The founding family of Idemitsu Kosan Co. opposes its planned merger next April with Showa Shell Sekiyu K.K., the family's representative said Tuesday, clouding the outlook of the creation of one of the largest oil distributors in Japan.
The founding family, which owns a 33.92 percent stake in Idemitsu, can veto proposals, so for the merger to go through, the management of Idemitsu may need to take counteractions, such as issuing new shares to reduce the ratio of the family's shareholdings.
The founding family is against the merger as Idemitsu and Showa Shell have operated under separate management policies and have different corporate cultures.
As Idemitsu has close ties with Iran and Showa Shell with Saudi Arabia, the family does not believe it is appropriate for the two oil distributors to come together at a time of rising tensions between the two countries in the Middle East, according to the family's representative.
Idemitsu and Showa Shell agreed last year to merge, in a move seen as potentially leading to further consolidation in Japan's refinery sector.
At a shareholders meeting on Tuesday, the family voted against Idemitsu's proposal to reappoint 10 board members, although their reappointments received majority support.