Idemitsu, Showa Shell to Delay Merger Opposed by Family

  • Shares of both companies tumbled following Nikkei report
  • Idemitsu founding family opposes merger with rival Showa Shell

Japanese refiner Idemitsu Kosan Co. will delay a planned April 2017 merger with domestic rival Showa Shell Sekiyu K.K. amid opposition from a key shareholder.

The companies postponed the combination as the founding family of Idemitsu, which controls a 33.92 percent stake in the refinery, still opposes the deal, Idemitsu President Takashi Tsukioka told reporters in Tokyo on Thursday. The company still intends to buy a 33.2 percent stake in Showa Shell from Royal Dutch Shell Plc sometime in October or November, he said.

The announcement, which follows a dispute between Idemitsu and the company’s founding family, came after markets closed in Tokyo and confirmed a report in the Nikkei newspaper earlier in the day that sent the shares of both companies tumbling. Showa Shell fell 4 percent to 950 yen, making it the biggest decliner on the Nikkei 225, while Idemitsu ended the day down 2.6 percent.

“As the founding family’s opposition hasn’t changed, it would be difficult to merge in April,” Hidetoshi Shioda, a Tokyo-based senior analyst at SMBC Nikko Securities Inc., said by phone before the announcement. “Still, there is an option to do the merger through a tender offer, which doesn’t require a shareholder voting at an extraordinary meeting and can be done even with the family’s opposition.”

Achieving the merger under the original plan “is the best option for every stakeholder,” Tsukioka said when asked if a tender offer and other options are under consideration. Idemitsu hopes to resume talks with the family “as soon as possible,” Tsukioka said.

Royal Dutch Shell “remains fully committed to selling the majority of its shareholding in Showa Shell to Idemitsu,” a spokesman for the company said. “The sale is in line with Shell’s strategy to concentrate downstream activity on areas where it can be most competitive.”

Japan has been pushing oil refiners to consolidate and reduce processing capacity as domestic demand declines amid a shrinking population and a shift to more energy-efficient cars. Domestic refiners JX Holdings Inc. and TonenGeneral Sekiyu K.K. in August finalized the terms of an agreement to form the county’s biggest processor starting in April.

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