TOKYO (Reuters) - Idemitsu’s founding family will drop its opposition to plans for a merger of Idemitsu Kosan (5019.T) and Showa Shell Sekiyu 5002.T, paving the way for the Japanese oil firms to combine, the Nikkei reported.
The family, led by descendants of founder Sazo Idemitsu and which has a little over 28 percent 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 percent stake in Showa Shell in 2016, agreed to bring on the eldest son of Idemitsu Chairman Emeritus Shosuke Idemitsu as a director, it added.
Idemitsu has resumed discussions with major shareholders, the refiner said, adding no formal decisions have been made as yet. The founding family’s spokesperson said they could not confirm the report immediately.
A few members of the founding family have agreed to the merger, while Shosuke Idemitsu is still opposing it, Jiji news agency reported on Wednesday.
Talks on the merger are continuing and no decisions have been made, Showa Shell said.
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 percent of domestic gasoline sales, coming second only to JXTG Holdings (5020.T), which was created last year from JX’s takeover of TonenGeneral Sekiyu and controls about half of domestic oil sales.
Shares in Idemitsu ended 13.6 percent higher at 3,980 yen, while Showa Shell jumped 8.5 percent after the news, compared with a 0.3 percent decline in the benchmark Nikkei share average .N225.
Reporting by Chris Gallagher, Osamu Tsukimori, Taiga Uranaka and Aaron Sheldrick; Editing by Muralikumar Anantharaman and Sherry Jacob-Phillips