July 5, 2016
Volume 7 Issue 4
Founder's Family Contests Idemitsu Merger
Founding members of major Japanese oil company Idemitsu Kosan Co. expressed opposition to the company’s merger with Showa Shell Sekiyu K.K., during Idemitsu Kosan’s ordinary General Meeting of Shareholders last week.
“Idemitsu founders are opposing merger as they do not want to lose their influence to a new organization when both [companies] merges. They also feel uncomfortable with the way corporate management explained the merger,” Adachi Yukihiko, managing director of Kline Japan told Lube Report Asia in an email interview.
“There were only two meetings with [the founders and] merger conclusion being already there. There was no consultation to Idemitsu founders before the [merger] announcement,” he added.
In two press releases last week, Idemitsu Kosan admitted a major shareholder, the founder’s oldest son, Idemitsu Shosuke, expressed objection to the merger. But denied media reports the company may resolve the matter by diluting the founder’s family majority voting shareholdings of 33.92 percent, which can veto the merger proposal, with the issuance of new shares to a third party.
“We have not made any announcement in this regard. There is no factual basis to any reports that we are considering such allocation of new shares to a third party,” said the company’s press release on June 29th.
However, according to Adachi, Idemitsu Kosan plans to have a shareholders meeting by the end of this year and will then require approval of two thirds or more of shareholders if the merger is to go ahead.
Idemitsu’s management wants the merger to go through. “Upon receiving approval from authorities, Idemitsu plans to acquire these shares and then conclude the business integration agreement following discussions between both companies,” Representative Director and CEO Tsukioka Takashi said Friday during a briefing about financial results for fiscal year 2015. The planned date of business integration is April 1, 2017.
Idemitsu Kosan and Showa Shell Sekiyu signed a memorandum of understanding in November to integrate their businesses. Currently, the acquisition of Showa Shell Sekiyu’s shares, equivalent to 33.3 percent of voting rights from Royal Dutch Shell Group, is under review by the Japan Fair Trade Commission.
Idemitsu Kosan and Showa Shell Sekiyu are among the five largest lubricant blenders in Japan. The others are JX Nippon Oil & Energy, TonenGeneral and Cosmo Oil. Idemitsu’s total sales of lubricants for the financial year 2015 increased 5.9 percent to 1.11 million kiloliters, compared to 1.048 million kl in the previous year. The company said in its financial report it expects lubricant sales to continue to grow in the next fiscal year.