News Post
Japanese refiners Idemitsu, Showa Shell to merge
By AARON CLARK
Bloomberg
Idemitsu Kosan Co. and Showa Shell Sekiyu KK signed a non-binding agreement to merge, as Japan’s refiners consolidate amid declining domestic demand and a fuel glut.
The two companies expect 50 billion yen ($407 million) of synergies by the fifth year after a deal, according to a filing on Thursday to the Tokyo Stock Exchange.
The merger is expected to be completed between October 2016 and April 2017. A value for the transaction wasn’t provided.
The memorandum of understanding isn’t binding and most details, including the method for merging, haven’t been decided. In July, Idemitsu agreed to purchase a 33.24% stake in Showa Shell from Royal Dutch Shell for 169 billion yen. A full combination of the two would create a company with about a third of the domestic gasoline market.
Oil demand in Japan has been declining as the nation’s population shrinks and as a shift to more energy-efficient cars prompts refiners to lower output.
The government, a backer of industry consolidation, has asked for cuts in processing capacity as the US boosts exports and new production redraws global gasoline and diesel trade flows.
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