(EnergyAsia, August 9 2015, Sunday) — Japan’s second largest downstream oil company Idemitsu Kosan has agreed to buy over the bulk of Shell’s 35% stake in the Tokyo-listed refiner Showa Shell Sekiyu for about 169 billion yen. (US$1=124 yen).
Idemitsu will pay 1,350 yen for a near 23% premium for 125.3 million Showa Shell shares to own a 33.24% stake when the deal closes next year. Royal Dutch Shell will be left with less than 1.8% and Saudi Aramco the remaining 15% while the rest will be held by shareholders through the Tokyo Stock Exchange, according to information on Showa Shell’s website.
The deal meets with both companies’ objectives: Idemitsu which is looking to bulk up to compete against industry leader JX Holdings and Shell as it sheds underperforming assets and jobs around the world to shore up profits and consolidate operations.
“The sale is consistent with Shell’s strategy to concentrate its downstream footprint on a smaller number of assets and markets where it can be most competitive,” said John Abbott, Shell’s downstream director.
“Idemitsu is an established and successful company and is well positioned to take up Shell’s shareholding.”
Japan remains an important market for the Anglo Dutch oil giant, particularly for its liquefied natural gas (LNG) business that is being expanded through the recent acquisition of the UK-based global gas giant BG Group.
Idemitsu’s enlarged downstream presence is part of the government’s long-stated goal to consolidate Japan’s shrinking refining and fuel retailing industry. With the purchase of Showa Shell, Idemitsu will have about 28% of the country’s refining market and a third of its gasoline business.
JX Holding was formed in 2010 from the merger of Nippon Oil and Nippon Mining Holdings. When the Idemitsu-Showa Shell deal is completed by the first half of next year, Japan will have a total of four downstream groups including smaller players TonenGeneral Sekiyu and Cosmo Oil.