Japan refiner Idemitsu finalizes deal to buy out Showa Shell
TOKYO (Reuters) - Japanese oil refiner Idemitsu Kosan (5019.T) on Tuesday finalized a deal to buy out Showa Shell Sekiyu (5002.T) through a share swap in a deal worth about $5.6 billion.
Shares in the two companies, which had run up strongly ahead of the integration, initially fell sharply on details of the deal before closing down around 3 percent in a firmer overall market.
“The latest announcement spurred feelings that the stock has run out of new material,” said a source at a Japanese brokerage.
The refiners announced in July they had finally reached a deal to merge, in April next year, after Idemitsu’s founding family dropped its long-standing opposition to the plan.
Idemitsu, Japan’s No.2 oil refiner by sales, has long been keen to merge its operations with fourth-ranked Showa Shell in response to shrinking gasoline demand in the country.
The combined firm would account for about 30 percent of Japan’s domestic gasoline sales, second only to JXTG Holdings (5020.T), which controls about half the market.
In a joint statement on Tuesday, the companies said 0.41 Idemitsu shares would be exchanged for each Showa Shell share. Idemitsu will be the surviving entity with Showa Shell shares to be delisted March 27.
Based on the ratio and Idemitsu’s closing price on Monday, Showa Shell is valued at 2,431.3 yen per share, a slight discount to its 2,441 yen close on Monday. That puts the deal value at about 630 billion yen ($5.6 billion) for the nearly 69 percent of Showa Shell that Idemitsu does not already own.
Idemitsu shares fell as much as 9 percent before ending down 3.2 percent, while Showa Shell shares fell as much as 8 percent before closing down 2.6 percent.
The new firm has a higher ratio of residue cracking capability at its refineries than rivals, he said.
The group could raise the capacity of heavy oil processing units at Idemitsu’s 190,000-
Reporting by Osamu Tsukimori and Chris Gallagher; writing by Chris Gallagher; editing by Stephen Coates and Richard Pullin
Comments