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Unable to merge, Idemitsu and Showa Shell to promote collaboration in oil business

10 MAY 2017

Idemitsu Kosan Co. and Showa Shell Sekiyu K.K., whose planned merger is being blocked by Idemitsu’s founding family, said Tuesday they will increase collaboration.

The collaboration between the two Japanese refiners will include joint procurement of crude oil and equipment, mutual supply and joint transportation of oil products, and integrated refinery operations.

The two will also step up personnel exchanges.

Idemitsu and Showa Shell aim for an annual synergy effect of over ¥25 billion ($220 million) within three years, including by reducing costs.

“There is no change in our plan to merge the two companies as early as possible,” Idemitsu Chief Executive Officer Takashi Tsukioka said at a meeting of officials from both companies.

“This is the first step toward the merger,” Showa Shell President and CEO Tsuyoshi Kameoka said at the meeting.

The collaboration comes after JX Holdings Inc. cemented its position as industry leader through a merger with TonenGeneral Sekiyu K.K. last month.

But the synergy effects from the collaboration between Idemitsu and Showa Shell are limited compared with those from the merger. The two companies aim to achieve an annual synergy effect of ¥50 billion within five years of the merger.

Idemitsu acquired a 31.3 percent stake in Showa Shell in December in an effort to promote talks with the founding family, which controls over one-third of Idemitsu.

But the talks on the merger have been deadlocked.

“We still have no idea when we’ll be able to gain permission from the founding family,” Idemitsu Director Susumu Nibuya said.

SOURCE

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