Japanese oil refiners Idemitsu Kosan Co. and Showa Shell Sekiyu K.K. said Tuesday they will merge in April next year, with Idemitsu's founding family dropping its opposition to the deal announced three years ago.
The founding family, a major shareholder of Japan's second-largest oil wholesaler, had opposed the planned merger, agreed in July 2015, citing differences in corporate culture.
Japanese oil refiners have been facing a decrease in demand for petroleum products in their home market. Once the merger takes place, Japan's oil wholesale sector will be dominated by the newly merged firm and industry leader JXTG Holdings Inc.
Idemitsu said it will merge with fourth-ranked Showa Shell via a stock swap effective April 1, 2019. Showa Shell will be delisted on March 29 before the merger is completed.
Idemitsu also said it will buy back its shares with a value of up to 55 billion yen ($495 million) to prepare for the stock swap.
The two companies will hold extraordinary shareholder meetings within this year to gain approval for the deal.
(Idemitsu Chairman Takashi Tsukioka, right, and Showa Shell CEO Tsuyoshi Kameoka)
"We were able to reach a solid agreement," Takashi Tsukioka, chairman of Idemitsu, said at a press conference, adding he hopes to see both companies move forward together.
The deal ends a long-time feud between the founding family and the company, after Masakazu Idemitsu, grandson of founder Sazo Idemitsu, agreed to the merger after listening to the advice of activist investor Yoshiaki Murakami.
"We will join the board and make efforts to help turn the company into a better one," the founding family said.
Following the stock swap, Idemitsu will become the parent company of Showa Shell.
Two seats on the board of the combined entity will be allotted to the founding family, said Idemitsu Chairman Tsukioka. The family earlier signaled it will approve the merger on condition that Idemitsu agrees to its proposals, including ensuring family members are appointed to the board of the merged company.
Even after the integration, the refiners will continue to use their own names and brands.
After the deal was stymied due to the founding family's opposition, Idemitsu resumed talks with the family in June this year.
Idemitsu has long been known for its rare management style that treats employees as family members rather than staff.
(Headquarters of Idemitsu Kosan, left, and Showa Shell Sekiyu)
