Tuesday, December 20, 2016

Shell sells Showa Shell stakes to Japan’s Idemitsu for $1.35B

Japanese petroleum company, Idemitsu Kosan Co. has just completed its acquisition deal with Showa Shell from Royal Dutch Shell totaling 31.2% of its stakes for $1.35 billion (¥158.9 billion) or ¥1,350 a share.

Initially, Idemitsu was supposed to buy 33.24% of Showa Shell’s stake, but was rejected by the company’s founding family. The family owns 33.92% of Idemitsu and patriarch Shosuke Idemitsu stated that the merger of the two companies would not be advisable, with the fact that they are too different to work.


The deal was originally signed last July 2015. Even though the acquisition was already approved to go through, the family said that they would still keep an eye on the management.

“We haven’t changed our opposition to the merger. We will closely monitor any actions management takes,” said one of Idemitsu’s lawyers.

The deal was eventually approved by the Japan Fair Trade Commission with an anti-trust approval on Monday. Meanwhile, shell will still retain 3.8% of its stake in the company.

Shell downstream director John Abbott said, “Shell has enjoyed a long and valuable partnership with Showa Shell since the year 1900. I wish the company success and look forward to seeing the commercial linkages and a new relationship between our two companies over the coming years.”

Idemitsu says that it will still maintain Showa Shell’s independence and will not send an executive to the Showa Shell’s board, since the merger is a one-way purchase rather than cross-shareholdings.

The deal between Idemitsu and Showa Shell will result in a fewer oil wholesaling in the Japanese market. The demand for gasoline has plunged by 2-3% every year and analysts believe that it can go lower by 20-30% between no to 2030.

The acquisition was part of Shell’s $30 billion (£24.6 billion) divestment initiative. Earlier in the year, Shell bought BG Group for $50 billion (£38 billion), a move that strives to grapple along with the industry’s continuous oil pricing through cost-cutting. Viva Energy Australia bought Shell’s Australian aviation fuel business for $250 million (£200 million).

Shell’s shares climbed 0.24% to 2,297 pence at 10:40 GMT.


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