• Kyodo, Bloomberg

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JX Holdings Inc. and TonenGeneral Sekiyu K.K., Japan’s two biggest oil refiners, officially announced Thursday they intend to merge in April 2017, creating a company with control of more than half the country’s gasoline market.

JX’s wholly owned subsidiary JX Nippon Oil & Energy Corp. will merge with TonenGeneral, the No. 3 distributor by sales, around April 2017 through a share swap.

Oil titans JX and TonenGeneral will have combined sales of ¥14.3 trillion, compared with the ¥7.6 trillion of Idemitsu and Showa Shell combined.

JX and TonenGeneral said they aim to improve group earnings by more than ¥100 billion a year within five years of the merger.

They will maintain the names of JX’s “Eneos” and TonenGeneral’s “Esso,” “Mobil” and “General” gas station brands, before considering integrating them in the future.

“The oil industry is facing a tough business environment with a structural decrease in demand,” JX Chairman Yasushi Kimura told a joint news conference. “We’ve agreed it’s necessary to maximize our corporate value.”

The merger comes as the government encourages refiners to consolidate and cut processing capacity amid declining fuel demand caused by the shrinking population and the shift to more energy-efficient cars. The new company would be the biggest competitor to Idemitsu Kosan Co. and Showa Shell Sekiyu K.K., which agreed to merge last month into a company controlling about a third of the nation’s gasoline market.

By reducing the number of refiners to two major companies, the industry would likely see better refining margins, Syusaku Nishikawa, an analyst at Daiwa Securities Co., said Thursday prior to the announcement.

The companies may integrate the operation of facilities in the Kawasaki area, according to the statement.

Demand for oil-related products will fall about 6.8 percent in the five years through the end of March 2020, according to a forecast in April by the Ministry of Economy, Trade and Industry.

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