MOSCOW (MRC) -- Japanese oil refiner Idemitsu Kosan Co. said Thursday it would put off a planned merger with a rival, bowing to opposition from the son of Idemitsu’s late founder, said The Wall Street Journal.
The battle has captured attention in Japan, where founding families maintain influence in various forms at many major companies including Toyota Motor Corp.
Idemitsu management has pushed hard for the merger with Showa Shell Sekiyu K.K. but repeatedly failed to persuade the company’s honorary chairman and former president, 89-year-old Shosuke Idemitsu. Mr. Idemitsu and family members control a 33.9% stake in Idemitsu, enough to block the merger.
On Thursday, Idemitsu’s president, Takashi Tsukioka, said the merger could no longer happen as planned in April 2017. He said he expected a delay of up to a year. Still, he said he believed the merger was "the best possible combination and the best possible measure for the two companies’ sustainable growth."
Mr. Tsukioka said he hasn’t met Mr. Idemitsu since July 11 but still believed the former president would eventually come around to the merger idea. Mr. Idemitsu’s lawyers said that would never happen. In a statement, the lawyers used a Japanese proverb to argue that the two companies were incompatible, saying a merger would be like "grafting a bamboo shoot onto a tree."
The backdrop to the proposed merger is a fast-shrinking domestic market, where slow economic growth and the rise of environmentally friendly cars such as Toyota’s Prius, a best-seller locally, have cut demand for gasoline. Also, the country’s largest oil refiner, JX Holdings Inc. plans to swallow up a smaller refiner in April 2017, which would give JX more than half of the domestic market.
If they merged, Idemitsu and Showa Shell Sekiyu would have a market share of about 30%.
International oil major Royal Dutch Shell PLC owns a roughly one-third stake in Showa Shell Sekiyu. Idemitsu said it planned to follow through with previously announced plans to buy that stake by next month, on the assumption that the full merger with Showa Shell Sekiyu will eventually happen.
Mr. Idemitsu, whose father founded the company, has argued that its Japanese roots and historical ties with Iran give it a different corporate culture from Showa Shell Sekiyu, where non-Japanese shareholders including Saudi Arabian Oil Co. have held the leading hand.
Showa Shell Sekiyu Chief Executive Tsuyoshi Kameoka, sitting next to his Idemitsu counterpart, rejected that view, saying Showa Shell Sekiyu’s roots in Japan go back 116 years and it has 33 affiliated gas-station operators with which it has done business for more than a century.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
Idemitsu Kosan is a Japanese petroleum company. It owns and operates oil platforms, refineries and produces and sells petroleum, oils and petrochemical products. The company runs two petrochemical plants in Chiba and Tokuyama. The two naphtha crackers can produce up to 997,000 tonnes of ethylene per year.
MRC