Idemitsu Denies Acquisition Rumors

Idemitsu Kosan Co. repudiated a news report suggesting that it has agreed to purchase fellow Japanese major Showa Shell Sekiyu, but it acknowledged that the companies are discussing potential cooperation.

A Dec. 20 Nikkei Asian Review article claimed that Idemitsu was in the final stages of talks to acquire Showa Shell Sekiyu for around 500 billion yen (U.S. $4.1 million).

Two days later, Idemitsu released a statement denying involvement in such a deal. Idemitsu is considering wide-scale business restructuring, and [Idemitsu and Showa Shell] are discussing potential cooperation. However, no formal decision has been made regarding such cooperation.

In a separate release, Idemitsu also referenced and denied reports of it negotiating with TonenGeneral Sekiyu on a similar purchase agreement.

Both Showa Shell Sekiyu and TonenGeneral also issued statements disclaiming any agreements with Idemitsu. Showas Dec. 20 statement noted that it was discussing options with Idemitsu on a very preliminary basis. TonenGeneral said it is looking to enhance its domestic supply chain through collaboration or alliance with oil companies, but does not have any concrete dealings with Idemitsu.

Oil companies in Japan are trying to reorganize to cope with the nations shrinking demand for fuel, lubricants and other petroleum products. Idemitsu Kosan is currently the nations second-largest supplier of both lubricants and fuels, and acquiring Showa Shell would move it closer to market leader JX Nippon Oil and Energy.

JX Nippon held 32 percent of the lube market in 2012, compared to 22 percent for Idemitsu Kosan. Showa Shell and TonenGeneral followed with 9 percent and 8 percent, respectively.

All four companies are also among the largest base oil producers in Japan. Idemitsu Kosan operates one plant with capacity to make around 300,000 metric tons per year of base oil, and Showa Shell has a 279,000 t/y plant. JX Nippon Oil & Energy has three plants with combined capacity of around 613,000 t/y.