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July 25, 2017

Volume 7 Issue 7

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Idemitsu Legally Cleared to Issue New Shares

Idemitsu Kosan Co. said on Thursday that it was able to proceed with its offer of 48 million new shares, after the Tokyo High Court rejected a shareholding group’s claim that the issuance would be illegal because it would purposely dilute its share of the company solely to advance a contentious merger with Showa Shell Sekiyu KK.

Idemitsu will issue the shares by way of global offering at a rate of ¥2,600 per share for an approximately ¥138 billion (U.S. $1.2 billion) increase in capital. The company said it plans to use the funds to help pay for the acqusition of Showa Shell Sekiyu KK shares and to invest in its most promising segments, including some of its international lubricants subsidiaries.

On July 4, a day after the company announced it would issue new shares, the merger opposition group – led by the founder’s eldest son, 90-year-old honorary chairman and former company president, Shosuke Idemitsu – filed a petition against the issuance at the Tokyo District Court.

When the court denied the injunction, the group sought an appeal at the Tokyo High Court. Last week, the Tokyo High Court rejected the founding family’s appeal against the public offering.

The opposition group holds a 33.92 percent share of voting rights, which would allow it to block the merger, which requires a two-thirds vote for approval. With the issuance ramping up total shares to 208 million, the group will could have as little as 26 percent of Idemitsu Kosan shares.

The company said it will invest some of the new capital in overseas lubricant subsidiaries P.T. Idemitsu Lube Techno Indonesia; Idemitsu Lube India Pvt.; and Idemitsu Q8 Petroleum LLC, a joint venture with Kuwait Petroleum International Ltd. The remainder will be used for plant equipment and to repay loans used to acquie Showa Shell shares.