with Asian competitors. Kyokuto Petroleum and Cosmo Oil Co. (5007) agreed in September to consider joint operations of their Chiba refineries after Exxon Mobil, the world’s biggest oil company by market capitalization, reduced its voting rights in TonenGeneral to 22 percent from about 50.5 percent last year.

“By acquiring efficient sales channels, TonenGeneral would be able to strengthen its supply chain” and have more unified refinery operations, Hidetoshi Shioda, a Tokyo-based analyst at SMBC Nikko Securities Inc., said by phone today before the announcement. The deal would “help TonenGeneral boldly seek an alliance with other companies.”

TonenGeneral is in talks with other stakeholders of Mitsui Oil to boost its stake in the refiner to about 95 percent by the end of March 2014, it said. Mitsui Oil’s other shareholders include Sumitomo Mitsui Banking Corp., Sumitomo Mitsui Trust Bank Ltd. and Mitsui O.S.K. Lines Ltd., TonenGeneral said.

Separately, Mitsui & Co. agreed to buy a 6.4 percent stake of TonenGeneral from Exxon for 33.6 billion yen, the Japanese trading company said in a statement.

Cooperative Relationship

“Mitsui will seek to deepen its cooperative relationship with TonenGeneral through the continued transaction of crude oil and petroleum products,” the trading company said in the statement.

The Kyokuto Petroleum joint venture operates the 175,000-barrels-a-day Chiba refinery near Tokyo, according to Mitsui Oil’s website. TonenGeneral owns three refineries with combined capacity of 661,000 barrels a day, according to its website.

Mitsui Oil had net income of 3.5 billion yen and revenue of 367.5 billion yen in the year ended March 31, TonenGeneral said in today’s statement. TonenGeneral posted profit of 54.8 billion yen and sales of 2.8 trillion yen in the year ended Dec. 31, 2012.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

To contact the editor responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net

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