Oil distributors Idemitsu Kosan Co. and Showa Shell Sekiyu K.K. are in talks for a capital and business tie-up ahead of their planned merger, sources close to the matter said Wednesday.
They are considering taking an estimated 20 percent stake in each other and jointly operating oil refineries or other facilities, the sources said.
The two companies announced in October that they had decided to suspend their planned merger for April 2017 without setting a clear timeline, as Idemitsu has yet to gain consent for the deal from its founding family, a major shareholder.
While attempts to persuade the founding family to approve the merger are ongoing, the two companies will proceed with the planned capital and business tie-up to enhance their relationship, the sources said.
According to the sources, Idemitsu plans to obtain a 33.3 percent stake in Showa Shell from Royal Dutch Shell PLC once the Japan Fair Trade Commission gives regulatory approval.
By depositing more than 8 percent of that stake in a trust bank, Idemitsu will keep its controlling stake below 25 percent to enable Showa Shell to continue to exercise its voting rights.
Showa Shell is set to acquire roughly a 20 percent stake in Idemitsu. The smaller refiner will decide on acquisition methods later, the sources said.
The combined shareholdings of founding family members stand at 33.92 percent, enabling them to veto the merger at an extraordinary shareholder’s meeting.
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