The founding family of Idemitsu Kosan Co is opposed to the Japanese refiner’s planned takeover of smaller rival Showa Shell Sekiyu, Idemitsu said yesterday, but added that both firms would continue with plans to merge next April.
Idemitsu agreed late last year to buy Showa Shell for about $4bn, creating what would be Japan’s No 2 refiner by capacity.
However, opposition from the founding family and related parties, which together hold 33.92% of Idemitsu shares, could be enough to veto the takeover, Kyodo and Jiji News said.
In a statement issued to the Tokyo Stock Exchange, Idemitsu said it would continue to seek a merger with Showa Shell despite opposition from its founding family.
The company said it believes the founding family’s voting rights are 21.2% and exclude the 12.75% stake owned by two public foundations with Idemitsu’s name.
Therefore, the company’s understanding is that the founding family’s opposition alone would not be enough to veto the integration, general manager of public relations, Soichi Kobayashi, told reporters.
The merger of Idemitsu, which has close ties with Iran, and Showa Shell, which has close relations with Saudi Arabia, would be inappropriate amid an intensifying rivalry between the two nations, Kyodo quoted the founding family’s agent as saying yesterday.
Idemitsu was the first Japanese firm to buy Iranian oil in the 1950s during a British-led embargo against Iran, while Showa Shell is 15% owned by state-owned Saudi Aramco.
The founding family and related parties opposed the deal at Idemitsu’s annual general meeting yesterday, media reports said.
A Showa Shell spokesman said the firm was not in a position to comment regarding the reports but added that it would continue to work on integration with Idemitsu.
Idemitsu’s takeover of Showa Shell has already been delayed due to a longer-than-expected wait for approval from the Japan Fair Trade Commission (FTC), which is considering another large deal in the industry – a merger of Japan’s JX Holdings and TonenGeneral Sekiyu.
Earlier this month, Idemitsu said it planned to acquire a one-third stake in Showa Shell shares in September, later than its previous goal of before the end of June.
The two firms control about 28% of Japan’s refining market.
JX and TonenGeneral will hold more than 50% of the market should the FTC approve their deal.
Japan has been encouraging consolidation in its refining sector, where five big companies and three smaller ones are vying for business as a shrinking population increasingly buys more fuel efficient vehicles.