• Bloomberg

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JX Holdings Inc. and TonenGeneral Sekiyu KK on Wednesday finalized an agreement to form Japan’s biggest oil refiner starting in April.

JX Holdings will give 2.55 shares for each TonenGeneral share, the two companies said in a joint statement. The deal values TonenGeneral at ¥965.2 a share based on Tuesday’s closing prices. The two companies are targeting more than ¥500 billion of ordinary income in the year ending March 2020, according to the statement. They plan to seek shareholders’ approval in December.

Japan has been pushing refiners to consolidate and reduce processing capacity as domestic demand declines amid a shrinking population and a shift to more energy-efficient cars.

The merger between JX and TonenGeneral would create a refiner with control of about half of the country’s gasoline market.

Domestic rivals Idemitsu Kosan Co. and Showa Shell Sekiyu KK are also seeking to tie up.

The combined company, JXTG Holdings Inc., expects to achieve more than ¥100 billion a year in synergies within three years. JX and TonenGeneral plan to integrate operations of a refinery and chemical plants in the Kawasaki area and expect ¥10 billion in savings.

JX Holdings President Yukio Uchida will be the president of the new company, and TonenGeneral President Jun Mutoh will be the vice president. JX Holdings Chairman Yasushi Kimura will be the chairman.

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