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Japan`s second-largest oil wholesaler. Idemitsu Kosan Co.. and Showa Shell Sekiyo K.K. announced their merger on Monday to create the newest oil giant as the compete in the increasingly challenging conditions in the market due to the falling demand of gasoline.
The merger is expected to have combined sales of not less than ¥5 trillion and it is projected to dominate Japan`s petroleum wholesale sector as it competes with other companies like the JXTG Holding Inc. which was formed after JX Holdings Inc. and TonenGeneral Sekiyu K.K. merged in 2017.
The merger will operate under the Idemitsu Showa Shell trade name. Shell will continue using its brand name at its gas stations. The merger was first announced in 2015 and it was delayed because the founding family if Idemitsu opposed the plan due to differences in corporate culture.
The family approved the merger and settled the feud after it was agreed that its members will sit as a board of the merged company. Showa Shell became a subsidiary of Idemitsu through a share exchange.
The shareholders of the two companies gave a two-thirds voter approval to bring Shell into the wing of Idemitsu as its subsidiary. The unification of the company took effect on April 1.
The merger expects that they will improve the efficiency in oil procurement. refining. and distribution amid the slowing demand in the domestic market. Reports showed that the demand for gasoline declined 2 to 3 percent because of the accelerating trend toward more fuel-efficient car models.
According to Idemitsu President Shunichi Kito. Three years have passed since the announcement. and we apologize that our integration process has been delayed. He also said that during the last three years. we were beaten by JXTG in achieving a merger. and now we are that much behind in creating synergies. The shareholders of the company believed that their competitions are no longer limited to the oil industry.
Over the past three years. the oil industry drastically evolved as the merger is being worked out. The price of gasoline eroded at great margins which makes the merger a critical step in producing a reliable earning base. Japan`s full deregulation of the electric and gas markets caused many companies to merge to survive.
In August 2017. Tepco. Tokyo Electric Power Co. Holdings. merged with Nippon Gas to form Tokyo Energy Alliance. Osaka Gas and Chubu Electric Power also teamed up to form a new company in April of last year.
