Shell says still committed to Showa Shell stake sale

Royal Dutch Shell ( RDS.A ) shares declined nearly 1% intraday after it emerged April 1, 2017, is no longer the effective date of a merger between Japanese refiners Showa Shell Sekiyu K.K. and Idemitsu Kosan, according to a joint statement Thursday.

The founding family of Idemitsu, which controls a 33.9% stake in the refinery, opposes the merger, although the company says it has not changed its plan to buy a one-third stake in Showa Shell for ~¥170B ($1.7B) this month or next.

The deal was to have to have been the second in the domestic refining sector after JX Holdings Inc's planned takeover of TonenGeneral Sekiyu KK. "The market is shrinking and refiners need to pursue economies of scale", Fujiwara said.

In June, Shosuke Idemitsu, honorary chairman of Idemitsu, expressed opposition to the merger plan, citing different corporate cultures among other reasons, at the company's shareholders meeting.

Idemitsu, the second largest wholesaler in Japan, and Showa Shell, the fifth biggest, also said in a statement that it is "not appropriate" at this juncture to set a clear date when they will merge. Both companies now have a market value of around $3.6 billion although Idemitsu is bigger in terms of sales and refining capacity.

The Nikkei daily reported Idemitsu plans to talk with Royal Dutch Shell about its planned stake purchase, given the postponement of the full acquisition.

The family opposes the merger partly because of Showa Shell's close ties with Saudi Arabia, according to earlier media reports.

Representatives of the founding family have refused requests from Idemitsu management for talks since July.

Given the latest development, shares of the two companies dropped Thursday at the Tokyo Stock Exchange, with Idemitsu closing the day's trading at ¥2,251, down 2.6 percent, and Showa Shell falling 4 percent to ¥950.

  • Zachary Reyes