A Tokyo court on Tuesday approved Idemitsu Kosan Co.’s plan to issue new shares for a public offering, a decision that could propel the oil distributor’s stalled plan to merge with Showa Shell Sekiyu K.K.
Idemitsu’s founding family had sought an injunction against the share offering on the grounds that it is meant to dilute the family’s stake in the company.
Even though the Tokyo District Court agreed the share offering carries the intent to dilute the family’s stake, it rejected their request for an injunction, saying it is not clear that is the primary objective.
Shosuke Idemitsu, son of founder Sazo Idemitsu and a former company president, and his family immediately appealed the decision.
They control just more than one-third of shareholder votes, enough to veto the merger. After the new shares are issued, that would fall to around 26 percent.
Idemitsu says it plans to use the roughly ¥120 billion raised by the share offering to bolster its finances. If the Tokyo High Court upholds the lower court decision, the company will issue new shares with payment due Thursday.
The company, Japan’s No. 2 oil distributor, agreed in November 2015 to merge with Showa Shell, which ranks No. 4 in the industry, but the merger planned for this April was postponed indefinitely after Idemitsu failed to obtain the consent of the founding family, which argues that the corporate cultures of the two companies are incompatible.
The feud has developed as Japan’s wholesalers build alliances to survive. Demand for fuel has been declining as fewer people drive cars and those who do shift toward environmentally friendly models requiring less fuel.
Industry leader JX Holdings Inc. merged with TonenGeneral Sekiyu K.K. in April to form JXTG Holdings Inc., while third-ranked Cosmo Energy Holdings Co. has entered a capital tie-up with Kygnus Sekiyu K.K.
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