Major refiners Idemitsu Kosan Co. and Showa Shell Sekiyu K.K. each won approval from their shareholders Tuesday for their long-delayed merger plan, clearing the last hurdle for the April creation of a new oil industry giant.
At their respective extraordinary meetings, the companies’ shareholders gave the green light to the April 1 integration of Idemitsu, Japan’s second-largest oil wholesaler, and fourth-ranked Showa Shell.
Once the merger takes place, the country’s oil wholesale sector will be dominated by industry leader JXTG Holdings Inc. and the newly merged firm.
“Through the integration, we will make a strong business entity capable of sustainable growth,” Idemitsu said in a statement following its meeting.
The merger comes as the companies look to improve efficiency in a shrinking domestic market. Gasoline demand in Japan has seen declines of 2 to 3 percent annually, partly due to a shift in the auto industry towards electric and fuel-efficient hybrid vehicles.
The new entity will aim to save a total of ¥60 billion over the three years through fiscal 2021 by combining the two companies’ operations.
The companies have already integrated offices in some areas, such as procurement and personnel affairs, and are streamlining business operations.
But critics say such efforts are not enough, comparing the situation with industry leader JXTG, which was formed in 2017 through a merger of JX Holdings Inc. and TonenGeneral Sekiyu K.K.
JXTG unified the brands under the name Eneos and halted production at some refineries.
Showa Shell will become a wholly owned subsidiary of Idemitsu through a share exchange and the merged company will conduct business under the name Idemitsu Showa Shell. They will continue to use their own brands at gas stations and keep seven oil refineries in total.
The consolidation agreed to in July 2015 was delayed when the founding family of Idemitsu opposed the merger with Showa Shell, citing differences in corporate culture.
But the family gave its approval in July on condition that its members join the board of the merged company.
Idemitsu President Shunichi Kito will become president of the new company, while Idemitsu Chairman Takashi Tsukioka will become chairman and Showa Shell President Tsuyoshi Kameoka will serve as deputy chairman.
Masakazu Idemitsu, a major stakeholder and grandson of company founder Sazo Idemitsu, will be a part-time board member.
One shareholder in his 60s who attended the Showa Shell meeting said, “Some shareholders are worried about the differences in corporate culture, but I think they will overcome them.”
An Idemitsu shareholder in his 60s was critical of the new company management appointments, saying, “It is not appropriate that a member of the founding family who caused confusion will become an executive.”
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