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September 6, 2016

Volume 7 Issue 8

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JX, TonenGeneral Settle on April Merger

JX Holdings and TonenGeneral Sekiyu KK last week finalized their agreement to merge in April 2017 to become Japan’s largest oil refiner. Among midstream, downstream and energy ventures, the group said it expects lubricants to be one of its main growth segments in Asia.

The new entity, JXTG Holdings, Inc., will see TonenGeneral delisted and absorbed by JX Holdings’ subsidiary, JX Nippon Oil & Energy, according to a joint statement. The firms’ shareholders will meet on Dec. 21 to approve the integration, which is also subject to the scrutiny of the Japan Fair Trade Commission and other regulatory bodies.

The group initially planned to achieve 100 billion yen in profit improvements through reductions in distribution, manufacturing and procurement spending during its first five years, but now aims to hit that goal within three years. “Taking into account the severe business climate that is expected to continue both in Japan and abroad, the two companies acknowledged the need for even more drastic rationalization and efficiency improvement, which neither company would likely be able to achieve individually,” the statement continued.

The group did not comment on plans for its respective base oil refineries, but noted that it would combine or close some of its manufacturing bases across its various segments. “JX Holdings and TonenGeneral understand that fixed cost reduction through refinery closure is vital to achieving further profit improvements. With that understanding, the integrated energy company will study and conduct refinery closure as soon as possible.”

JXTG hopes to earn 500 billion yen or more during its fiscal year 2019. Mainstays for the group’s future growth will be its enhanced, “next-generation businesses,” which include overseas markets, electricity, gas, new energy, lubricants, and specialty chemicals.

JX Holdings has three base oil plants in Japan and claims about 32 percent of the country’s finished lube market. It manufactures automotive and industrial lubricants under its Eneos brand. TonenGeneral produces base oil at its Wakayama refinery and holds approximately 8 percent of domestic finished lube sales, marketed under ExxonMobil’s Mobil brand. Both companies plan to continue marketing products under their respective brands after the merger.

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

The other two oil firms making up Japan’s top four, Idemitsu Kosan Co. and Showa Shell Sekiyu KK, are also negotiating a tie-up.