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A member of the founding family of major oil wholesaler Idemitsu Kosan Co. has bought shares in industry peer Showa Shell Sekiyu K.K. in an attempt to block the two firms' planned merger.
Shosuke Idemitsu, honorary chairman of Idemitsu Kosan, purchased about 400,000 Showa Shell shares, or about 0.1 percent of the total outstanding shares in the company, his attorneys, including Takujiro Hamada, said Wednesday.
The situation may force the Idemitsu Kosan management team to change its strategy regarding the merger, industry sources said. The founding family of Idemitsu Kosan opposes the integration.
Last November, Idemitsu Kosan, the second-largest oil wholesaler in Japan, and fifth-ranking Showa Shell reached a basic agreement on their merger. Based on the accord, Idemitsu Kosan is planning to buy an equity stake of 33.3 percent in Showa Shell from Anglo-Dutch oil giant Royal Dutch Shell PLC out of the market in September.
At Idemitsu Kosan’s general shareholders meeting in June, the founding family expressed its opposition to the integration, saying, among other things, the two companies have different corporate cultures.
At Wednesday’s press conference, the attorneys for Shosuke Idemitsu argued that Idemitsu Kosan would have to launch a tender offer to buy the Royal Dutch Shell-owned Showa Shell shares under the financial instruments and exchange act because the equity stake to be held by the Idemitsu Kosan side, including the 0.1 percent held by the founding family member, would exceed one third of the total Showa Shell shares.
In that case, Idemitsu Kosan’s financial burden associated with the share acquisition will increase from the initially envisaged level, according to the attorneys.
Under the law, purchases of shares in a company by an individual or institution have to be made through a tender offer if the total stake to be held exceeds one third. Because the founding family of Idemitsu Kosan owns more than 20 percent of the firm in terms of voting rights, the company and the family are regarded as joint asset owners.
If a tender offer is to be held for Showa Shell shares, Idemitsu Kosan would have to buy not only the Royal Dutch Shell-owned shares but shares to be offered by other holders and its share acquisition costs would balloon from the initially planned ¥169.1 billion as a result.
If all outstanding Showa Shell shares are bought, Idemitsu Kosan’s costs would amount to about ¥500 billion.
Showa Shell may voice caution about becoming a fully owned unit of Idemitsu Kosan, sources said.
At the press conference, Hamada reiterated the founding family’s opposition to the Idemitsu Kosan-Showa Shell integration and called on the Idemitsu management team to cancel the move, saying, “We’ll ask [the management team] for an early solution to the issue.”
He also said the founding family has no intention to hold talks with the management side unless it announces a decision to withdraw the planned purchase of Showa Shell shares. Shosuke Idemitsu is considering the possibility of purchasing more Showa Shell shares, according to Hamada.
Idemitsu Kosan President Takashi Tsukioka in a statement showed the firm’s regret over the founding family’s move and said the company will study its response after examining details.
Tsukioka also stressed the company’s intention to realize its integration with Showa Shell while holding talks with the founding family side.
(JIJI PRESS)
