Idemitsu, Showa Shell to merge key operations next spring
TOKYO (Reuters) — Japanese refiners Idemitsu Kosan and Showa Shell Sekiyu will combine management of their key businesses, an Idemitsu spokesman said on Tuesday, pursuing a merger bitterly opposed by a core investor—Idemitsu's founding family.
Japan's second- and fourth-biggest refiners will form an office next spring with a staff of about 300 to manage crude oil purchases, refining and sales, seeking to cut costs by 30 B yen ($266 MM) over 3 yr, Idemitsu spokesman Akitaka Yoshino said, confirming a Nikkei newspaper report.
The cost-cut target was raised from a forecast of at least 25 B yen when the companies said they would start integrating operations. A spokeswoman at Showa Shell confirmed the plans.
About two-and-a-half years after Idemitsu announced it was buying nearly a third of Showa Shell as part of a takeover, the companies are still trying to complete the marriage while Japan's refining market goes through the biggest shakeup in its history.
This week the family of Idemitsu's founder said it had raised its stake in Idemitsu in the clan's latest gambit to halt the merger plans, after having their holdings diluted by a new share sale earlier this year.
"The merger with Showa Shell is the best option for us. Our policy won't change," Idemitsu chief executive officer Takashi Tsukioka said in an interview in the Nikkei. Company spokesman Yoshino confirmed the comments.
"Our No.1 wish is to try to gain understanding from the founding family on the creation of 30 B yen of cost synergies, but we have not gained their understanding yet," Yoshino said.
A spokeswoman for the family said it could not immediately comment.
In a rare public corporate battle, the founding family and the Idemitsu board have been in dispute through court and shareholder actions.
The family, led by Shosuke Idemitsu, has said Idemitsu and Shell are too different for any merger to work, while the board says the combination is necessary to compete in Japan's shrinking oil products market.
JXTG Holdings, the dominant player in a country where a falling population is using ever more efficient vehicles, was formed this April out of the merger of JX and TonenGeneral, with government encouragement.
Idemitsu shares were 3% higher by the morning close of trading, while Showa Shell was up 1.1%. JXTG shares were up 2.2% and the Nikkei 225 average was down slightly.
Reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Kenneth Maxwell
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